Sensex zooms 283 points on dovish Fed comments; Reliance leads
18 June 2015
The market closed more than 2-week high on Thursday, extending its rally for the fifth consecutive session after Fed's dovish comments. Reliance Industries led the rally along with banks and auto stocks. The broader markets also saw buying interest. Equity benchmarks outperformed global peers. The 30-share BSE Sensex climbed 283.17 points or 1.06 percent to 27115.83 and the Nifty jumped 83.05 points or 1.03 percent to 8174.60.
Better-than-expected monsoon, postponement of rate hikes by Fed and the reasonable MSP price hike are among the few positives that are likely keep Nifty in the vicinity of 8000 level, said Sachin Shah, Fund Manager, Emkay Investment Managers.
The US Federal Reserve left interest rates on hold Wednesday and said the country's economy was likely to be strong enough to withstand a rate hike this year. However, it lowered its expectations for 2015's economic growth due to a weak start to the year.
Fed is seeing expansionary trends, said Hartmut Issel, head-APAC equity and credit at UBS. He sees the first Fed rate hike in September, followed by another 25 basis points hike in December.
Globally, markets were weak. In Asia, Shanghai plunged 3.67 percent and Nikkei dropped 1.1 percent. European equities were marginally lower ahead of a key meeting of euro zone finance ministers who are expected to find a solution to the Greece deadlock.
Meanwhile, Finance Minister Arun Jaitley promised faster reforms and said 8 to 9 percent growth rate is very much achievable. He is on a roadshow to US investors. He assured US investors of tax stability and promised to cut the red tape.
The rupee also strengthened following Fed comments, up 35 paise to close at 63.75 a dollar.
The BSE Midcap and Smallcap indices were down 0.8 percent and 1.07 percent, respectively but the market breadth was not very strong. About 1427 shares advanced against 1313 shares declined on the Bombay Stock Exchange.
Index heavyweight Reliance Industries was the biggest gainer on Sensex, up more than 5 percent. State-run oil & gas exploration company ONGC was up 2 percent.
Tata Motors rallied 2.7 percent after showing underperformance in earlier sessions. Nomura has maintained a buy rating on the auto major with a target price of Rs 581 per share. The brokerage feels that recovery in Jaguar Land Rover volume growth to be key catalyst for the stock.
Asian Paints was up 2.5 percent after CLSA upgraded the stock to buy from sell, raising target price to Rs 850 per share. According to its report, H1FY16 will mark the bottom of the earnings downgrade cycle.
Leading private sector lender ICICI Bank advanced 0.7 percent. CLSA has maintained its buy rating on the stock with a target price of Rs 440 apiece. Over FY15-18, the brokerage sees 17 percent CAGR in profit and improvement in asset quality that can drive re-rating of valuations (30-50 percent discount to private banks).
Telecom operator Bharti Airtel rebounded, up 1.3 percent. However, the stock dropped 2 percent in early trade today as the company terminated its agreement to sell towers to Helios in Tanzania and Chad which was signed last year.
Wipro gained 2 percent as reports indicated that company is nearing settlement with Securities Exchange Commission (SEC) in the US. The company is expected to pay around USD 10 million as settlement. The SEC was investigating allegations of junior level embezzlement of money from 2010.
Among others, HDFC Bank, Sun Pharma, SBI, Maruti, Dr Reddy's Labs and Hindalco gained more than 1 percent.
Cipla lost 1 percent as the company witnessed the largest ever churn in its top deck. Sources indicated that in the last 4 months alone the company has seen massive exits at the top deck and the posts are still vacant.
03:00 pm Market close: The market ended on a higher note. The Sensex was up 283.17 points or 1 percent at 27115.83 and the Nifty was up 83.05 points or 1 percent at 8174.60. About 1634 shares advanced, 1099 shares declined and 157 shares were unchanged. Reliance, ONGC, Tata Motors, Sun Pharma and Wipro were top gainers in the Sensex. Among the losers were Coal India, Cipla, NTPC, Tata Steel and GAIL.
03:15 pm International markets: Bond yields and the dollar fell on Thursday after the Federal Reserve signalled that US interest rates would rise more slowly than markets had expected, while Greece's drift closer to default pushed European stocks lower.
Euro zone finance ministers meet later in the day, but expectations are low that Greece and its international creditors will reach a deal to prevent the cash-strapped country from defaulting at the end of the month.
European markets are likely to take their cue from the news out of the Luxembourg meeting, along with the outlook for US monetary policy.
02:58 pm Market Update: The Sensex gained 302.16 points or 1.13 percent at 27134.82 and the Nifty rose 84.05 points or 1.04 percent to 8175.60. About 1607 shares have advanced, 1036 shares declined, and 161 shares are unchanged on the BSE.
02:45 pm Import duty hike support steel cos?: Fitch Ratings does not expect the Indian government's increase in customs duties on steel imports to alleviate much of the pressure on Indian steel producers, which have been challenged by cheap imports and weak domestic demand.
The higher customs duties is likely to result in only a marginal increase (between INR500-INR1100 per ton) in the landed costs of imported steel products, which in the short term will help close the gap between domestic output and the cheaper imports, said the rating agency.
However, Fitch does not expect domestic steel makers' realisations to improve because steel demand continues to be weak, particularly as the economy moves into the low demand season during June-September due to monsoon rains.
The government increased the customs duty on long product to 7.5 percent from 5.5 percent, and on flat products to 10 percent from 7.5 percent. The new duties were announced on 17 June 2015 and effective immediately.
02:25 pm Tech Mahindra under pressure: Nomura downgraded Tech Mahindra to neutral fron buy and also slashed target price to Rs 560 from Rs 625 earlier as it turned cautious on slow margin recovery and limited revenue growth upside.
Despite being below consensus on revenue growth expectations for Tech Mahindra, the brokerage had kept the faith in the stock on expectations of sharp EBIT margin recovery to 15 percent levels in FY16F (Q4: 12.4 percent) and cheap valuations after the Q4 results-related correction.
However, after its meeting with management, the brokerage is tempering the slope of EBIT margin increases as Comviva will likely see a higher-than-anticipated fall in Q1F leading to margin pressure; large deal ramp-ups could exert pressure on near-term margins and overall sluggish growth will cause a delay in realising operational/SGA leverage. Thus Nomura cut FY16/17F EBIT margins by 110/60 basis points to 13.9/15 percent, while retaining USD revenue CAGR of 11.7 percent (7.4 percent organic) over FY15-17F.
02:00 pm Market Check: The market has strengthened in afternoon trade with the Sensex surging 324.59 points or 1.21 percent to 27157.25. The Nifty is inching up towards 8200, up 89.70 points or 1.11 percent at 8181.25 aided by banking & financials, oil & gas, technology, auto and FMCG stocks.
The broader markets also remained strong. The BSE Midcap gained 0.9 percent and Smallcap rose 1.2 percent. About 1628 shares have advanced, 942 shares declined, and 157 shares are unchanged on the BSE.
Petrochemical major Reliance Industries extended rally, up 4.5 percent (the biggest gainer on Sensex). Tata Motors surged 2.7 percent as Nomura has maintained a buy rating on the auto major with a target price of Rs 581 per
share. The brokerage feels that recovery in Jaguar Land Rover volume growth to be key catalyst for the stock.
Shares of HDFC Bank, ICICI Bank, SBI, ONGC, Bharti Airtel, Sun Pharma, Wipro, Hindalco and BHEL climbed 1-2 percent. However, Cipla fell 0.8 percent after sources said many senior and mid-management level exits seen in
last 3-4 months. Cipla is yet to fill senior executive posts after senior and mid-management level exits, sources added.
Castex Technologies (earlier known as Amtek India) fell nearly 4 percent as sources said the company is facing trouble with USD 70 million FCCB issue.
The rupee gained further, rising 36 paise to 63.74 a dollar after Federal Reserve kept key rates unchanged.
1:50 pm FII view: Govt needs to be praised for keeping extent of MSP increase subdued, says Sajjid Chinoy, Asia Economics, JPMorgan. While progress of monsoon will be critical, the government's move on MSP will help contain inflation, Chinoy told CNBC-TV18. He, however, said the scope of a rate cut in the mid term is limited. "if growth picks up in the coming quarters, you would expect core inflation to pick up," he said. He expects core inflation to inch up in the coming months on the back of firming growth and added a quick offloading of stocks of rice and wheat will help contain food inflation
1:30 pm Buzzing: Investors continued to buy shares of Orchid Chemicals and Pharmaceuticals on Thursday after the company received approval from US Food and Drug Administration (USFDA) for its anti-bacterial drug. The stock rallied more than 16 percent intraday. It was the third USFDA approval for the company in June. "Orchid has received approval from the USFDA for the abbreviated new drug application (ANDA) for Gemifloxacin Mesylate tablets (320 mg) with 180 days of generic drug exclusivity," said the drug maker in its filing. Gemifloxacin Mesylate is the generic version of drug Factive.
The market is still gaining even though China market is under huge pressure. The Sensex is up 279.38 points or 1 percent at 27112.04, and the Nifty up 73.45 points or 0.9 percent at 8165.00. About 1585 shares have advanced, 909 shares declined, and 138 shares are unchanged.
Reliance, Bharti Airtel, Tata Motors, Wipro and SBI are top gainers while Coal India, Cipla, Tata Power, Tata Steel and NTPC are among laggards in the Sensex.
Globally, Asian markets trade mostly lower as Greece worries weigh on sentiment. Japan's Nikkei hits its lowest level since June 10 and Shanghai is down more than 3 percent. Oil prices slipped on Thursday after US government data showed that gasoline stocks and distillate inventories rose last week, although the falls were checked by continuing Middle East geopolitical tensions and a weaker US dollar.
12:55pm Market Update: The Sensex gained 266.13 points at 27098.79 and the Nifty rose 70.65 points to 8162.20. About 1579 shares have advanced, 901 shares declined, and 138 shares are unchanged on the BSE.
12:45pm Brokerage on ICICI Bank: CLSA has maintained its buy rating on the stock with target price of Rs 440 apiece.
Over FY15-18, the brokerage sees 17 percent CAGR in profit and improvement in asset quality that can drive re-rating of valuations (30-50 percent discount to private banks).
After analysing bank's FY15 annual report, CLSA said the key highlight is the focus on lending to higher rated corporates (including PSU) to de-risk balance sheet. Though this could be a headwind for margins, ICICI will benefit from strengthening of deposit franchise and rise in share of domestic loans, it added.
"Management highlighted plans to raise share of better rated corporate borrowers as well as public-sector enterprises in order to de-risk its corporate book; exposure to riskier sectors rose only 2 percent Y-o-Y in FY15. While yields on these loans are lower, transition could be neutral to NIMs as ICICI benefits from improving deposit franchise and rise in share of domestic loans,"it explained.
Retail segment continued to drive profits (up 50 percent Y-o-Y), while corporate struggled (-6 percent) due to slower growth and high credit costs. Consolidated profit was 10 percent above standalone and well-funded balance sheet of subsidiaries is helping them to repatriate capital.
12:35pm Market Expert: Better-than-expected monsoon, postponement of rate hikes by Fed and the reasonable MSP price hike are among the few positives that is likely keep Nifty in the vicinity of 8000 level, says Sachin Shah, Fund Manager, Emkay Investment Managers.
12:15 pm Oil Update: Oil prices slipped today after US government data showed that gasoline stocks and distillate inventories rose last week, although the falls were checked by continuing Middle East geopolitical tensions and a weaker US dollar.
Brent August crude declined 18 cents at USD 63.69 a barrel after it settled 17 cents higher on Wednesday at USD 63.87.
Data from the US Energy Information Administration (EIA) showed crude inventories fell more than expected last week, but gasoline stocks rose by 460,000 barrels, more than analysts' expectations for a 314,000-barrel drop, according to a agency poll.
The EIA report also showed that operating capacity at US refineries fell to 93.1 percent last week from 94.6 percent.
12:00 pm Market Check
Equity benchmarks as well as broader markets continued to see buying interest and are heading towards higher closing for fifth consecutive session today. Oil & gas, banking & financials and auto stocks supported the market.
The Sensex climbed 267.76 points or 1 percent to 27100.42 and the Nifty jumped 69.25 points or 0.86 percent to 8160.80. The BSE Midcap and Smallcap indices rallied 0.7 percent and 1 percent, respectively.
The market breadth was strong too, about 1518 shares have advanced against 841 shares declined on the Bombay Stock Exchange.
Globally, Asian markets remained mostly lower as Greece worries weighed on sentiment. Nikkei hit its lowest level since June 10 and Shanghai fell a percent.
Index heavyweight Reliance Industries extended upside today, up 3.7 percent in addition to 3 percent rally in previous session. HDFC Bank, ICICI Bank, Tata Motors, TCS, SBI, Sun Pharma and Bharti Airtel were other prominent gainers, up 1-2 percent.
Asian Paints gained more than 2 percent after brokerage CLSA upgraded the stock to buy from sell, raising target price to Rs 850 per share. According to the report, H1FY16 will mark the bottom of the earnings downgrade cycle.
However, Cipla fell over a percent as the company witnessed the largest ever churn in its top deck. Sources indicated that in the last 4 months alone, the company has seen massive exits at the top deck and the posts are still vacant.
11:30 am Buzzing: Shares of Eicher Motors jumped 2 percent, hitting 52-week high at Rs 19675.80 intraday. Eicher Polaris, a 50:50 joint venture between Eicher Motors and Polaris Industries Inc announced the launch of
Multix-India's first personal utility vehicle today. Multix is specially designed for Independent Businessmen, having an estimated population of 5.8 crore in India. Purpose-built, specially designed and powered by a reliable diesel engine, Multix will be available in two variants and four colours, starting at a price of Rs 232,850, a company press statement said.
Eicher Polaris has made an investment of Rs 350 crore towards product development.
The market is still holding up gains as the Sensex is up 255.55 points or 0.9 percent at 27088.21. The Nifty is up 65.70 points or 0.8 percent at 8157.25. About 1479 shares have advanced, 716 shares declined, and 131 shares are unchanged.
Reliance, Tata Motors, HDFC Bank, BHEL and ICICI Bank are top gainers in the Sensex. Among the losers are Cipla, NTPC, Tata Power and Tata Steel.
Gold futures traded Rs 59 higher at Rs 27,177 per 10 grams as speculators created fresh bets amid positive cues from global markets. Analysts attributed the rise in gold prices to a firming trend overseas where it extended gains as the dollar fell, adding to the appeal of the precious metal after the Fed signalled that the pace of policy tightening will be gradual. Meanwhile, gold was trading 0.2 percent higher at USD 1,187.47 an ounce in Singapore.
10.56 am Market Update: The Sensex climbed 265.47 points or 0.99 percent to 27098.13 and the Nifty added 65.95 points or 0.82 percent at 8157.50. About 1413 shares have advanced, 679 shares declined, and 130 shares are unchanged on the BSE. The rupee gained 24 paise at 63.86 a dollar after Federal Reserve kept interest rate unchanged.
10:45 am Bharti Airtel in focus: Bharti Airtel's ambitious efforts to cut its Rs 60,000 crore debt pile via sale of its Africa tower business has hit a hurdle -- at least partially. The sale of tower assets in two countries to Helios Towers has been called off, reports CNBC-TV18.
Sources said the deal was called off because of valuations. Airtel was demanding about Rs 3,000-3,400 crore while Helios was willing to offer about Rs 2,500-2,600 crore. Further, the deadline before which the deal was supposed to be inked lapsed before an agreement could be arrived at between the two parties.
However, negotiations for sale of asset towers in two other countries continue for Airtel.
10:25 am FII View: Lack of reliable high-frequency economic indicators, fiscal consolidation and weak results led to a slowdown in the economy in the last few quarters. But now green shoots are emerging with government both at the state and Centre - showing willingness to spend, said Neelkanth Mishra, Head of Equities (India), Credit Suisse.
In an exclusive interview with CNBC-TV18, Mishra said the reforms taken up by government will start showing up. He lauds the decision to not recapitalise all public sector banks and says reforms in coal, Railways and defence were are ahead of expectations.
Speaking about earnings, he said the year-on-year earnings will remain weak for a couple of quarters more, because of crude and metal prices. "Earnings cuts will still happen, but the pace will fall very shaprly from here." Earnings growth should be much better in FY16, and can safely say worst is behind us. He says cement and consumption names will see a pick up and lead the earnings upgrade. He is also overweight on and private sector banks and IT sector.
10:00 am Market Check
The market is on fire with major support of banks, capital goods and oil. The Sensex is up 230.24 points or 0.9 percent at 27062.90 and the Nifty is up 59.15 points or 0.7 percent at 8150.70. About 1251 shares have advanced, 509 shares declined, and 122 shares are unchanged.
Reliance, Cipla, ICICI Bank, Axis Bank and ITC are top gainers whilr Bharti, GAIL and Hindalco are major losers in the Sensex.
Meanwhile, Michael Gavin, Barclays said European equities weakened due to the Greek crisis. Euro area finance ministers are scheduled to meet today, but with no new proposals from Greece, progress toward an agreement is unlikely, he added.
He further said US equities rallied and the dollar weakened as the FOMC stayed on hold and adjusted downward its forecast of future policy rates. However, the FOMC left the door open for rate hikes later in the year, Gavin believes.
9:55 am Buzzing: Shares of Tata Motors rose 1 percent intraday on Thursday. Nomura has maintained a buy rating on the auto major with a target price of Rs 581 per share. The brokerage feels that recovery in Jaguar Land Rover volume growth to be key catalyst for the stock. Tata Motors share price has declined 15 percent year-to-date due to 1 percent year-to-date decline in JLR's overall retail volumes and a 23 percent contraction in China volumes. This has led to investors concerns on JLR volumes in China especially for the China JV. We believe that the current stock price builds in a very pessimistic scenario of a sharp volume slowdown and pricing erosion in China, Nomura says in a report.
9:45 am Fed outlook: The US Federal Reserve is more likely to hike its interest rates in October than September, if not later, says Adrian Mowat of JP Morgan. The Fed left its benchmark interest rate unchanged at near zero , saying the US economic growth is "moderate" after the winter slowdown. In an interview to CNBC-TV18, Mowat says the Fed rate hike, is more a case of normalisation than tightening as its interest rates are zero. He explains a rate hike means the US economy is doing well and that is a positive event. Hence, the market sentiment is expected to be risk on as the experts are more confident about the economy, he argues.
9:24 am Market check: The Sensex is up 214.68 points or 0.8 percent at 27047.34 and the Nifty is up 53.00 points or 0.7 percent at 8144.55. About 936 shares have advanced, 229 shares declined, and 81 shares are unchanged.
Reliance, Cipla, ICICI Bank, Sun Pharma and Wipro are top gainers in the Sensex. Among the losers are Bharti Airtel and Tata Steel.
The market opened higher with the Sensex rising 117.03 points to 26949.69 and the Nifty gaining 24.50 points at 8116.05. About 452 shares have advanced, 130 shares declined, and 63 shares are unchanged on the BSE.
ICICI Bank, Dr Reddy's Labs, Axis Bank, Coal India, BHEL, Asian Paints and BPCL gained 0.7-1.6 percent. However, Bharti Airtel lost 1.6 percent. Tata Steel, GAIL, Tata Power, Hero Motocorp, Yes Bank, Zee Entertainment and Power Grid were other losers.
The Indian rupee gained in the early trade on Thursday. It has opened higher by 17 paise at 63.94 per dollar versus 64.11 Wednesday.
Ashutosh Khajuria of Federal Bank said, "We expect the rupee to hover between 64.25-64.50/dollar levels. The FOMC meet is largely neutral for the rupee."
He further added, "The Reserve Bank of India (RBI) would like to gradually allow the rupee to depreciate, so any move towards 64.25/dollar will not be resisted. We expect the RBI to support the dollar."
Globally, the US markets ended mildly higher as the Federal Reserve says that the US economy is likely strong enough to withstand a rate hike later this year.
The Fed's Open Market Committee (FOMC) voted to maintain the status quo that has prevailed since the US central bank first went to zero rates in late-2008.
European markets closed lower on Wednesday as investors awaited the conclusion of the Fed meet. Asian markets too are negative in morning trade as investors await a flurry of economic data across the region. China stocks meanwhile opened lower, in line with the weakness in the region, as investors digested release of the country's home price index.
In other asset classes, the euro gained after the US Federal Reserve left its benchmark interest rates unchanged. The dollar index extended its losses to trade around the 94 mark.
In commodities, crude prices held steady as the dollar weakened following the US Fed meet. Brent crude is trading below the USD 64 per barrel mark.