China, earnings fear pinch; Nifty below 8500, Sensex weak
11 August 2015
Stocks tumbled on Dalal Street due to a heady cocktail of weak global cues and poor earnings. The Nifty cracked 8500 mark to end at 8462.35, down 63.25 points or 0.74 percent. About 1016 shares advanced, 1876 shares declined, and 135 shares were unchanged.
Midcaps also fell in tandem with the blue chips as the index lost nearly 100 points.
What worried Indian investors was devaluation of Chinese currency. The People's Bank of China allowed the yuan to depreciate almost 2 percent against the US dollar to levels last seen three years ago, sending a shock through currency markets.
In a statement, the Chinese central bank said that it had changed the way it calculated the currency's daily midpoint against the greenback, now taking the midpoint from market-makers quotes and the previous day's closing price.
However, Hartmut Issel, Head-APAC Equity and Credit at UBS says overlap between China and India is the smallest in the region and impact on India is thus expected to be negligible.
Amid all the chaos, Finance Minister Arun Jaitley introduces the constitutional amendment to facilitate goods and service tax (GST) in the Rajya Sabha. However, hopes run thin as congress refused to budge and sources say the AIADMK is still not on board.
Meanwhile, asset quality concerns continue to haunt State Bank of India. Its Q1 profits beat estimates in but slippages see a sharp spike sequentially. The stock tanked 5 percent even as the company assures that rise in slippages is seasonal.
Tata Steel too fell 5 percent even though it posted better-than-expected Q1 earnings (announced after market closing).
The country's largest steel producer Tata Steel has just about managed to beat street estimates. A sharp rise in other income helped the company's pat grow by more than 100 percent.
Hindalco, Tata Motors and Coal India were other laggards in the Sensex.
Meanwhile, technology stocks outperformed benchmark as rupee slipped to a two-month low. Infosys, Wipro and TCS gained 1-3 percent while Cipla and GAIL were top gainers.
03:30 pm Market closing: It was a day oof sharp sell-off. The Sensex was down 235.63 points or 0.8 percent at 27866.09 and the Nifty slipped 63.25 points or 0.7 percent at 8462.35. About 1016 shares advanced, 1876 shares declined, and 135 shares were unchanged.
Infosys, Wipro, TCS, Cipla and GAIL were major gainers while Tata Steel, SBI, Hindalco, Tata Motors and Coal India were laggards.
03:00 pm Is it really bad time for Indian tyres? Indian tyre makers have been crying foul about unabated dumping by their Chinese counterparts for a while now. But the stock price movement of tyre companies tell a different story. Shares of CEAT , Apollo Tyres and MRF have risen 30-75 percent over the last six months and analysts tracking the industry say prospects still look good. The threat from cheap
Chinese imports notwithstanding, analysts say low raw material costs combined with rise in original equipment manufacturer (OEM) and replacement demand bode well for Indian tyre makers. The steep fall in crude oil prices has resulted in an equally sharp decline in prices of synthetic rubber and other rubber chemicals. Rubber constitutes 70 percent of raw-material costs of a typical tyre company.
02:45 pm July Inflation poll: India's retail inflation likely cooled in July as food price rises stayed in check, while factory output grew slightly faster in June, a Reuters poll found this week.
Over the last 19 months, inflation in India has halved from double-digit levels to below the Reserve Bank of India's 6 percent target, giving the bank room to shave 75 basis points off its key repo rate this year.
But economists and the RBI have warned of the risk of a temporary spike in food prices due to poor monsoon rains in a country where around a quarter of the population lives on 74 US cents per day.
So far, those fears are unfounded according to the survey of over 30 economists. The poll's median showed consumer price inflation likely eased to 4.42 percent in July from 5.40 percent in June.
02:20 pm Jaguar's new plant: Luxury carmaker Jaguar Land Rover has signed a letter of intent to build a new car plant in Slovakia, a further expansion away from its British manufacturing base.
The brand, owned by India's Tata Group since 2008, said it was carrying out a feasibility study for a factory in the western Slovak town of Nitra with the aim of reaching an annual output of up to 300,000 cars over the decade from 2018 when the plant would be due to start production.
A final decision will be made later this year.
The carmaker said the facility would play a major role in increasing the number of lightweight aluminium models produced and that it had turned down locations in Europe, the United States and Mexico in favour of Nitra because of a strong supply chain and good infrastructure.
"With its established premium automotive industry, Slovakia is an attractive potential development opportunity for us," Chief Executive Ralf Speth said.
02:00 pm Market Check
The market extended losses in afternoon trade with the Sensex falling more than 150 points, weighed by selling in metals, banks, capital goods and auto stocks.
The 30-share BSE Sensex slipped 170.95 points to 27930.77 and the 50-share NSE Nifty fell 52 points to 8473.60. The BSE Midcap and Smallcap indices, too, remained under pressure, falling 0.6-1 percent.
More than two shares declined for every share advancing on the Bombay Stock Exchange.
Tata Steel slipped more than 4 percent ahead of Q1 earnings. A CNBC-TV18 poll expects company to post loss of Rs 440 crore against profit of Rs 337 crore year-on-year. Tata Motors lost more than 3.5 percent.
State Bank of India crumbled 4 percent after disapointing net interest income in Q1 that rose 3.6 percent against expectations of 10 percent growth. Profit increased more than 10 percent.
Apollo Tyres plunged 10 percent on 12 percent decline in revenue in Q1FY16 year-on-year.
1:50 pm Result poll: Tata Steel is expected to report consolidated net loss of Rs 440 crore in the quarter ended June against profit of Rs 337 crore in the year-ago period, according to average of estimates of analysts polled by CNBC-TV18. Lower steel prices and China's cheap imports may impact overall earnings. There is a wide range for expectations of bottomline. According to them, the profit could be Rs 260 crore and maximum loss may be around Rs 1,000 crore in Q1.
1:30 pm TEarnings review: The June quarter earnings season has not been a big disappointment since expectations were anyway low, Harsha Upadhyaya, Chief Investment Officer, Kotak Mutual Fund says. He says the silver lining to the quarterly earnings has been the improvement in operating margins for many industries because of the fall in commodity prices. Upadhyaya says topline growth was sluggish and will remain so for another quarter. He is hopeful of it picking up from the December quarter onwards. Tepid global growth and the devaluation of the Chinese yuan are among the key risks to market sentiment, feels Upadhyaya.
The market continues to fall dragged by SBI (down 4 percent). The Sensex is down 159.03 points or 0.6 percent at 27942.69 and the Nifty is down 49.90 points or 0.6 percet at 8475.70. About 898 shares have advanced, 1816 shares declined, and 124 shares are unchanged.
SBI, Tata Steel, Tata Motors, Hindalco and Coal India are major laggards. Infosys, cipla, TCS, Maruti and Sun Pharma are top gainers in the Sensex.
State Bank of India (SBI) beat analysts' expectations with the first quarter net profit rising 10.2 percent year-on-year to Rs 3,692 crore. Other income supported profitability but slow growth in net interest income & operating profit and higher provisions restricted growth.
Net interest income missed estimates, up 3.6 percent to Rs 13,732 crore due to slow growth in advances and fall in net interest margin. Net interest income is the difference between interest earned and interest expended.
12:30 pm Earnings: State Bank of India (SBI) beat analysts' expectations on Tuesday with the first quarter net profit rising 10.2 percent year-on-year to Rs 3,692 crore.
Net interest income missed estimates, up 3.6 percent to Rs 13,732 crore compared to Rs 13,253 crore in the year-ago period. Net interest income is the difference between interest earned and interest expended.
Net profit was estimated at Rs 3,500 crore (up 4.5 percent) and net interest income at Rs 14,599 crore (up 10.2 percent) for the quarter, according to average of estimates of analysts polled by CNBC-TV18.
Gross non-performing assets increased to 4.29 percent from 4.25 percent and net NPA climbed to 2.24 percent from 2.12 percent on sequential basis.
12:00 pm Market Check
The market remained under pressure in noon trade, dragged by capital goods, FMCG, metals and private banking & financials stocks. The broader markets, too, declined; the BSE Midcap and Smallcap indices fell 0.5-0.7 percent.
The Sensex dropped 130.53 points to 27971.19 and the Nifty slipped 40.85 points to 8484.75. About 889 shares have advanced, 1632 shares declined, and 127 shares are unchanged on the BSE.
Metals & tyre stocks lost ground, reacting to Chinese central bank's decision to devalue yuan, stoking fears of Chinese exports becoming cheaper. The Tyre Manufacturing Association told CNBC-TV18 that dumping of cheaper tyres by China will hurt the Indian tyre industry. MRF, Ceat, Apollo Tyres and Goodyear dropped 2-4 percent. Tata Steel and Hindalco plunged 3 percent each.
In key earnings today, SBI's profit may slow down to single digit. Street will watch out for bank's slippage trend and 5 by 25 restructuring for June quarter. For Sun Pharma, revenue is seen up 1.7 percent to over Rs 6,200 crore quarter-on-quarter. And Tata Steel is expected to report a poor set of numbers with margin contracting 400 basis points due to weak global pricing and sharply lower domestic realisations may be the big drag.
Infosys rallied 2 percent and TCS gained 1 percent as sources told CNBC-TV18 that TCS and Infosys emerged as frontrunners for GST IT contract.
11:50 am Poll: State Bank of India's (SBI) first quarter earnings are expected to be subdued like previous quarters. Net profit may increase 4.5 percent year-on-year to Rs 3,500 crore and net interest income is seen rising 10.2 percent to Rs 14,599 crore, according to average of estimates of analysts polled by CNBC-TV18. Net interest income is the difference between interest earned and interest expended. The country's largest lender will announce its earnings on August 11.
11:30 am Market check: The Sensex is down 110.64 points or 0.4 percent at 27991.08, and the Nifty is down 38.40 points or 0.4 percent at 8487.20.
About 914 shares have advanced, 1536 shares declined, and 115 shares are unchanged.
The market is still under pressure as the Sensex is down 30.02 points at 28071.70. The Nifty is down 12.25 points at 8513.35. About 1029 shares have advanced, 1345 shares declined, and 118 shares are unchanged.
Infosys, SBI, TCS, Cipla and Maruti Suzuki are top gainers while Hindalco, Tata Steel, Tata Motors, HUL and BHEL are laggards in the Sensex.
Meanwhile, Moody's Investors Service said India's future sovereign credit profile is more exposed to negative effect of drought, but the steps taken by the government, if sustained over the next 2-3 years, could have a mitigating influence.
"Although India may avoid drought this year, its economy remains vulnerable to future drought or fluctuations in rainfall, and its sovereign credit profile is more exposed to the negative effect of drought than those of most 'Baa' rated sovereigns," Moody's said in a report. It currently rates India at 'Baa3', the lowest investment grade - just a notch above 'junk' status.
10:59 am Market Update: The Sensex declined 19.91 points to 28081.81, and the Nifty fell 10.35 points to 8515.25. About 1062 shares have advanced, 1240 shares declined, and 124 shares are unchanged on the BSE.
10:50 am Earnings Poll: Sun Pharma's June quarter earnings are expected to be subdued on account of Ranbaxy integration. The country's largest drug company already warned about its full year earnings performance, saying FY16 revenue will remain flat or record marginal decline compared to FY15.
In addition to the above revenue impact, profits may also be adversely impacted due to certain expenses/charges arising out of integration as well as remedial actions, Sun said on July 20.
However, Taro Pharma earnings, which announced on August 6, may support a bit to overall earnings, feel analysts. The company will announce its Q1 earnings on August 11. Year-on-year numbers will not be comparable due to Ranbaxy integration.
According to average of estimates of analysts polled by CNBC-TV18, net profit is seen rising 0.6 percent sequentially to Rs 894 crore and revenue may increase 1.7 percent to Rs 6,262 crore in the quarter ended June.
The muted growth may be on account of continued disruption in US sales from Halol facility, which contributes around 10 percent to total revenue. In September 2014, the US drug regulator US Food & Drug Administration issued form 483 on Halol facility.
10:35 am Gold update: Gold extended a recovery from recent lows as its resilience below USD 1,100 disappointed those expecting a deeper decline, but expectations that US interest rates could rise as early as September kept up pressure on prices.
The metal has fallen in the second half of this year on the prospect of rising rates, which would lift the opportunity cost of holding bullion while boosting the dollar.
Gold has however found support after sliding to a 5-1/2 year low at USD 1,077 an ounce last month.
10:20 am Rupee: The rupee fell to the lowest against the dollar in two weeks on Tuesday, tracking a stronger greenback after China devalued the yuan by nearly 2 percent.
The rupee weakened to 64.1808 to the dollar, the lowest since July 27, compared with its previous close of 63.75.
The RBI was not spotted supporting the currency, several traders said.
10:00 am Market Check
The market continued to consolidate in morning trade. The Sensex fell 13.96 points to 28087.76 and the Nifty declined 8.05 points to 8517.55, dragged by FMCG, capital goods, select banks and metals stocks. The broader markets, too, remained flat.
Syngene International, the research arm of biotechnology major Biocon, started off trade at Rs 295 on Tuesday, up 18 percent compared to issue price of Rs 250 apiece on the National Stock Exchange. The stock was trading at Rs 304.35, up 21.74 percent over issue price after rallying as much as 23.2 percent to touch an intraday high of Rs 308.30.
Shares of ICICI Bank, Tata Motors, HDFC Bank, ITC, HDFC, HUL, L&T, Sun Pharma, BHEL, Tata Steel and NTPC fell 0.5-1.5 percent while Infosys, TCS, SBI and Cipla gained more than 1 percent.
10:00 am Result poll: State Bank of India's (SBI) first quarter earnings are expected to be subdued like previous quarters. Net profit may increase 4.5 percent year-on-year to Rs 3,500 crore and net interest income is seen rising 10.2 percent to Rs 14,599 crore, according to average of estimates of analysts polled by CNBC-TV18.
Net interest income is the difference between interest earned and interest expended. The country's largest lender will announce its earnings on August 11.
Profit on yearly basis is likely to be impacted by rise in provisions, subdued other income and higher operating expenses. Analysts expect fee income to rise 10 percent year-on-year but treasury and dividend income may be weak (in Q4FY15, fee income grew by 9.71 percent and dividend income growth was 36.6 percent).
9:45 am Market outlook: Domestic mutual fund inflows are triggering the ongoing midcap rally, but Harendra Kumar, MD, Elara Capital warns that cracks are likely to emerge sooner than later and advises selling them on rally.
Meanwhile, the Chinese government has allowed yuan to depreciate 2 percent against the greenback which will impact India's exports to China. Talking about it, Kumar said the move is not a one-off action and expects further devaluation in future. Grasim a largecap stock, besides a host of tyre stocks will come under pressure. 'This period of volatility will not be easy to manage in the short term.''
In the domestic scene, recapitalisation of banks will initiate cherry picking in the sector and State Bank sits on the top of the public sector bank heap.
9:30 am Buzzing: Shares of Sun TV slipped 6.5 percent intraday as Madras High Court has cancelled interim anticipatory bail of former telecom minister Dayanidhi Maran in alleged illegal telephone exchange case.
Justice S Vaidyanathan has directed Maran to surrender before CBI within three days.
The CBI has accused Maran of providing more than 300 high-speed telephone lines go his brother Kalanithi Maran's Sun TV. CBI also claimed that Maran wasn't cooperating in the investigation.
The market opened higher but soon turned flat. The Sensex is down 8.29 points at 28093.43, and the Nifty is down 8.80 points at 8516.80. About 619 shares have advanced, 237 shares declined, and 65 shares are unchanged.
Tata Steel, Sun Pharma, Bajaj Auto, HDFC and HUL are major laggards while Infosys, SBI, Dr Reddy's Labs and Vedanta are top gainers.
The Indian rupee plunged in. The currency has opened lower by 29 paise at 64.16 per dollar against previous close of 63.87.
Tirthankar Patnaik of Mizuho Bank said, "Expect rupee to remain weak in the medium-term as Indian equities align with global risk-off concerns and incremental disappointment on reform process by the government."
The US dollar slipped from a nearly four-month high after comments from the US Federal Reserve's vice chairman stoked uncertainty over whether the US Central Bank would hike rates in September.
Equity markets in China were choppy early, on the back of unexpected news that the People's Bank of China (PBOC) is implementing a one-time depreciation of nearly 2 percent to the Chinese yuan.
Elsewhere in Asia, market indices were mostly higher, taking the lead from a rally on Wall Street overnight and as a rebound in gold and crude oil prices overnight helped to drive risk appetite.
Brent was up USD 1.78 at USD 50.39 a barrel and US crude ended up USD 1.09 at USD 44.96 a barrel, up from a session low of USD 43.35 during Asian trading, its lowest in four and a half months.
In early Asian trade, spot gold hovered near USD 1,100 an ounce after posting its biggest increase in more than seven weeks on Monday, as the U.S. dollar turned lower on comments from Federal Reserve officials that raised uncertainty about a September rate hike.