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Sensex Clocks Second 300-Point Gain; Nifty Closes Above 10,250

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Market Check

Indian equity benchmarks rallied for second day in a row led by gains in FMCG shares.

The S&P BSE Sensex rose 0.91 percent or 301 points to 33,250 and the NSE Nifty 50 Index advanced 0.97 percent or 99 points to 10,265.65.

Gains in today's session were broad-based as the S&P BSE MidCap Index rose 0.89 percent and the S&P BSE SmallCap Index jumped 1 percent.

For the week, Sensex rose 1.27 percent and the NSE Nifty 50 Index gained 1.42 percent.

All sector gauges compiled by BSE ended higher led by the S&P BSE Fast Moving Consumer Goods Index's 2.2 percent gain.

Countdown

Market Check

  • Indian equity benchmarks rose for second day in a row led by gains in ITC, HDFC twins and ICICI Bank.
  • The S&P BSE Sensex rose 0.9 percent or 304 points to 33,257 and the NSE Nifty 50 Index advanced 93 points or 0.92 percent to 10,260.
  • Broader markets were in-line with the benchmark indices. The S&P BSE MidCap index rose 0.85 percent and the S&P BSE SmallCap Index gained 1.04 percent.

Fab Four Stocks of The Day

  • Future Consumer: The Mumbai-based packaged food company rose as much as 15.5 percent, the most in three months, to Rs 67.70 after international brokerage Morgan Stanley initiated coverage on the stock with an ‘Overweight' rating for target price of Rs 95.
  • Sadbhav Infrastructure Project: The Ahmedabad-based construction company rose as much as 8.3 percent, the most in nearly two months, to Rs 144.40 after 33 lakh shares changed hand in two blocks.
  • Axiscades Engineering: The Bangalore-based technology service provider rose as much as 7.44 percent to Rs 176 after Valum Capital bought 1.95 lakh shares or 0.5 percent equity in the company.
  • Escorts: The Faridabad-based tractor maker rose 3.6 percent to Rs 688.50 after HSBC initiated coverage on the stock with a buy rating for target price of Rs 835, indicating potential upside of 26 percent.

Yield On Government's 10-Year Benchmark Bond Spikes Above 7.10%

Yield on government of India's 10-year benchmark bond rose above 7.10 percent following government's bond auction.

Nifty Up 100 Points For Second Day In A Row

Paper Stocks Buzzing In Trade

Shares of paper manufacturers were trading higher in today’s session.

  • JK Paper rose 7.88 percent
  • Ballarpur Industries advanced 5.26 percent
  • West Coast Paper Mills jumped 11 percent
  • Tamil Nadu Newsprint rose 2.28 percent
  • Seshasayee Paper & Boards advanced 8.72 percent
  • International Paper APPM rose 5.57 percent
  • N R Agarwal Industries gained 6.82 percent
  • Shree Rama Newsprint rose 3.71 percent
  • Star Paper Mills advanced 13.14 percent
  • Ruchira Papers rose 5.42 percent
  • Genus Paper & Boards advanced 4.93 percent
  • Pudumjee Paper Products rose 11.33 percent
  • Shreyans Industries rose 9.41 percent
  • Sundaram Multi Pap gained 2.11 percent
  • Balkrishna Paper Mills rose 6.13 percent

European Shares Advance

Shriram EPC Locked In 20% Upper Circuit

Shares of the Chennai-based infrastructure company rose as much as 20 percent, the most in over a month, to Rs 24.35 after it turned profitable in September quarter.

  • Revenues up 43.75 percent at Rs 115 crore versus Rs 80 crore
  • Net profit of Rs 2.4 crore versus loss of Rs 21.8 crore
  • Margins at 0.7 percent versus 2.1 percent
  • Finance cost down 50 percent at Rs 26.4 crore versus Rs 53.2 crore
  • Other income up 58 percent at Rs 30.6 crore versus Rs 19.4 crore
  • Employee expenses up 49 percent at Rs 13.4 crore versus Rs 9 crore

Unitech Extends Gains After NCLT Allows Government To Appoint Nominee Directors

Shares of the Delhi-based real estate developer extended gains and rose as much as 14.59 percent, the most in nearly five months, to Rs 6.99. NCLT has allowed the government to appoint 10 nominee directors on the board of the company and also restrained current directors from acting as board members.

Earlier in the day, Bloomberg reported that corporate affairs ministry in a rare move sought approval from the bankruptcy court to take over management control of real-estate giant Unitech Ltd. citing mismanagement and diversion of funds, people with knowledge of the matter said.

Tata Motors Shares Gain As Global Wholesales Rise In November

Shares of the auto maker rose 2.25 percent to Rs 411 after global wholesales of all Tata Motors commercial vehicles and Tata Daewoo came in at 40,845 units, up 51 percent (YoY).

Global wholesales for Jaguar Land Rover at 54,244 vehicles including JV with Chery Automobiles.

Power Lunch

Block Deal Alerts

  • Blue Star has 12.3 lakh shares change hands in a single block.
  • Bharti Infratel has 25.7 lakh shares change hands at Rs 374 per share in two blocks on BSE.
  • Motherson Sumi has additional 74.9 lakh shares change hands in a single block.
  • Motherson Sumi has 77.6 lakh shares change hands worth Rs 290 crore in a single block on the NSE.
  • Unitech has 13.2 lakh shares change hands in multiple blocks on the National Stock Exchange between Rs 6.15-6.60 per share.
  • Sadbhav Infrastructure Project has 27 lakh shares change hands in a single block.
  • Indoco Remedies has 14 lakh shares change hands at Rs 266.25-267.7 per share in two blocks on the BSE.
  • Yes Bank has 48.8 lakh shares change hands at Rs 312.3 per share in a block on the BSE.
  • Vakrangee has 14 lakh shares change hands at Rs 745 per share in a block on the BSE.

Buyers and sellers were not immediately known

Source: Bloomberg

Stock Moving On Heavy Volumes

  • Sanofi India: The Mumbai-based drug maker rose as much as 0.97 percent to Rs 4,367. Trading volume was 16.9 times its 20-day average.
  • Mahindra CIE Automotive: The Mumbai-based auto component maker rose as much as 2.14 percent to Rs 245.40. Trading volume was 8.7 times its 20-day average.
  • Narayana Hrudalaya: The Bangalore-based hospital chain rose as much as 1.8 percent to Rs 291. Trading volume was 8.3 times its 20-day average.
  • Emami: The Kolkata-based personal products maker fell as much as 1.96 percent, the most since Dec. 1, to Rs 1,239. Trading volume was 6.6 times its 20-day average.

#Ask BQ

Future Group Shares Rally

Shares of the Kishore Biyani-led companies were trading higher after its Future Supply Chain Solutions’ IPO got oversubscribed and international brokerage Morgan Stanley initiated coverage on Future Consumer with an 'overweight'.

  • Future Retail rose 4 percent
  • Future Consumer advanced 15 percent
  • Future Market Network surged 20 percent
  • Future Enterprises jumped 14.6 percent

Government Extends Deadline For Linking Aadhaar With PAN

The government has extended deadline for linking Aadhaar with PAN card till March 31, 2018.

EU And UK Reach Brexit Deal

The U.K. and the European Union struck a deal to unlock divorce negotiations, opening the way for talks on what businesses are keenest to nail down -- the nature of the post-Brexit future. The pound rose.

Reliance Industries Acquires Stake In Uruguay-Based Company

Shares of the Mukesh Ambani-led company fell 0.5 percent to Rs 926.70. The company has acquired stake in a newly incorporated entity namely Dreketi S.A. in Uruguay (hereinafter called 'Dreketi'), Reliance Industries said in a stock exchange notification.

IPO Market Update

Future Supply Chain Solutions' Rs 650 crore initial public offer was fully subscribed on last day of offer. The issue got 1.05 times subscription till 11:30 pm.

Trend Spotting

Maruti Suzuki Overtakes SBI In Terms Of Market Value

Maruti Suzuki overtook India's biggest lender State Bank of India in terms of market capitalisation. Maruti Suzki's market cap rose to Rs 2.74 lakh crore while the State Bank of India's market cap stood at Rs 2.73 lakh crore.

Abolishing Poverty Has To Be The Most Important Task, Says Bimal Jalan At IGIDR

Telecom Shares Advance In Trade

Shares of telecom companies were trading higher led by gains in Bharti Airtel which rose over 2.5 percent. The gauge of telecom shares- the S&P BSE Telecom Index rose nearly 2 percent to 1,625.43.

The F&O Show

IndianOpen

Nifty Trades Above 50-Day Moving Average

SAIL Rises On Buzz Of Entering JV Partnership With ArcelorMittal

Shares of the state-run steel maker rose as much as 3.94 percent to Rs 81.85 as it has finalised terms for Rs 6,000 crore plant with ArcelorMittal to cater to the automobile sector, Bloomberg reported citing a person familiar with the development.

The agreement for the automotive grade steel plant is likely to be approved next week by SAIL’s board, the person said, asking not to be identified as the matter wasn’t public.

Pramod Gubbi of Ambit Capital To BloombergQuint

  • Fundamentals will recover soon but markets will take time to reflect the same
  • Ideally people would like to take money off the table during the year end
  • Market would look for political stability to continue
  • Anything less than clear majority in Gujarat would lead to market uncertainty
  • Seeing rotation in U.S. from technology to economy facing sectors
  • Rotation in developed market may result in outflow from emerging markets
  • Emerging Markets would return as favored asset class in 6-12 months
  • Earnings growth has been elusive, stay with growth companies
  • Rising cost of funds a risk for NBFCs
  • Expect IT spending to increase in the U.S.
  • Currency to remain short term focus for IT

Future Consumer Rallies After Morgan Stanley Initiates Coverage

Shares of the Mumbai-based packaged food company rose as much as 15.5 percent, the most in three months, to Rs 67.70 after international brokerage initiated coverage on the stock with an 'Overweight' for target price of Rs 95.

The brokerage in a report said:

  • Initiated ‘Overweight’ rating with price target of Rs 95; implying a potential upside of 61 percent form yesterday’s close.
  • Expect Future Consumer to be India's fifth-largest FMCG company by March 2021.
  • Future Group’s retail ecosystem yields a unique competitive advantage.
  • FCL can launch innovative products with a disruptive go-to-market strategy.
  • Expect Future Retail to contribute over 90 percent of financial year-ending March 2020’s revenues, compared to 74 percent in the next financial year.
  • Expect revenues to jump 3.2 times by March 2020; margins to expand by 470 basis points by March 2020.
  • Scale-driven efficiencies, better fixed-cost absorption and product mix improvement to drive margin expansion.
  • Bull Case price target Rs 194: Faster ramp-up of small format stores by FRL, and higher contribution of FCL brands.

Jet Airways Falls As Net Profit Declines Sharply In Q2

Shares of Jet Airways snapped three-day gains and fell as much as 4.6 percent to Rs 664.65, after posting weak September quarter earnings.

Earnings Highlights (Q2, YoY)

  • Revenue up 3 percent at Rs 5,627 crore.
  • Net Profit down 91 percent to Rs 50 crore.
  • Ebitdar down 31 percent at Rs 837 crore.
  • Ebitdar margin at 14.9 percent versus 22.1 percent.

The stock has returned 100.5 percent so far, this year, compared to 25.4 percent advance in the country's benchmark S&P BSE Sensex index.

Opening Bell

Indian equity benchmarks rose led by gains in Tata Motors, GAIL India and Coal India.

The S&P BSE Sensex rose 0.45 percent to 33,098 and the NSE Nifty 50 Index advanced 0.41 percent to 10,207.

All sector gauges compiled by BSE were trading higher led by the S&P BSE Industrials Index's 0.7 percent gain.

Rupee Opens Marginally Higher Against U.S. Dollar

The rupee edged up 2 paise to 64.55 against the US dollar in early trade at the interbank forex market today on increased selling of the American currency by exporters and banks.

Besides, a higher opening in domestic stocks supported the rupee, forex dealers said.

However, the dollar's recovery against some currencies overseas restricted the local unit's upmove.

Yesterday, the rupee had lost further ground to end at a near two-week low of 64.57 against the US currency, falling by 5 paise on sustained demand for the dollar from importers despite a strong rebound in equities.

Meanwhile, benchmark BSE Sensex rose 190.36 points, or 0.57 per cent, to 33,139.57 in early trade today.

Source: Press Trust of India

Money Market Heads Up

The cheer after the no-news RBI policy was short lived and yields are again moving north. The concern around inflation and fiscal slippage are very real and will continue to be the key drivers for the market. For today, we have the auction of Rs 15,000 crore of bonds and the cutoff will reveal the market mood. Yields are seen staying in a range of 7.03-7.10 percent.

In the currency market, the dollar index is in the green for a fifth consecutive session. The greenback is headed for its best weekly gain this year as the U.S. tax reform bill made encouraging progress. The rupee is likely to take cues from Asian peers which are little changed. Traders expect the local unit to move in a band of 64.40-64.70 per dollar in the day.

BQ Heads Up

IPO Market Update

  • Shalby over-subscribed 2.8 on final day.
  • Future Supply Chain Solutions overall subscribed 74 percent at end of day 2.

All You Need To know

F&O Cues

  • Nifty December Futures trading at 10,202.9, premium of 37 points versus 24.6 points.
  • Dec. Futures: Nifty open interest down 1 percent; Bank Nifty open interest up 2 percent.
  • India VIX closed at 14.2, down 5.4 percent.
  • Max open interest for Dec. series at 10,500 Call (open interest at 61.9 lakh, down 7 percent).
  • Max open interest for Dec. series at 10,000 Put (open interest at 85.9 lakh, up 7 percent).

Earnings To Watch

  • Aegis Logistics
  • Ajmera Realty
  • Federal Mogul
  • Global Vectra Helicorp
  • HDFC Standard Life Insurance
  • Jayshree Tea
  • KDDL
  • Omax Autos

Earnings Reaction To Watch

Indian Hume Pipe (Q2, YoY)

  • Revenue down 52 percent at Rs 214 crore.
  • Net profit down 63 percent at Rs 8 crore.
  • EBITDA down 49 percent at Rs 25 crore.
  • Margin at 11.7 percent versus 11.3 percent.

Fortune Financial (Q2, YoY)

  • Revenue up 36 percent at Rs 60 crore.
  • Net profit down 33 percent at Rs 8 crore.
  • EBITDA up 33 percent at Rs 20 crore.
  • Margin at 33.3 percent versus 34.1 percent

BPL (Q2, YoY)

  • Revenue up 23 percent at Rs 43 crore.
  • Net profit at Rs 16 crore.
  • EBITDA up 260 percent at Rs 3.6 crore.
  • Margin at 8.4 percent versus 2.9 percent.

Bulk Deals

Himatsingka Seide

  • Merrill Lynch India Equities Fund bought 13.76 lakh shares or 1.4 percent equity at Rs 332 each.
  • Promoter Leela Devi Himatsingka sold 11.55 lakh shares or 1.2 percent equity at Rs 332 each.

Blue Star

  • SAIF India IV FII Holdings sold 7.57 lakh shares or 0.8 percent equity at Rs 800 each.

Kohinoor Foods

  • Equity Intelligence India sold 2 lakh shares or 0.6 percent equity at Rs 77.04 each.

Religare Enterprises

  • Resilient India Growth Fund bought 1.76 crore shares or 9.9 percent equity at Rs 56.7 each.
  • IDBI Trusteeship sold 1.78 Crore shares or 10 percent equity at Rs 56.7 each.

Axiscades Engineering

  • Master Portfolio Services - Valum India Discovery Scheme bought 1.95 lakh shares or 0.5 percent equity at Rs 153.22 each.

LT Foods

  • India Agri Business Fund sold 20 lakh shares or 0.7 percent equity at Rs 84.19 each.

Ruchi Soya

  • Cresta Fund sold 42.50 lakh shares or 1.3 percent equity at Rs 20.48 each.

Asian oil fields

  • Religare Finvest sold 1.79 lakh shares or 0.6 percent equity at Rs 217.75 each.

Stocks To Watch

  • GAIL awards contracts for laying 520 km pipelines from Dobhi to Durgapur.
  • NCL Industries’ QIP opens at floor price of Rs 249.63 per share.
  • Union Bank QIP opens at a floor price of Rs 162.79 per share.
  • TVS Motor bought 14.8 percent stake in electric two-wheeler company Ultraviolette.
  • Federal Bank gives in principal approval for investment to be done by a strategic investor in its wholly owned subsidiary FedBank Financial Services.
  • Emami to acquire 30 percent stake in Helios Lifestyle Pvt. Ltd. for an undisclosed consideration.
  • Tube Investments to acquire controlling stake in Creative Cycles & Great Cycles, Sri Lanka.
  • JSPL submits plans for debt resolution, eyeing equity issue (Financial Express).

Brokerage Radar

HSBC on Escorts

  • Initiated ‘Buy’ rating with price target of Rs 835, implying a potential upside of 26 percent from yesterday’s close.
  • Brand and profit growth back on track.
  • New products to boost market share, margins, and profits.
  • Expect Tractor volumes, revenue, EBIT and net profit to grow at a compounded rate of 10 percent, 13 percent, 33 percent and 45 percent respectively by March 2020.
  • Cost cutting, improved product mix and increased capacity utilization to drive profits.
  • Construction equipment to break even in the current financial year.
  • Return on capital employed to improve to 23 percent by March 2020, compared to 11 percent, clocked in previous financial year.
  • Positives: improved demand, favourable monsoons, increasing farm mechanisation and improving farming income.

Credit Suisse on HDFC Bank

  • Maintained ‘Outperform’; raised price target to Rs 2,075 from Rs 1,955.
  • Bank's CET1 at 12.2 percent, similar to the levels seen in the financial year-ended March 2015.
  • Expects bank to undertake next capital raise in in the next financial year.
  • If $3 billion raised, then expect 4 percent dilution and increase in capital base by 20 percent.
  • $3 billion enough to support growth for next 3-4 years, if loan growth at 23-25 percent.
  • Stock does well around capital raise as P/B premium moderates.
  • An equity raise can equalise P/B multiples of HDFC Bank and Kotak.

Citi on JSW Energy

  • Maintained ‘Buy’; raised price target to Rs 93 from Rs 75.
  • Signing of new power purchase agreements increases comfort.
  • Strong cash flows despite untied capacity.
  • Low visibility on PPA for Vijaynagar, but several other potential positives in making.
  • Raised price target on the back of new PPA, improvement in cash flow and decline in net debt.

Morgan Stanley on Cyient

  • Maintained ‘Overweight’ with price target of Rs 620.
  • Potential hiccups in communication vertical, but company reiterates outlook for the current financial year.
  • Any delays in fibre rollout in Australia to have an impact on Cyient's business.
  • Worst case impact to be 5-6 percent on the next financial year’s earnings estimates.
  • Still believes Cyient is cheap relative to many mid-cap peers.

Morgan Stanley on Indian Telecom

  • Smaller operators’ merger or exit mean top incumbents/Jio could gain 10 percent market share in next 12 months.
  • Tower companies to see near-term headwinds on consolidation, but rising data usage augers well.
  • Remain constructive on tower companies over the medium term.
  • TRAI’s recommendation to raise limit for overall spectrum holdings could be favorable for the top incumbent operators/Jio to augment their holdings if the spectrum is sold or auctioned.

Jefferies on Bharat Petroleum

  • Maintained ‘Underperform’ with price target of Rs 425.
  • Fuel margins should rebound but refining headwinds loom.
  • Less confident of margin momentum into the busy election calendar in the next financial year.
  • Current quarter tracking to be a weak quarter with core earning per share down 25 percent on a sequential basis.
  • Expect refining margins to rise to $8.5/bbl once Kochi stabilises by the second half of next financial year.

Morgan Stanley on Future Consumer

  • Initiated ‘Overweight’ rating with price target of Rs 95; implying a potential upside of 61 percent form yesterday’s close.
  • Expect Future Consumer to be India's fifth-largest FMCG company by March 2021.
  • Future Group’s retail ecosystem yields a unique competitive advantage.
  • FCL can launch innovative products with a disruptive go-to-market strategy.
  • Expect Future Retail to contribute over 90 percent of financial year-ending March 2020’s revenues, compared to 74 percent in the next financial year.
  • Expect revenues to jump 3.2 times by March 2020; margins to expand by 470 basis points by March 2020.
  • Scale-driven efficiencies, better fixed-cost absorption and product mix improvement to drive margin expansion.
  • Bull Case price target Rs 194: Faster ramp-up of small format stores by FRL, and higher contribution of FCL brands.

IIFL on Vardhman Textiles

  • Maintained ‘Buy’; raised price target to Rs 1,480 from Rs 1,400.
  • Expect yarn spreads to remain healthy.
  • Expect global cotton prices to remain healthy.
  • Erratic weather increased share of low quality U.S. cotton.
  • Expect margins to benefit in second half of the current financial year as yarn spreads expand.
  • Margins in the first half of next financial year to benefit from low-cost cotton inventory.
  • Raised earnings per share estimates by 4 percent till March 2020.

Talking Points

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India was little changed at 10,203 as of 7:09 a.m.

The dollar is poised for its biggest weekly gain since September as the U.S. tax reform bill made encouraging progress and ahead of employment data that’s expected to show hiring remains robust in the world’s largest economy.

Asian stocks opened higher following a broad-based rally in U.S. equities. Japan’s benchmarks advanced, buoyed by a weaker yen, which maintained a 0.7 percent slide. The Bloomberg dollar index looks like ending the week with a 1 percent gain after the passage of the U.S. tax bill through the Senate underpinned gains.

Here are some key events for the remainder of this week:

  • China reports on trade on Friday.
  • U.S. employers probably hired at a robust pace in November as the unemployment rate held at an almost 17-year low. The Labor Department’s jobs report Friday may also show a bump up in average hourly earnings.

Commodities

  • West Texas Intermediate crude was little changed at $56.60 a barrel.
  • Gold was steady at $1,247.38 an ounce.

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