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Sensex falls on inflation concern; RIL, banks take a hit
MUMBAI: Falling for the fifth day in a row, the BSE benchmark Sensex on Monday dipped by 77 points on profit selling by funds in bluechips following spurt in inflation.
The fall was led by Reliance Industries, which declined to a 52-week low on sustained selling.
Besides, the banking sector stocks fell as inflation rose during April, reducing chances of a cut in interest rates.
The Sensex, which has lost nearly 620 points in the last four sessions, fell further by 77.14 points, or 0.47 per cent, to 16,215.84.
Traders said selling emerged as inflation moved up to 7.23 per cent in April from 6.89 per cent in March.
The broad-based National Stock Exchange index Nifty fell by 21.10 points, or 0.43 per cent, to 4,907.80, led by refinery, banking and realty sector stocks.
Sensex heavyweight RIL tumbled by 2.32 per cent to Rs 681.15, while shares of country’s largest lender State Bank of India fell 0.65 per cent to Rs 1,840.20 and HDFC Bank declined 2.02 per cent to Rs 500.50. Other losers of the index kitty were BHEL, DLF, ICICI Bank, ONGC, Tata Motors, Tata Steel, Tata Consultancy Services, Sterlite Industries, HDFC Ltd, NTPC and Jindal Steel.
The oil and gas sector index suffered the most with a loss of 1.69 per cent to 7,420.47, followed by banking index fell by 1.61 per cent to 10,661.64. Realty index lost 1.27 per cent to 1,541.89 and Power index by 0.79 per cent to 1,808.48. Bucking the trend, Larsen and Toubro gained 1.84 per cent to Rs 1,159.80 on fresh buying following strong quarter earnings.
Rupee off lows, no definite talk of RBI intervention
MUMBAI: The rupee is off the day’s lows at 54.24/25 compared to the 54.46 record low hit earlier in session, as stocks pared some losses and the euro posted a modest recovery.
Some state-run banks have been seen on the sellside, but there is no definite talk of RBI intervention, dealers said. Today’s lowest is being considered as the immediate resistance level for now.
Seeking to allay investor fears, Finance Minister Pranab Mukherjee told Parliament today that India’s growth story is intact.
“We will take some austerity steps to convey that it is responding to situation, but I am not pressing the panic button,” Mukherjee added.
He emphasised the need to take serious steps to cap the subsidy bill at 2% of the GDP. The government cannot pass the entire burden of high oil prices to the consumers, he added.
The rupee hit a record low against the dollar on Wednesday as risk aversion in global markets added pressure on a currency already under fire from fiscal and current account deficits that are weighing on growth.
Repeated currency intervention by the central bank and a rash of other measures targeting deposits and exporters have failed to stem the slide in the currency, the worst performing emerging Asian currency by far since March.
The rupee dropped as low as 54.46 per dollar, breaching its previous record low of 54.30 in December. It was last trading at 54.34/36 compared to a close of 53.79.
The Reserve Bank of India (RBI) will continue to face a losing battle in trying to check the rupee’s fall, analysts say.
The downturn in global markets raises the prospect of capital outflows when India needs inflows to shore up its balance of payments, which slipped into the red in the December quarter for the first time in three years.
Stalled policymaking in government ahead of general elections due by 2014 are also playing a key role in undermining confidence in the currency.
Frequent currency intervention by the central bank would further sap rupee liquidity from the economy at a time when the country is facing a severe cash crunch in its banking system, analysts said.
Specialty Restaurants’ fundamentals look average: SMC
NEW DELHI: SMC is of the view that the fundamentals of Specialty Restaurant Ltd (Speciality) look average. However, factors like the rising working class base, increasing urbanization, a growing middle class population and rising disposable income in India are expected to provide momentum to the restaurant business.
Speciality is a fine-dining restaurant operator in India with 69 restaurants and 13 confectionaries as at February 29, 2012, featuring certain well-recognised brands in the Indian restaurant industry.
“Moreover, the company has been successful in creating brands like Mainland China (the flagship brand) and Oh! Calcutta, which are characterized by high brand mortality and strong competition. On the flip side, the company will have to consistently set up new outlets as older ones tend to mature in four-five years,” SMC said in a report.
SMC assigned a 2.5 rank to the offering.
Speciality has priced its IPO at Rs 146-155 to raise up to Rs 182 crore The issue will run from May 16 until May 18.
The company’s business depends significantly on market recognition of its Mainland China brand. Should it fail to maintain or enhance its brand equity, business, finances, operational results and prospects may be materially and adversely affected, the SMC report added.
In order to maintain and speed up growth, the company plans to use the IPO proceeds to expand mainly through ownership and opportunistically through franchising on a FOCO model, developing a food plaza, repaying part of its term loan facilities and for general corporate puposes.
Considering the P/E valuation on the upper end of the price band of Rs 155, the stock is priced at a pre-issue P/E of 27.26x on its annualized FY11 EPS of Rs 5.69. Post issue, the stock is priced at a P/E of 36.35 on its annualized EPS of Rs 4.26.
On the lower end of the price band of Rs 146, the stock is priced at a pre-issue P/E of 25.68x on its annualized FY11 EPS of Rs 5.69. Post issue, the stock is priced at a P/E of 34.24 on its EPS of Rs 4.26.
Citi downgrades Sintex to ‘sell’ , cuts target price to Rs 52
Citigroup has downgraded the ratings of Sintex Industries to ‘Sell’ . The bank had initiated coverage on Sintex with a ‘Buy’ in November 2011 after a sharp correction in CY11, as the company seemed to be on track with keeping working capital and capex under control.
This has not played out in FY12. With a sharp overshoot in capex in FY12 and deterioration in working capital, Citigroup thesis has been invalidated and, hence, it has downgraded the stock to ‘Sell’ . “We cut our target price to Rs 52 from Rs 104 as we now use 5.3x EV/EBITDA on March 13E to capture the increasing possibility that a large part of FCCBs will have to be funded by interest-bearing debt,” said the Citigroup note.
Citigroup estimates do not yet factor in the replacement of FCCBs with high-cost debt, which may lead to a further downside in numbers. FY12-FY 14E EPS has been cut by 2% to 14% to factor in FY12 results and slowdown in monolithic and custom-molding businesses.
HSBC remains neutral on dabur on muted price growth
HSBC has maintained a ‘Neutral’ rating on Dabur India with a price target of Rs 115. Consumer care division registered a revenue growth of 15%, while foods grew by an impressive 30.5% in the quarter. While margins declined as the input prices persisted, and Dabur increased its A&P spend, overall net earnings grew by 16%.
Overall volume growth is expected to remain in high single digits but price growth will be rather modest , as competitive dynamics limits the scope of price hikes. “Our valuation work in the Indian FMCG space suggests that a sustainable volume growth is one of the most sensitive factors for the multiple contraction or expansion,” said an HSBC note. If Dabur were to sustain overall volume growth close to 10%, even a permanent rerating of the stock is plausible.
Sensex ends at 16,200; oil & gas, banks, realty down
MUMBAI: The Sensex ended in the negative territory led by losses in oil & gas, banking, realty and power stocks. The increase in the April WPI and a selloff in the European markets following the political uncertainty in Greece hurt sentiment.
The Sensex ended at 16,199.23, down 93.75 points, or 0.58 percent. It touched an intraday high of 16,390.33 and a low of 16,124.82 today.
The Nifty closed at 4,900, down 28.25 points, or 0.57 percent. It touched an intraday high of 4,957.20 and a low of 4,874.50 today.
The BSE Midcap Index fell 0.97 percent and the BSE Smallcap Index declined 1.26 percent.
Rate-sensitive stocks were under pressure after a pick-up in April WPI inflation to 7.23 percent, against 6.89 percent in March, doused hopes of any rate hike by the Reserve Bank of India.
Among sectoral indices, the BSE Oil & Gas Index was down 1.87 percent, the Bankex fell 1.81 percent, the BSE Realty Index declined 1.29 percent and the BSE Power Index slipped 0.89 percent. The BSE Healthcare Index was up 0.75 percent and the BSE IT Index edged up 0.42 percent.
HSBC upgrades Spicejet and Jet Airways ratings
MUMBAI: The aviation sector continues to face turbulent weather as the recent strike by pilots of Air India and Kingfisher Airlines is likely to put pressure on the industry. This places listed players like Spicejet and Jet Airways in a relative better situation.
In a recent report, HSBC upgraded Spicejet and Jet Airways to ‘Overweight’ and ‘Neutral’, respectively.
Spicejet has been the biggest beneficiary of the curtailed operations of Kingfisher Airlines. It is also better placed to attract FDI, according to the report.
“With fuel prices trending down and the FDI decision awaiting approval, the good news cycle is likely to continue. With new international route rights, permission to directly import jet fuel, better placement in attracting FDI, and a stronger equity support, Spicejet is well-placed in our view,” the report said.
The company is likely to benefit from the import of 20 percent of fuel consumption which will come at a 20 percent lower cost.
“Our new target price of Rs 40 implies a potential return of 28 percent, above the ‘Neutral’ band; therefore, we are upgrading our rating on the stock to ‘Overweight’ from ‘Underweight’,” the report said.
Jet Airways enjoys a wider presence in both domestic and international routes and is expected to see a pick-up in both the segments. It has already seen passenger growth in the months of January and February.
“While the overall industry saw passenger growth slow to 7 percent in the January-March quarter from 11 percent in the October-December quarter, the reported statistics for Jet Airways in January and February show that domestic passenger growth nearly doubled compared with the 16 percent rate recorded for 3QFY12.
The international business witnessed a similar improvement, with passenger growth in January-February at 25 percent, more than double the 12 percent growth recorded in 3QFY12,” the report said.
However, the report stated that unlike the domestic market, competitive pressure remained high in the international market. A weak performance in this segment tends to weigh down the entire business performance.
HSBC has upgraded Jet Airways to ‘Neutral’ from ‘Underweight’ and raised the target price to Rs 350 per share from Rs 240 earlier.
Bank contracts plunge to lifetime low; Basel norms seen putting pressure on banks’ profitability
MUMBAI: Traders raised bearish bets on Bank Nifty futures amid concerns lenders’ asset quality could be hit by a slowing economy and profitability could be squeezed because of the higher capital norms. Bank Nifty contracts fell to lifetime lows and their discount to the Bank Nifty spot index widened on Thursday, suggesting heightened pessimism about lenders’ prospects.
Nifty seen opening lower on weak global cues; HDFC eyed
NEW DELHI: The 50-share Nifty is expected to open lower on Monday following a sharp selloff on Wall Street after a slowdown in job creation in the world’s top economy fuelled concerns about the prospects of US’ growth.
Investors will keep a close eye on HDFC Ltd ahead of its quarterly results. According to Sharekhan estimates, the housing mortgage major is expected to post a profit after tax (PAT) of Rs 1,217 crore and a year on year growth of 6.6%.
The National Stock Exchange’s Nifty underperformed global peers and closed below important support levels on Friday. The Nifty breached its 200-DMA at the 5,117 levels in its third attempt, indicating bearishness in the markets.
“The main reasons for the sharp fall are the depreciation of the rupee against the dollar, heightened worries of a fiscal deficit and the uncertainty relating to India’s tax policies for offshore investors,” Dharmesh Pancholi, Senior Manager at Sharekhan, said.
“Next week is going to be crucial as the government is likely to take up the Finance Bill on May 7 and 8 in the Lok Sabha, which also contains tax proposals. Any negative outcome on GAAR (General Anti-Avoidance Rule) and indirect transfer rules may have negative repercussions on the equity market,” Pancholi added.
Since important announcements are scheduled for May 7-8, the markets are likely to turn very volatile, he noted. Hence, participation via options is advisable.
“Market participant having huge positions are advised to hedge their position by buying suitable put options,” Pancholi said.
“Industry sources said the fear prevailing in the market since late March could have led to at least $ 10 billion worth investments either being withdrawn or deferred by P-note holders,” a PTI report said.
The Nifty closed below its 200-DMA and now the larger picture will turn negative, experts said. The index is now trading near the psychological level of 5,000 where it can stall for some time. But the trend has weakened and further lows to 4,950 cannot be ruled out.
“On the downside, the Nifty may find support at 5,000-4,950, while on the upside, Nifty May futures may face resistance at around 5,250-5,300,” Puneet Kinra, Sr. Technical Analyst (Equity Research), Bonanza Portfolio, said.
On Friday, US stocks ended their worst week this year with a sharp selloff.
“Employers reduced hiring for the third straight month, adding 115,000 workers in April, well below forecasts of 170,000. Traders’ expectations had fallen during the week, but the softer jobs number missed even more pessimistic forecasts,” a Reuters report said.
The Dow Jones Industrial Average dropped 168.32 points, or 1.27 percent, to 13,038.27 at close. The Standard & Poor’s 500 Index lost 22.47 points, or 1.61 percent, to 1,369.10. The Nasdaq Composite fell 67.96 points, or 2.25 percent, to 2,956.34.
Asian stocks slipped early Monday after elections in Greece and France fuelled questions about commitments from struggling euro zone economies to pursue austerity measures. MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.9 percent while Japan’s Nikkei stock average slid 2.5 percent.
Safe-haven assets such as government debt and yen rose on Monday. “The dollar stayed below 80 yen and the yield on the benchmark 10-year Japanese government bond slipped 2 basis points to 0.865 percent, its lowest level since October 2010,” a Reuters report said.
Japan’s Nikkei 225 index was trading 2.4% lower at 9,143.62 and Hong Kong ‘s Hang Seng was trading lower at 20,577.12, down 2.4%. South Korea ‘s Kospi was trading 1.7% lower at 1,954.45. China’s Shanghai index was trading at 2,441, down 0.4%.
At 08:00 a.m., Nifty India stock futures in Singapore were down 67 points at 5,011.00, indicating a negative opening on the domestic market.
Important Results to watch out today are:
HDFC Ltd, Andhra Bank, Aptech Ltd, Bank of India, GlaxoSmithKline Consumer Healthcare Ltd, Rolta India Ltd, SKS Microfinance Ltd, South India Bank Ltd, Welspun India Ltd, Aptech Ltd and Bosch Ltd.
Stock to watch:
Jaiprakash Associates Ltd, after the green bench of the Himachal Pradesh high court slapped a fine of Rs 100 crore on the company on Friday for setting up a cement plant fraudulently.
Natco Pharma Ltd, after Bayer said it is challenging an order from the patents office that allowed Hyderabad-based Natco Pharma to sell a cheap generic version of the German firm’s drug Nexavar in India. Nexavar is used in the treatment of cancer of the kidney and liver.
Orient Refractories Ltd, after Germany’s RHI AG, a leading refractory manufacturer, may acquire the Delhi-based company in a transaction valued at about Rs 600 crore.
JSPL, after its management approached the state government for allowing them for enhancing the capacity of its proposed steel project in Asanboni, near Jamshedpur, from 5 MTPA to 6 MTPA to produce steel through blast furnace in lieu of direct reduction of iron technology (DRI).
Allahabad Bank, after the state-run bank reported a 55% increase in net profit for the quarter to March 31, 2012, backed by strong interest earnings while it made less provisioning towards bad loans. The bank has proposed a 60% dividend for 2011-12 which means Rs 6 per share of a face value of Rs 10.
Indian Overseas Bank, after it reported a net profit of Rs.528.81 crore for the fourth quarter ended March 31, 2012, up from Rs.434.30 crore in the same period in the previous year. This represents a rise of 21.76 per cent.
Nifty near 5000; realty, banks, tech decline
MUMBAI: The Nifty fell sharply in line with global peers as risk-averse investors booked profits after elections in Greece and France raised concerns on whether eurozone nations will be able to handle the debt crisis effectively. Back home, investors await Finance Minister Pranab Mukherjee’s statements on the tax treaty with Mauritius and clarity on GAAR in Parliament today.
“There appears to be misery on the Street. We are staring at yet another tumultuous session as local and overseas headwinds continue to dampen sentiment.
All eyes will be on Parliament, where the FM will present his arguments on the Finance Bill. The markets are eager to know if he will soothe frayed nerves over GAAR and Vodafone-like tax cases. French voters sent President Nicolas Sarkozy marching out choosing Socialist challenger Francois Hollande instead.
Asian markets are down after the US and European markets took it on the chin. It is likely to be an action-packed week. The odds are in favour of a further downside unless the FM chooses to change the game,” an IIFL report stated.
Factors like a resumption of FII inflows, a correction in crude oil prices and a pause in the rupee’s fall may stem a further downslide of the indices during the day.
Foreign institutional investors turned buyers in the Indian equities. They bought equities worth Rs 427.92 crore on Friday, as per provisional data. In the last five trading sessions, they bought equities worth Rs 1224.82 crore.
The rupee bounced back after a weak opening against the dollar on suspected Reserve Bank of India’s intervention. The partially convertible rupee was at 53.34, up 12 paise, against the previous close of 53.47/48.
At 11.10 a.m., the Nifty was at 5,002.05, down 84.80 points, or 1.67 percent. It has touched a high of 5,021.15 and a low of 4,990.30 in trade today.
The Sensex was at 16,573.46, down 257.62 points, or 1.53 percent. It has touched a high of 16,620.44 and a low of 16,516.77 in trade today.
“Nifty broke its horizontal range on downside. With that it also broke the support of 200-dma. This means that short term bias for the index is bearish. In that case we are expecting a move up to 4950, which is the 61.8% retracement of the entire advance from 4531 to 5630.
If Nifty breaks 4950, then the next pivotal point on the way down is 4768,” said Dharmesh Patel, Technical Analyst, Emkay Global Financial Services.
The BSE Midcap Index was down 1.50 percent and the BSE Smallcap Index declined 1.13 percent.
Among sectoral indices, the BSE Realty Index was down 2.60 percent, the BSE Bankex fell 2.34 percent, the BSE IT Index was 2.09 percent lower and the BSE Oil & Gas Index was slipped 1.42 percent.
Jaiprakash Associates (5.34%), Cairn India (5.05%), State Bank of India (3.74%), Bank of Baroda (3.11%) and Hero MotoCorp (2.92%) are among the top Sensex losers.
BPCL (2.12%), BHEL (0.96%), Ambuja Cements (0.63%), Cipla (0.46%) and Sun Pharma (0.46%) are among the index gainers.
The market breadth was negative on the NSE with 270 gainers against 1,121 losers.
The Asian markets drifted lower on eurozone concerns and disappointing US jobs data. The Hang Seng fell 2.64 percent, the Nikkei 225 was down 2.62 percent, the Taiwan Weighted slipped 2.18 percent and the Kospi fell 1.80 per cent.
The uncertainty over Europe’s economic health and disappointing US jobs data led to a sharp decline in crude oil prices. The Brent crude for June delivery slipped to $111.92 per barrel against the previous close of $113.18.
