● Nifty index managed to surpass its previous day’s high and extended it gains towards 12034 mark in the first half of the session. However it failed to hold its gains above 12000 zones and drifted sharply towards 11888 levels. It formed a Bearish Candle on daily scale while Doji Candle on weekly scale. Multiple supports are seen at lower zones while selling pressure is seen near 12000- 12050 levels
● Now it has to continue to hold above 11850 zones to witness an up move towards 12035 then 12103 levels while supports are seen at 11780 – 11750 zones
● On monthly options front, Max Put OI is at 11600 then 11500 strike while Max Call OI is at 12000 then 12300 strike. We have seen Put writing at 11900 and 11700 strike while Call writing is seen at 12300 then 12200 strike. Option data suggests a broader trading range in between 11800 to 12200 zones
● India VIX moved up by 4.24% at 15.85 levels
● Bank Nifty relatively outperformed the benchmark index and extended its gains towards 31100 mark. It gained nearly 400 points on intraday basis but failed to hold its gains at higher levels and closed near 30700 levels. It formed a Shooting Star candle on daily scale while Bullish Candle on weekly scale
● Supports are gradually shifting higher and now it has to continue to hold above 30500 zones to witness an up move towards 31000 then 31250 levels while supports is seen at 30250 then 30000 zones
● Longs in IGL, MGL, Kotak Bank and IndusInd bank
● Shorts in Siemens, Gail, BPCL and Bank of Baroda
Expect market to open on a flat note on account of domestic and Global cues. Nifty declined nearly 1% yesterday but FIIs were net buyers Rs832cr. Positive signals on US China trade front has put pressure on gold prices which has fallen to 3-month low (Generally inverse relation between Gold and equity). SGX Nifty declined 11 points or 0.1%. However, traders buy on dips in the market.
Asian markets declined marginally – Nikkei slipped 0.2% and Hong Kong Index slipped 0.6% after the President Donald Trump said on Friday that he has not agreed to scrap tariffs on Chinese goods, dampening hopes about a resolution. Stocks fell on Trump’s comments. China said on Friday that tariff removal is a requirement for a deal.
US market update, the S&P 500 posted its fifth straight weekly gain while the Dow rose for a third consecutive week. The Nasdaq, meanwhile, notched its sixth straight weekly gain. The major averages also hit record highs this week as sentiment around U.S.-China trade generally improved. Better than expected earnings from companies such as Disney and Qualcomm also contributed to the marginally gained US market.
Brokers Radar – CLSA Positive on Housing Finance stocks on its India Strategy after a government reform process. CLSA positive on Bank of Baroda, CLSA TGT GAIN 180. Macquaire BUY Nestle TGT 15397, CITI BUY Lal Pathlab TGT 1700, DLF TGT CITI 155.
Key macroeconomic numbers are likely to drive stock in a holiday-shortened week (Tuesday Holiday) ahead as quarterly earnings season is almost coming to an end and the Ayodhya verdict unlikely to have any major impact on overall investor sentiments. IIP data on Monday, inflation rate on Tuesday and WPI inflation on Thursday would be keenly watched by market participants amid economic slowdown concerns. Among the global cues, US-China trade deal, Saudi Aramco’s record IPO starts November on 17 will be an important driver for the Indian market.
In the global market, Investors will be looking for updates on the U.S.-China trade war today. Trade optimism spurred by news that the world’s two largest economies agreed to roll back tariffs rallied all three stocks averages to record-highs this week. However, Both macro and micro factors are encouraging. Strong FIIs buying, continued government reform process and impressive quarterly results are among the positive macro factors in the market. Global factors like first phase of US-China trade deal likely to be implemented very soon and impressive US and China economy data also boosted the market sentiment.
Sector watch – Banking and Finance, Auto and Metal
Actionable BUY – M&M, Eicher and Amarraja Batteries.
Market summary – Eicher, M&M, Ashok Leyland, NTPC, Amararaja Batteries and Mas Financial reported better than expected Q2 results. Bharat Forge, Nestle, United Breweries announced lower than Q2 results, Bank of Baroda, Indostar Capital announced inline with expected Q2 reults. Results – today Adani Ports, Alembic Labs, Britannia, Coal India, Hindalco, Hindustan, Indian Cement, Indian Hotel, , Mahanagar Gas, Motherson Sumi. Moody’s Investors Service revised its outlook of six financial institutions to negative from stable – HDFC Bank, Hero FinCorp, HUDCO and SBI. US FDA alearts recall of Ranitidine made by Aurobindo Pharma USA. Tata Chemical – Value unlocking through demerger of Consumer business.
Watch on SBI – Media news that the SBI plans to sell 14% stake in card business unit’s IPO worth Rs8000cr with valuation of Rs37000cr.
Watch on Hero Motocorp and Max Financial – Media news that the Hero corp is set to buy a significant minority stake in Max Financial Services
Maruti Suzuki production slashed 21% in Oct; cut for ninth month in a row. The company produced a total of 1,19,337 units in October as against 1,50,497 units in the year-ago month – Negative for Maruti
Watch on PVR – Company to open 9 silver screen in Sri Lanka – Positive for PVR.
MSCI added stocks likely to be momentum continue – Expect momentum to continue after Morgan Stanley Capital Index (MSCI) included eight Indian stocks like ICICI Prudential, Siemens, IGL, SBI Life, Berger Paints, Colgate, DLF, HDFC AMC and InfoEdge.
Media news that the Edelweiss group is planning to raise up to raise $1bn in dedicated real state fund with South Korea Mertiz .
Raymond was locked in 20% upper circuit on Friday after the media news that the Company will demerge its core lifestyle business to a separate business.
Friday, Profit booking pulled down Nifty nearly 1% (104 points) to close below 12k (11908). Sentiment dampened after Moody’s downgrade of India’s sovereign outlook from ‘stable’ to ‘negative’ citing increasing risks to the country’s economic growth. Moreover, traders booked profit after Nifty climbed up over 4% (451 points) in the last eleven trading sessions. India Vix gained 4.3% at 15.20.
Moody’s revises outlook on 6 Indian financial companies – Moody’s Investors Service revised its outlook of six financial institutions to negative from stable on November 8. These are EXIM India, HDFC Bank, Hero FinCorp, HUDCO, IRFC, and SBI. At the same time, Moody’s has maintained its outlook on Bank of India, Canara Bank, Syndicate Bank and Union Bank as stable.
Nestle reported marginally lower than expected Q3 results.Company NEST reported net sales growth of 9.4% YoY to INR32.2b (est. INR31.9b). Domestic sales grew 10.5% during the quarter largely driven by volume & mix. Export sales declined 7.1% due to lower coffee exports to Turkey. EBITDA grew by 2.4% YoY to INR7.6b (est. INR8.1b), PBT grew by 2.8% YoY to INR7.1b (est. INR7.6b) and Adj. PAT grew 30.4% YoY to INR6b (est. INR5.1b). EBITDA margin contraction of 160bp YoY to 23.6% in 3QCY19.
Ashok Leyland reported better than expected EBITDA and EBITDA margin. Company reported Q2 net profit Rs38.9cr (92.6% YoY) – expectation loss Rs5cr, EBITDA Rs228.5cr (down 72.4% YoY) – expectation Rs206cr , EBITDA margin 5.8% vs 10.9% (YoY) – Expectation Rs5.2% and Income Rs3929cr (down 48.4% YoY) – expectation Rs2894cr.
Bank of Baroda reported inline with expected Q2 results. Company reported Q2 net Rs736.7cr, NPA at 3.9%, GNPA 10.25% – expectation 9.7% vs 10.3% (QoQ), NIM 2.8% vs 2.6% (QoQ), provision coverage ration 64.4% vs 72.2%(QoQ), NPA at 3.91% vs 4% – expectation at 3.8%, provision Rs4210cr vs Rs3285cr (expectation Rs3440cr) and NII Rs7020cr (up 10.1% YoY)
IDBI Bank expects to be profit by end of current financial year. Company to sell entire stake in IDBI asset management – Avoid on IDBI Bank .
KEC International Q2 net profit Rs139cr and income Rs2810cr
Aurobindo Pharma – US FDA alearts recall of Ranitidine made by Aurobindo Pharma USA – Negative for Aurobindo Pharma
MRF Q2 net profit Rs220cr (down 17.7%YoY) and income Rs3950cr (up 1.5% YoY)
Bharat Forge reported lower than expected Q2 results. Stock declined 7% after announced Q2 results. Company reported Q2 net profit Rs245cr (up 7.6% YoY) – expectation Rs228cr, EBITDA margin 25.4% vs 25.9% (YoY) – expectation 26.2%, EBITDA Rs320cr (down 32.6% YoY) – expectation Rs353cr and 1258cr (down 25% YoY) – expectation Rs1348cr
Strides announces re-launch of Ranitidine tablets for US markets. Strides completed testing of several of its Ranitidine batches – Positive for Strides.
Century Textiles Q2 net profit Rs183cr and Income Rs851cr
Tata Motors committee to decide on debt issue terms on Nov. 12 and road show from November 11 for USD Bond – Positive for Tata Motors. Company reported impressive Q2 results.
HDFC India Equity Fund boosted its holdings in ITC Ltd. and reduced its holdings in Infosys in October,- The fund’s disclosed holdings rose 4.1% in value to Rs233.4bn. State Bank of India was the biggest investment, representing 10% of disclosed assets.
NTPC reported better than expected Q2 results. Stock is trading attractive valuation and we have a buy rating on the stock. Company reported PAT increased ~24% YoY to INR34.8b (16% beat to our est.). PAT has been adjusted for INR3.3b fixed charge (FC) under-recovery (u/r) this quarter. The beat was on account of rise in late payment surcharge income. Also, reported PAT was up ~34% YoY to INR33b.
Oil India reported lower than expected Q2 results. However, valuation is attractive and we have a buy rating on the stock. Company reported 2QFY20 revenue was 5% higher than est. at INR32.1b (-14% YoY), led by higher gas sale and higher than expected net realization. EBITDA was 12% lower than est. at INR12.4b (-16% YoY) due to higher employee cost (+37% YoY, +21% QoQ). PBT for the quarter was down 23% YoY to INR9.7b, led by higher depreciation cost of INR4.2b. Depreciation cost was at USD5.0/boe v/s USD4.4/boe in 2QFY19. PAT was 27% lower YoY at INR6.3b.
Gujarat State Petronet reported lower than expected EBITDA but volume announced impressive growth. Standalone net sales were 6% higher than our est. at INR5.4b (-10% YoY), led primarily by higher than expected transmission volume and marginal improvement in implied tariff. Revenue in 2QFY19 included one-time retrospective adjustment in tariff; resulting in gas transportation in the quarter declining 10% YoY at INR5.3b. EBITDA was down 15% YoY at INR4.4b and PBT down 15% YoY (+16% est. led by lower interest cost) at INR3.9b. PAT was up 41% YoY to INR4.5b.
Amaraja Batteries reported better than expected Q2 results and strong volume growth. We have a buy rating on the stocks. Company reported volume grew 7-8%. Volume growth was driven by strong growth in aftermarket, exports and UPS, but diluted by decline in OEMs and telecom. Auto volumes grew 7-8% while Industry volumes grew 6-7%. Lower lead prices, favorable mix benefit diluted by operating deleverage: However, operating deleverage diluted EBITDA margin expansion to ~350bp YoY (+190bp QoQ) at 17.2% (v/s est. 15.6%). PBT grew ~26% YoY. This coupled with lower tax boosted adj. PAT growth to ~80% YoY to INR2.2b (v/s est. INR1.3b).
United Breweries reported lower than expected Q2 results but volume growth reported inline with expectation – Company reported 2QFY20 standalone net sales grew 3.4% YoY to INR15.8b (v/s est. INR17.2b). EBITDA declined 39.5% YoY to INR1.9b (v/s est. INR2.9b). PBT declined 53.7% to INR1.2b (v/s est. INR2.1b). Adj. PAT declined 29.7% YoY to INR1.2b (v/s est. INR1.4b). Volumes in 2QFY20 grew 6%.
Mas Financial reported impressive Q2 results and strong AUM growth – We have a buy rating on the stocks. Company reported Q2 – PBT declined 7% YoY to INR499m (23% miss), largely driven by pressure on spreads (net operating income miss of 6%) and lower tax rate advantage used for aggressive provisions (Write offs are ~INR100m for the quarter). PAT grew 35% YoY to INR467m (in-line). Asset quality was largely stable with Gross Stage 3 loans at 1.27%. However, provisions grew 87% YoY to INR226m as the company aggressively resorted to writing off GNPLs to offset the tax gain. Adjusted for write offs, Gross Stage 3 % would have grown to ~1.4%.
Indostar Capital reported inline with expected Q2 results and stable asset quality. We have a buy rating on the stocks after a fall in the last few sessions. Company reported – 2QFY20 PAT/PBT declined 23%/32% YoY to INR494m/INR675m (30% below est.). While operating profit grew 27% YoY to INR1.4b (10% beat), the miss was driven by higher credit cost of INR722m (v/s est. INR250m). Overall AUM declined 7% QoQ as the company received large repayments in the corporate lending business (share of non-real estate in the total corporate book down from 37% to 27% QoQ). Asset Quality: Overall GNPL ratio reduced by 100bp to 3.7%.
Tata Chemical – Value unlocking through demerger of Consumer business – In May’19, the board of Tata Chemicals had approved the demerger of its Consumer products business and the transfer it to Tata Global Beverages (TGBL) in an all-equity transaction. It was also announced that TTCH would retain salt manufacturing with itself post the deal. The existing shareholders of TTCH will receive 1.14 shares of TGBL for every 1 share held in TTCH. Deal valued the Consumer business at ~18x FY19 EBITDA, implying an EV of INR57.6b (INR226/share). However, since then, the share price of TGBL has rallied by ~50% and of TTCH by 14%. As a result, the value/share of the consumer business being transferred to TGBL stands at INR342/share. Against this backdrop, we attempt to analyze the valuation at which the residual business is available.
Havells India on Thursday launched a new range of air purifiers. The Freshia range, which comprises four products, is priced between Rs 14,490 and Rs 43,290 – Positive development after a launch of new products
M&M reported better than expected EBITDA and EBITDA margin after a cost control. We have a buy rating on the stocks. Company reported Q2 net profit 1210cr (down 28% YoY) – expectation Rs1465cr , EBITDA Rs1541cr (down 16.7%) – expectation Rs1357, EBITDA margin14.1% – expectation 12.2% and income Rs11080cr (down 13% YoY) – expectation Rs11105 cr
GAIL reported lower than expected EBITDA margin. Company reported Q2 net profit 1060cr (down 46% YoY) – expectation Rs1465cr , EBITDA Rs1541cr (down 16.7%) – expectation Rs1357, EBITDA margin 9.1% vs 15.2% (YoY)- – expectation 12.2% and income Rs18250cr (down 5.3% YoY) – expectation Rs11105 cr
Eicher reported better than expected Q2 results and reported above EBITDA margin. Company reported Q2 net profit 573cr (up 1.2% YoY) – expectation Rs449cr, EBITDA Rs546.1cr (down 25%) – expectation Rs524cr, EBITDA margin 25.1% vs 30.3% (YoY)- expectation 24.4%, other income Rs145cr and income Rs2190cr (down 9% YoY) – expectation Rs2145 cr
Lal Pathlabs Q2 net profit Rs80.5cr, dividend Rs6.5 (up 41.4% YoY) and Income Rs365cr (up 15%)
Trigyn Tech units contract with un extended till December 2020
SBI Fixed Deposit Interest Rate, MCLR 2019 – SBI on Friday announced another reduction in its Fixed Deposit interest rate and marginal cost of funds-based lending rate (MCLR) by 5 bps across all tenors. The one year MCLR will come down to 8.0 per cent per annum from 8.05 pa from November 10, 2019. SBI has also cut interest rates on term deposits (or fixed deposits) of different tenors. We are positive on SBI after reported good quarterly results. – We are positive on SBI.
Finance Ministry Responds To Moody’s India Outlook Change – The finance ministry in a statement said India continues to be among the fastest growing major economies in the world. “India’s relative standing remains unaffected,” it said citing International Monetary Fund’s recent World Economic Outlook putting India’s GDP growth rate at 6.1 percent in 2019 and rising to 7 percent in 2020. “As India’s potential growth rate remains unchanged, assessment by IMF and other multilateral organisations continue to underline a positive outlook on India,” it said.
SBI Blue Chip Fund added Bandhan Bank to its investments and exited its position in Aurobindo Pharma in October, according to data analyzed by Bloomberg. The fund’s disclosed holdings rose 1.1% in value to Rs225.4bn. Boosted ICICI Lombard, Reduced Infosys, HDFC Bank was the biggest investment and one new buy of Bandhan Bank 2.35mn shares.
Results today – Adani Ports, Alembic Labs, Astrazenaca Pharma, Balmer Lawrie, Balarampur Chini, Bilss GVS, Bombay Dyeing, Britannia, Coal India, Finolex Industries, General Insurance Corporation, Hindalco, Hindustan Aeroonacits, Indian Cement, Indian Hotel, Jindal Stainless, Linde Industries, Mahanagar Gas, Metropolis Healthcare, Motherson Sumi, NESCO, NHPC, NMDC, Phoenix Mills, Shankara Mills, Sheela Foams, SJVN, SERI Infra and Superjit Engine.