Sensex, Nifty Decline As Inflation Concern Weigh On Sentiment 

Indian equity benchmarks fell for a second day as investors worry that rising commodity inflation will prompt authorities to ease back on stimulus has weighed on risk assets in recent sessions.

The S&P BSE Sensex ended 0.7% lower at 49,564.86 after seesawing between gains and losses earlier in the day. The NSE Nifty 50 Index declined 0.8%, with both gauges sliding the most since May 12. Sixteen of the 19 sector sub-indices compiled by BSE Ltd. fell, led by a gauge of metal companies.

With the earnings season underway, 21 of the 34 Nifty 50 companies that have so far announced quarterly results have missed analysts’ estimates, while 12 have beaten or met, according to data compiled by Bloomberg.

“Raw material cost inflation is impacting margins,” Jefferies India analysts Mahesh Nandurkar and Abhinav Sinha wrote in a note dated yesterday. They downgraded earning estimates for the year through March 2022 for more than half of the 58 Indian companies under their coverage that have reported earnings so far.

India’s central bank buys Rs 8,350 crore of 5.85% 2026 bond at 5.9526% cutoff yield: statement.

• RBI buys Rs 2,980 crore of 6.18% 2024 bond at 5.0145% cutoff yield
• Buys Rs 6,590 crore of 7.59% 2026 bond at 5.7022% cutoff yield
• Buys Rs 5,140 crore of 6.79% 2027 bond at 6.0140% cutoff yield
• Buys Rs 6,700 crore of 7.17% 2028 bond at 6.1906% cutoff yield
• Didn’t buy any of the 7.95% 2032 bond
• Buys Rs 5,240 crore of 6.22% 2035 bond at 6.5827% cutoff yield

• USD/INR down 0.1% at 73.1013
• 10-year yields fell 1bp to 5.97%; yield on 6.64% 2035 bond down 2bps to 6.59%

Source: Bloomberg

Shares of Unichem Laboratories Ltd. rise most in more than three months after the U.S. FDA approves the Mumbai-based company’s application for a generic drug used in the treatment of depression.

• Co. has received approval to market generic version of AstraZeneca’s Elavil; the product will be commercialized from co.’s factory located in Goa
• Shares rise as much as 9.9%; most since Feb. 3
• Second best performers on S&P BSE Healthcare index

Bosch India reported net income for the fourth quarter that beat the average analyst estimate.

• Net income Rs 482 crore vs. Rs 81.14 lakh YoY, estimate Rs 335 crore
• Revenue Rs 3,220 crore, +44% YoY, estimate Rs 3,150 crore
• Total costs Rs 2,690 crore, +33% YoY
• Other income Rs 117 crore, -16% YoY
• Dividend per share Rs 115

Key Appointments

• Markus Bamberger to be chairman effective June 1
• Appoints Pawan Goenka as additional director
• Appoints Bhaskar Bhat lead independent director

Shares of the search engine operator for different business categories climbed as much as 14.5% as its relative strength index slipped below 30, a level that some traders read as oversold.

• Stock has fallen ~5% in May after rising for three consecutive months
  • Company reported Q4 net income of Rs 33.6 lakh, -56% YoY, which missed estimate of Rs 39.6 lakh in a Bloomberg survey
• “Over the long run though, we believe that Just Dial has an opportunity to create a valuable business proposition in the business-to-business space,” analysts Manik Taneja and Swapnil Potdukhe at Mumbai-based JM Financial Institutional Securities Ltd. wrote in a note this week
• Brokerage retains buy, ups price target to Rs 730 (earlier Rs 700) as valuations “cheap” relative to peer IndiaMart Ltd.

Bharti Airtel Ltd. gained the most as the churn rate in India’s telecom sector doubled during the pandemic.

The sector’s mobile network portability churn rate rose to 1% in February compared with 0.5% a year earlier, according to Telecom Regulatory Authority of India data. The average during the period was 0.6%.

And despite offering costlier tariffs than Reliance Jio Infocomm Ltd., Bharti Airtel added the most active subscribers during the period. It added twice the number of regularly paying users compared to Jio. Vodafone Idea Ltd. lost both gross and active users.

Read the full report here

Shares of the logistics solution provider rose as much as 15.15% to a new record high after posting its highest-ever Ebitda margins of 19.4%.

The performance was backed by higher operating leverage, realisation hike, cost control initiatives and passing on of fuel price hike to most customers, according to ICICI Direct.

The broking firm said rising competitiveness in the sector has left TCI unscathed, primarily due to the company’s relentless focus on building its moat in the B2B segment.

ICICI Direct raised its target price of on the stock to Rs 1,400 from earlier, while maintaining a buy recommendation.

Stock Insight

• Trading volume was 40 times the 20-day average for this time of day.
• The shares are up 32% in the past 5 days and rose 45% in the past 30 days.
• The relative strength index on the stock was above 70, indicating it may be overbought.

Indian sovereign bonds are largely steady ahead of the central bank’s Rs 35,000 crore of government debt purchases.

• 10-year yields little changed at 5.98%
• RBI to buy 6.18% 2024 bond, 7.59% 2026 bond, 6.79% 2027 bond, 7.17% 2028 bond, 5.85% 2030 bond, 7.95% 2032 bond, and 6.22% 2035 bond using the multiple price method
• USD/INR steady at 73.1337; rupee has gained 2.4% in May in Asia’s best performance

Indian Energy Exchange fell as much as 6.8% to its lowest intraday level since April 23, after about 15 million shares changed hands in two bunched trades, according to data compiled by Bloomberg.

• Among most traded Indian stock by volume, value
• Worst performer on Nifty Smallcap 100, S&P BSE 500 indexes
• Snaps 2-day gain
• Trading volume >9.9x 3-month full-day average
• Buyers, sellers not immediately known

Other large trades:

• Zee Media had 1.52 million shares change hands.
• BHEL had 1.52 million shares change hands.

Shares of the fertiliser makers rallied after the government decided to increase the subsidy for Di-ammonium Phosphate (DAP).

The government said subsidy for the fertiliser would be hiked to Rs 1,200 per bag from Rs 500 per bag. Price of fertilisers is increasing amid higher prices of raw inputs like phosphoric acid and ammonia, among others, internationally, the Prime Minister’s Office said in a statement on May 19. [More details here]

The government’s timely intervention will benefit farmers as well as the fertilisers industry, according to Elara Capital. The broking firm said the centre’s decision to bear 50% of the cost of DAP fertilisers will reduce market price to the past year’s level of Rs 24,000/tonne, making it more affordable.

Indian equity benchmarks fluctuated between gains and losses, in line with Asian peers, as traders weighed Fed minutes that flagged the possibility of a debate on scaling back asset purchases.

The S&P BSE Sensex added 0.2% to 49,990.66 after seesawing between gains and losses, while the NSE Nifty 50 Index was little changed as most stocks declined. Eight of the 19 sector sub-indexes compiled by BSE Ltd. fell, led by a gauge of metal companies.

With the earnings season underway, 21 of the 34 Nifty 50 companies that have so far announced quarterly results have missed analysts’ estimates, while 12 have beaten or met, according to data compiled by Bloomberg.

Sovereign bond traders will wait for the cutoffs at RBI’s Rs 35,000 crore purchase of debt for indications of its market intent.

• RBI to buy 6.18% 2024 bond, 7.59% 2026 bond, 6.79% 2027 bond, 7.17% 2028 bond, 5.85% 2030 bond, 7.95% 2032 bond, and 6.22% 2035 bond using the multiple price method
• Nomura remains positive on INR despite the currency’s underperformance since the start of April, which was due in part to the RBI’s government bond purchase programme and the second Covid-19 wave, it said in a note
  • Early signs that daily infections are starting to stabilize, and expect the pace of vaccination to accelerate after June
  • Expects a resumption of foreign portfolio inflows, which support BOP surplus, as market will be forward-looking
  • Also encouraged by signs that the RBI has stepped in to limit upside volatility in USD/INR during periods of significant rupee depreciation. Overall, beyond local factors, expect USD to soften over the next 1-2 months
• USD/INR rose 0.2% to 73.1663 on Wednesday
  • Implied opening from forwards suggest spot may start trading around 73.20
• 10-year yields little changed at 5.98% on Wednesday

Read the full report here

Good morning!

Asian stocks were steady Thursday and Treasury yields held an advance after Federal Reserve minutes flagged the possibility of a debate on scaling back asset purchases. Commodities extended declines.

Equities fluctuated in Japan, posted modest losses in Hong Kong and China, and rose in Australia. U.S. futures edged down after the S&P 500 pulled back for a third day.

India's SGX Nifty 50 Index futures for May delivery rise 0.1% to 15,047.50, while MSCI Asia Pacific Index -0.3%. The NSE Nifty 50 Index fell 0.5% Wednesday to 15,030.15.

The minutes indicated some Fed officials may be open “at some point” to discussing adjustments to the pace of massive bond purchases if the U.S. economy keeps progressing rapidly. The benchmark 10-year Treasury yield was steady after climbing to 1.67%. A dollar gauge trimmed a rally.

Commodities slid amid concern about inflation, potential curbs on monetary stimulus and China’s efforts to rein in raw material prices. Volatility swept over cryptocurrencies, with Bitcoin posting a same-day plunge and rally of about 30% Wednesday.

Oil stabilized after slumping to the lowest in three weeks with traders also concerned about growing supply from the U.S. and Iran.

Back home, Indiabulls Housing, Endurance Technologies, JK Tyre, Man Infra may react as the companies reported quarterly results after the market closed Wednesday. HPCL, Zee, Havells, Bosch, Torrent Power are the companies scheduled to report earnings Thursday. Foreign investors bought net Rs 1,140 crore of stocks on Tuesday, according to NSDL website.