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Sensex, Nifty Post Longest Losing Streak In 3 Months

Indian equity benchmarks declined for a sixth straight session amid escalating tension between the U.S. and North Korea and as some investors deemed the recent run up in stocks overdone.

Singapore government’s wealth fund Temasek will make threefold gains as it sells a third of its nearly 20 percent stake in Godrej Agrovet Ltd., India’s largest animal feed maker, in an initial public offering.

Godrej Agrovet will raise up to Rs 1,157 crore by selling 2.52 crore shares at Rs 450-460 in the IPO that opens on October 4. V-sciences Investment Pte., an investment arm of Temasek, had acquired its stake in 2012 at an average cost of Rs 154.6 a share.

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Reliance General Insurance Co. Ltd. will list by the end of this financial year, Anmol Ambani, executive director of its parent company Reliance Capital Ltd. said in his first public address after assuming office.

Anmol Ambani, Executive Director, Reliance Capital We have already received round one approval from IRDAI. We expect to become operational beginning early next year.  

The market regulator won’t rush in to allow unified commodity and stock exchanges. It will first release a consultation paper before moving in that direction, said SK Mohanty, executive director of the Securities and Exchange Board of India.

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Shares of the D-Mart store operator rose as much as 18.3 percent, snapping a three-day decline, after brokerage house Goldman Sachs initiated coverage on the stock with a buy rating.

Goldman Sachs On Avenue Supermarts

  • Price target at Rs 1,586; add to conviction list
  • Benefit from tax reforms as grocery market share shifts to the organized sector
  • Set to grow EBIT by 13x in 10 years, aided by this high growth, low margin and high return strategy
  • Valuation is full as 65x FY19 PE but does not factor growth, business model

3 Reasons For Conviction List Addition

  • Profitable supermarket chain
  • Beneficiary of recent government reforms
  • Winning the online wallet
  • Entertainment Network India: Shares of the Radio Mirchi operator fell as much 1.17 percent. Trading volume was 42.2 times the 20-day average for this time of day.
  • IFB Industries: Shares of the home appliances maker dropped as much as 2.15 percent. Trading volume was 39.4 times the 20-day average for this time of day.
  • TI Financial Holdings: Shares of the Murugappa Group company dropped as much as 2.5 percent. Trading volume was 22.1 times the 20-day average for this time of day.
  • Rural Electrification Corp: Shares of the state-owned company fell 2.6 percent. Trading volume was 2.7 times the 20-day average for this time of day.

The local currency dropped to its lowest level since March, tracking declines in most emerging Asian currencies, as tensions over the Korean peninsula escalated.

Overseas holdings of rupee-denominated government and corporate bonds fell by Rs 640 crore on Monday in a third day of declines, the longest run of outflows since mid-August, according to NSDL data.

Indian sovereign bonds traded lower. Yield on 6.79 percent notes due May 2027 rose 2 basis points to 6.64 percent amid concern fiscal deficit may widen after the government said it was considering measures to boost growth.

Shares of the country’s largest oil explorer rose nearly 3 percent to Rs 169. Trading volume was 4 times the 20-day average for this time of the day. In the past year, the stock had a similar or greater gain five times and was little changed next day.

ONGC trades at 10.8 times trailing 12-month earnings per share and 9.3 times estimates for the coming year. The stock is 14 percent below the Bloomberg consenus one-year target price.

Indian Open

  • IDFC has 15.8 lakh shares change hands in a block deal
  • Aurobindo Pharma has 10.2 lakh shares change hands in single block
  • Deep Industries has 89.6 lakh shares (or 28 percent of equity) change hands in a block deal on the BSE.

Buyers and sellers were not immediately known.

Source: Bloomberg

Indian equity benchmarks opened higher but pared gains soon after to decline for a sixth straight session as some investors deemed the recent run up in stocks as overdone.

The S&P BSE Sensex fell 0.2 percent to 31,567 and the NSE Nifty 50 dropped nearly 0.3 percent to 9,846. Both the indices are trading close to their one-month lows.

Eleven of the 19 sector gauges compiled by the BSE Ltd. rose, led by the S&P BSE Realty Index’s 0.4 percent gain. The S&P BSE Consumer Durables Index dropped 0.7 percent, the most among the indices.

Indian rupee is likely to point downwards today tracking its Asia pacific currency peers, which have fallen against the dollar. Yesterday, the currency extended its worst weekly decline since November.

The pitfalls for the currency also includes the tensions in the Korean peninsula. Yesterday the U.S. National Security Adviser HR McMaster said the threat from North Korea is "much further advanced" than anticipated.

There's a risk aversion across Asia following the Nkorean tension and Indian benchmark bonds might be impacted by that. The bonds gained yesterday on indications from Finance Minister Arun Jaitley that a government stimulus may not be coming anytime soon, allaying concerns about overshooting fiscal deficit target.

Investors will be keenly watching for the cut-off of the 22,500 crore rupees of bond sale by the state-owned lenders.

  • Nifty September Futures closed with a premium of 6 points from 18.5 points
  • Nifty October Futures trading with a premium of 39 points at 9911.7
  • Rollover: Nifty at 20 percent, Bank Nifty at 19 percent
  • Nifty Futures open interest across series up 4 percent & Bank Nifty up 0.1 percent
  • India VIX closed higher by 4.1 percent at 13.3
  • September series highest Call base shifts to 10,000 from 10,200 (open interest at 64.4 lakh shares, up 55 percent)
  • September series highest Put base shifts to 9700 from 9,900 (open interest at 39.2 lakh shares, up 16 percent)
  • Call strikes at 9900, 9950, 10,000 saw open interest addition
  • Put strikes 9900, 10,000 sees open interest unwinding, addition seen for 9700 & 9800
  • Prataap Snacks IPO Day 3. The issue was subscribed 2.18 times at end of day 2.
  • Godrej Agrovet IPO price band at Rs 450 - 460 per share

Nomura on Coal India

  • Maintain Neutral; Cut price target to Rs 260 from Rs 320
  • FY18 and FY19 EPS estimates cut by 16 percent and 10 percent respectively
  • FY18 and FY19 EBITDA estimates cut by 12 percent and 4 percent respectively
  • Cut quantifying grade slippage and wage revision risk
  • Hike in non-coking coal prices imperative; Expect 4-5 percent price revision
  • Expect dividend per share of Rs 14 and Rs 18 for FY18 and FY19 respectively

Edelweiss on Adani Transmission

  • Initiate Buy with price target of Rs 154
  • EBITDA and net profit expected to grow at CAGR of 19 percent and 36 percent respectively over FY17-19; And robust free cash flow
  • Positives:- domestic transmission opportunity, debt restructuring & additional leveraging and aggressive growth to drive economies of scale and synergy benefits

IIFL on Century Plyboards

  • Maintain Buy Rating with price target of Rs 330
  • Revenue, EBITDA and Net profit to grow at CAGR of 20 percent, 18 percent and 15 percent respectively over FY17-19
  • Increase in capacities, entry in MDF segment and revival in housing offstage to drive earnings
  • Company to generate strong free cash flow over next 2-3 years
  • Net debt-to-equity to reduce to 0.5 times in FY19 from 0.8 times in FY17
  • Improving product mix and operating leverage to drive an uptick in margins from FY19

IIFL on HUL

  • Maintain Buy; Hiked price target to Rs 1,270 from Rs 1,225
  • Expect 4-5 percent volume growth and 9 percent revenue growth in Q2FY18
  • Benign input cost and cost-saving initiatives to drive 19 percent growth in EBITDA and Net profit
  • HUL suggests no significant recovery in consumer demand
  • Expect EPS to grow at 17 percent CAGR over FY17-20

Credit Suisse on Capital Goods

  • Mid-cap companies suggest modest impact of GST; L&T cautious on uncertainties created by GST
  • Process related issues exist; GST making them review execution timelines
  • Maintain Outperform on L&T with price target of Rs 1,425
  • L&T witnessing execution pick-up and can unfold several large domestic opportunities
  • Maintain Outperform on Sadbhav Engineering with price target of Rs 360
  • Maintain Outperform on Dilip Buildcon with price target of Rs 650
  • Outperform on Dilip and Sadbhav on the back of strong execution and opportunities in the roads sector

JPMorgan on Metals

  • Expect limited correction in metal stocks and every correction should be entry opportunity
  • Pullback in metal stocks expected led by Chinese supply cuts and strong global growth
  • Tata Steel, Hindalco, Vedanta and JSW Steel with improved balance sheets to work on next phase of value-accretive growth projects
  • Next trigger only in February 18 when news related to shut capacity in China flows
  • Weakness in domestic liquidity should weigh on the stocks

Macquarie on L&T Infotech

  • Maintain Outperform with price target of Rs 920
  • LTI is hiring seniors, culture changed to sales led approach from delivery led approach and strong automation-led approach for IMS and BPO to grow at faster pace
  • LTI stepping up its local hiring in U.S. to deal with H1B
  • LTI preferring small capability based acquisitions to chase revenue growth
  • LTI mindful of rising cash balance; Expects dividend payout to increase

DB on Titan

  • Maintain Buy Rating with price target of Rs 625
  • Preponement of purchase in Q1FY18 and government notification on PMLA to lead to weak demand in Q2FY18
  • New PMLA regulation to increase selling process time at the store

HSBC on Phoenix Mills

  • Maintain Buy Rating with price target of Rs 580
  • Company to double its mall space over the next five years
  • Double-digit rental growth to continue along with significant free cash flows
  • Company focus is now on adding to its retail portfolio under the new platform
  • Rental income and net profit to grow at CAGR of 13 percent and 30 percent respectively over FY17-20

CLSA on PM’s Power Push

  • The key is not the scheme but implementation of the scheme
  • Marginal power supply to consumers under the Saubhagya scheme could be loss making
  • Remain defensive on sector; Buy on regulated utilities stocks
  • Buy on NTPC, Power Grid and Tata Power
  • Sell on Adani Transmission, Adani Power and JSW Energy
  • Tata Motors: Jaguar Land Rover is said to scout for luxury brand acquisitions, according to Bloomberg
  • IOC board clears Rs 27,000 crore refinery of its unit Chennai Petroleum
  • DS Kulkarni to consider financial restructuring on October 3
  • IFCI approves sale of 0.86 percent stake in NSE to investors
  • IDBI Bank says it sold 1 percent stake In SIDBI On Friday
  • Chennai Petroleum To set up new 9 mmtpa refinery at Nagapattinam
  • GAIL plans to set up petrochemical complex in Andhra Pradesh, according to PTI
  • RBI says FII investment in JSW Holdings reached trigger limit
  • GE Shipping takes delivery of second hand medium gas carrier. Fleet size increases to 47 vessels.
  • Aditya Birla Capital receives in principal approval from RBI to set up an ARC
  • Ess Dee Aluminum Chairman Sudip Dutta granted bail
  • Just Dial completes buyback of 22.41 lakh shares. Post buyback no. of equity shares reduces to 6.73 crore
  • Swaraj Automotive’s two day offer for sale starts today
  • TV Today circuit filter revised to 10 percent
  • Sutlej Textiles: Ex date for stock split from Rs 10 to Re1 per share
  • Manpasand Beverages: Last trading day before 1:1 bonus
  • MOIL: Last trading day before 1:1 bonus
  • Lupin gets U.S. FDA nod for Clobetasol propionate topical lotion
  • The Sirpur Paper Mills: National Company Law Tribunal’s Hyderabad Bench admitted the applications filed by the creditors for initiation of corporate insolvency resolution process.
  • JK Paper: Disruption in production process at Orissa unit due to stoppage of water supply by some local villagers.
  • JM Financial: Shareholders approve board of directors to borrow money up to Rs 5,000 crore.

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.21 percent to 9,862.5.

Stocks in Asia fell, though declines were modest, as gains in gold and the yen petered out. Financial markets showed signs of stabilizing after a fresh trigger from North Korea had sent money into haven assets, with focus returning to comments from central bank policy makers.

A speech by Federal Reserve Chair Janet Yellen on Tuesday will be parsed as policy makers continue to disagree on whether to raise U.S. interest rates again this year. Investors see a roughly 60 percent chance that rates will be increased again in December following moves in March and June, according to Bloomberg

Commodities

  • Gold was steady at $1,311.26 an ounce, after jumping 1 percent on Monday.
  • West Texas Intermediate crude edged lower to $52.16 a barrel after rising 3.1 percent on Monday to the highest since April. Turkey threatened to shut down Kurdish crude shipments through its territory.

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