Sensex ends 157 points down, but bears wary of helicopter money
29 July 2016
The Sensex continued to struggle around the 28,000 mark to finish lower on Friday even as benchmark indices gained on the week. The weakness in Indian equities was in line with the subdued mood in Asian markets.
The Sensex closed at 28,051.86, down 156.76 points over its previous close, and the Nifty shed 27.80 points to close at 8,638.50. For the week, the Sensex rose 0.9 percent, and the Nifty by 1.1 percent.
About 1221 shares have advanced, 1462 shares declined, and 209 shares are unchanged.
The subject of intense debate among market players is how long the liquidity-fuelled upswing can continue, given the wide gap between fundamentals and stock valuations.
In a move that could further swell the tide of liquidity, Bank of Japan today pledged to increase its purchase of exchange traded funds, while keeping interest rates steady.
Despite the intermittent corrections, the widely held view is that global liquidity will continue to drive up stock prices across emerging markets in the short term.
''Liquidity will clearly continue to fuel the rally until the next big macro shock comes in but we have seen in all sorts of shocks being dealt quite deftly by the central banks and the asset markets continue to look the other side,'' Pramod Gubbi of Ambit had told CNBC-TV18 on Thursday.
''There are quite a few events coming up later in the year which can feed those shocks but the question is can the central bank continue to deal with these by pumping in more and more liquidity,'' he said.
Brokers say bears are wary of going short on the market as more liquidity measures-known in market parlance as helicopter money-could push stock prices higher.
Emerging markets has witnessed an inflow of USD 25 billion from foreign portfolio investors in this month so far, according to a report by Institute of International Finance.
And while many feel that India deserves the foreign capital flows it is getting, there are others who feel that the flows have nothing to do with fundamentals.
''Clearly valuations have become an issue we need to worry about and I would argue that this is not because the world has rediscovered India's growth but it is just that there is a very strong wave of money coming into the emerging markets,'' BoA Merrill Lynch's Sanjay Mookim said in an interview to CNBC-TV18 today.
He says Nifty one year forward price earning multiple of 16-17 times was expensive relative to its long term average and the market could correct 12-15 percent if the Nifty PE multiple were to revert to its mean.
Auto, healthcare and utilities shares held ground while most other sectors were under pressure.
Big gainers included Dish TV, IIF, DCB Bank, CARE Ratings and Eicher Motors, which were up between 7-10 percent.
Among laggards, JP Associates, Religare, SPARC, GSFC and KPIT fell between 4-9 percent
3:30 pm Market Closing: Equity benchmarks closed lower on profit booking. The Sensex fell 156.76 points or 0.56 percent to 28051.86 and the Nifty lost 27.80 points or 0.32 percent to 8638.50.
The broader markets outperformed benchmarks with the BSE Midcap and Smallcap indices rising 0.7 percent and 0.23 percent, respectively despite negative market breadth.
About 1450 shares declined against 1232 advancing shares on the BSE.
ICICI Bank was down 3.55 percent and L&T declined 1.3 percent ahead of first quarter earnings due later today. Bharti Airtel shed 3 percent while Lupin and Adani Ports surged over 2 percent.
3:10 pm Earnings: Paint colours manufacturer Kansai Nerolac, in April-June quarter, has registered a solid 34.6 percent profit growth at Rs 126.5 crore on yearly basis, driven by other income and operational performance. Strong earnings lifted the stock to record high of Rs 347.90.
Revenue increased 7.4 percent to Rs 1,047.5 crore in the quarter ended June 2016 compared with Rs 975.3 crore in year-ago period.
Operating profit during the quarter jumped 24 percent year-on-year to Rs 187.2 crore and margin expanded 240 basis points to 17.9 percent compared with corresponding period of last fiscal due to lower raw material cost (down 2 percent YoY).
2:59 pm Market Update: Equity benchmarks extended losses in late trade with the Sensex falling 144.21 points to 28064.41 and the Nifty down 26.65 points at 8639.65.
About 1382 shares declined against 1220 advancing shares on the BSE.
2:40 pm Oil at fresh April low: Oil prices fell to fresh April lows as slowing economic growth threatened to worsen ongoing oversupply of crude and refined products.
International Brent crude oil futures were trading at USD 41.99 a barrel, down 1.66 percent, from their previous close, the lowest since April.
US West Texas Intermediate (WTI) crude fell 1.14 percent to USD 40.67 a barrel, slipping below USD 41 for the first time since April.
Both crude benchmarks are now down around 20 percent since their last peak in June.
2:25 pm Earnings: Midcap healthcare company Alembic Pharma has reported solid earnings growth for April-June quarter as consolidated profit surged 44.7 percent to Rs 103.8 crore, driven by exports.
Revenue during the quarter grew by 25 percent to Rs 728 crore on yearly basis with international business showing a solid 72 percent growth at Rs 308.51 crore.
India branded business reported a 6 percent growth at Rs 277.74 crore but India generics degrew by 23 percent at Rs 21.32 crore, Alembic Pharma said, adding specialty segment showed 16 percent rise with anti diabetic & gynaecology increasing 31 percent each and cardiology 16 percent.
Operating profit shot up 50.4 percent year-on-year to Rs 156.9 crore and margin expanded by 370 basis points to 21.6 percent. Margin growth restricted due to higher R&D and other expenses.
"We continue to invest in R&D for future growth. Alembic USA has launched 23 products in the market," Pranav Amin, MD said.
2:00 pm Market Check: The market is still under pressure. The Sensex is down 95.14 points or 0.3 percent at 28113.48 and the Nifty is down 15.60 points or 0.2 percent at 8650.70. About 1278 shares have advanced, 1237 shares declined, and 215 shares are unchanged.
Bank stocks are under pressure while auto and pharma are gainers. Cipla, Bajaj Auto, Tata Steel, Adani Ports and Lupin are top gainers while ICICI Bank, BHEL, Bharti Airtel, HDFC and Wipro are losers in the Sensex.
Oil prices fell to fresh April lows on Friday as slowing economic growth threatened to worsen ongoing oversupply of crude and refined products. Both crude benchmarks are now down around 20 percent since their last peak in June.
Because refiners produced too much fuel from cheap crude, margins in the Americas, Europe and Asia have fallen sharply this year, eroding revenues for oil producers and refiners like Royal Dutch Shell, which this week reported poor results.
1:55 pm Tata's raod ahead: Tata Group Chairman Cyrus Mistry will meet the chief executives of all Tata Group companies to prepare a blueprint for the road ahead. The meet is likely to focus on big digital push, according to people privy to the development. There is likely to be a focus of streamlining HR policies and strategies, reports CNBC-TV18's Kritika Saxena. The group's strategy to expand existing businesses and leverage group companies for growth is likely to be addressed at the annual group leadership meet, people in the know of the development said.
1:45 pm FDI: India saw a record 53 percent increase in FDI in last two years as the investment climate brightened due to steps taken to foster growth, price stability and fiscal prudence which also improved the overall macroeconomic stability, government said today.
Emphasising that investments are not made for "charity", Finance Minister Arun Jaitley told the Lok Sabha that improving the ease of doing business was a "work in progress".
In the last two years, there has been 53 percent rise in FDI into the country, which is a record high, Jaitley said during Question Hour, adding that "comprehensive reforms in FDI have resulted in the highest ever FDI inflow in 2015-16".
1:30 pm Market outlook: There are a couple of key things to watch out for in the GST even if the Constitutional Amendment Bill is passed in this session of Parlaiment, Mahesh Nandurkar, India Strategist, CLSA tells CNBC-TV18. One, the market will be closely watching the standard GST rate. If the standard rate is 17-18 percent, the market will stay excited about GST, says Nandurkar. But if the standard rate is 20 percent or higher, the enthusiasm over GST will die down, he says. Second will be the flexibility offered by the Centre to the states on GST. States have been bargaining hard on the list of goods they can charge tax on and in some cases even on the rates they can charge.
Equity benchmarks continued to fall amid volatility in afternoon trade, dragged by index heavyweights ICICI Bank, HDFC, Reliance Industries, L&T and HDFC Bank.
The 30-share BSE Sensex was down 97.71 points at 28110.91 and the 50-share NSE Nifty fell 17.75 points to 8648.55 while the market breadth was positive. About 1287 shares advanced against 1163 declining shares on the BSE.
ICICI Bank remained top loser, down 3 percent ahead of Q1 earnings followed by HDFC, Reliance Industries, L&T, HDFC Bank and Infosys while Sun Pharma, Lupin, M&M, Bajaj Auto, Cipla, Adani Ports, Tata Steel and Hero Motocorp gained 1-2.5 percent.
European stocks traded higher helped by a rally in bank stocks as investors digest the conclusion of a two-day policy meeting of the Bank of Japan (BOJ) and take stock of more European earnings. The pan-European STOXX 600 was up 0.35 percent.
12:45 pm Earnings: Godrej Consumer Products' first quarter (April-June) consolidated profit more than doubled to Rs 244.3 crore compared with Rs 116.7 crore in year-ago period, driven by strong operational performance despite slow growth in revenue.
Revenue during the quarter increased 6.8 percent to Rs 2,123 crore on yearly basis, which was much lower than analysts' estimates.
Bottomline too missed expectations but margin was far ahead of estimates. Profit was estimated at Rs 257.2 crore on revenue of Rs 2,380 crore for the quarter, according to average of estimates of analysts polled by CNBC-TV18.
Consolidated operating profit (EBITDA - earnings before interest, tax, depreciation and amortisation) grew by 20.4 percent year-on-year to Rs 380 crore and margin expanded by 200 basis points to 17.9 percent in Q1, which were expected at Rs 381 crore and 16 percent, respectively.
12:40 pm Europe opens: European stocks opened higher on Friday as investors digest the conclusion of a two-day policy meeting of the Bank of Japan (BOJ) and take stock of more European earnings.
The pan-European STOXX 600 was up 0.35 percent.
12:25 pm CLSA on GST Bill: There are a couple of key things to watch out for in the GST even if the Constitutional Amendment Bill is passed in this session of Parlaiment, Mahesh Nandurkar, India Strategist, CLSA tells CNBC-TV18.
One, the market will be closely watching the standard GST rate. If the standard rate is 17-18 percent, the market will stay excited about GST, says Nandurkar. But if the standard rate is 20 percent or higher, the enthusiasm over GST will die down, he says.
Second will be the flexibility offered by the Centre to the states on GST. States have been bargaining hard on the list of goods they can charge tax on and in some cases even on the rates they can charge.
Nandurkar says that higher the flexibility offered to states, lower will be the effectiveness of GST.
12:00 pm Market Check: Consolidation with a negative bias continued in equity benchmarks in noon trade as investors digested earnings (announced so far) and waited for GST Bill to be tabled in the parliament for consideration and passage.
The 30-share BSE Sensex was down 102.61 points at 28106.01 and the 50-share NSE Nifty fell 16.80 points to 8649.50.
Healthcare, FMCG and metals stocks continued to support the market while banking & financials, infra and telecom stocks dragged.
Oil prices fell to fresh April lows as slowing economic growth threatened to worsen ongoing oversupply of crude and refined products. International Brent crude oil futures were trading at USD 42.50 a barrel, down 20 cents from their previous close, the lowest since April. US West Texas Intermediate (WTI) crude fell 21 cents to USD 40.93 a barrel, slipping below $41 for the first time since April.
The safe-haven yen jumped against the dollar after the Bank of Japan's monetary policy easing disappointed investors who had been hoping for more radical stimulus measures.
The BoJ announced a modest increase in purchases of ETFs, but maintained its base money target at 80 trillion yen ($775 billion) as well as the pace of purchases for other assets including Japanese government bonds. The BOJ also kept negative interest rates unchanged at minus 0.1 percent.
11:35 am Nikkei recovers: Japan's Nikkei recovered 395 points from day's low to close 0.6 percent higher after volatility due to Bank of Japan's monetary policy.
Japan shares whipsawed and the yen surged after the Bank of Japan threw markets a smaller-than-expected bone in keenly watched decision.
While the BOJ eased its monetary policy further by increasing its buying of exchange-traded funds (ETFs), it didn't change interest rates or increase the monetary base.
Reuters reported the BOJ will increase its ETF buying so that its holdings rise at an annual pace of 6 trillion yen, compared with 3.3 trillion yen previously. The BOJ left its base money target unchanged, said Reuters.
11:25 am Buzzing: Share price of Ajanta Pharma touched 52-week high, rises 3 percent intraday on the back of US Food and Drug Administration (USFDA) approval for oral suspension drug.
The company has received a final approval from USFDA for Omeprazole and Sodium Bicarbonate Powder for oral suspension, which is bioequivalent generic version of Zegerid 1 powder for oral suspension.
The company will be launching this product soon in 2 strengths 20 mg / 1680 mg and 40 mg / 1680 mg powder sachets.
The company has total 26 abbreviated new drug application (ANDA) of which it has final approvals for 12 ANDAs, 1 tentative approval and 13 ANDAs are under review with USFDA.
11:00 am Market Check
Equity benchmarks continued to trade lower with the Sensex falling 91.13 points to 28117.49 and the Nifty declining 15.15 points to 8651.15.
The market is consolidating around 8650 level today as investors waited for the next trigger - GST Bill that is likely to be cleared in the Monsoon Session of Parliament, especially after looking at the efforts of the ruling party to clear demands made by oppositions.
The broader markets continued to outperform with the BSE Midcap and Smallcap indices rising 0.5-0.8 percent. About 1223 shares advanced against 945 declining shares on the exchange.
ICICI Bank and L&T fell more than 3 percent and 1 percent ahead of quarterly earnings, respectively. A CNBC-TV18 poll expects the bank to report 28 percent decline in profit on yearly basis while in case of L&T, investors will closely watch company's FY17 guidance due later today.
10:30 am Interview: Despite severe competition from Chinese tyre imports, CEAT grew volumes 13 percent year-on-year. China tyre inflows have increased for truck radial and commercial vehicle segments and the company has requested the government for anti-dumping duty on tyres, said Anant Goenka, MD of the company.
CEAT posted a revenue growth of 3.9 percent on the back of healthy original equipment manufacturer (OEM) sector performance, he told CNBC-TV18.
The company has passed on price cut of 8-9 percent to its consumers, and has increased ad expenditure 70 -80 percent year-on-year. This is what has impacted CEAT's margins, Goenka added.
He believes rubber prices will cool down during October-December and benefits of product mix will be seen in future. However, if raw material prices increase, the company may look at hiking prices, Goenka said.
10:00 am Market Check
Equity benchmarks traded marginally lower on profit booking while the broader markets outperformed with the BSE Midcap rising 0.8 percent.
The 30-share BSE Sensex was down 74.70 points at 28133.92 and the 50-share NSE Nifty fell 10.90 points to 8655.40. About 1054 shares advanced against 741 declining shares on the BSE.
ICICI Bank fell more than 2 percent ahead of Q1 earnings. A CNBC-TV18 poll expects the bank to report 28 percent decline in profit on yearly basis.
L&T too was down around a percent as investors will closely watch company's FY17 guidance due later today.
HDFC Bank, HDFC, Infosys, Reliance Industries, Bharti Airtel and TCS were losers while ITC, Axis Bank, Bajaj Auto, Lupin, Sun Pharma and Tata Motors supported the market.
9:59 am Interview: Adlabs Entertainment , which operates Imagica theme park, expects to breakeven in cash this fiscal, said Kapil Bagla, CEO of the company. Adlabs was already cash positive in the first quarter of FY17.
The company reported a standalone net loss of Rs 19.23 crore for the first quarter ended June this fiscal.
In an interview to CNBC-TV18, he said Adlabs is working to improve EBITDA and pare debt by monetising land this year, he added.
Bagla expects footfall growth of 8-10 percent and revenue to grow 20-25 percent this fiscal.
Though Adlabs saw a decline in its footfalls, realizations per user (RPU) was up 21 percent, he said, adding, its first quarter occupancies for Novotel stood at 87 percent.
9:37 am Earnings: Automobile company Eicher Motors' first quarter (April-June) consolidated earnings matched analysts' estimates on Thursday with profit growing sharply by 58.6 percent to Rs 376.3 crore, driven by strong revenue as well as operational performance in Royal Enfield business.
Revenue increased 42 percent to Rs 1,555.7 crore in the quarter ended June 2016 compared with Rs 1,096 crore in year-ago period.
9:25 am BoJ eases monetary policy: The Bank of Japan (BOJ) has eased its monetary policy further today by expanding dollar lending programme to USD 24 billion.
The central bank kept deposit rate at -0.1 percent and said it will increase buying of exchange traded funds.
Bank of Japan has lowered its real GDP growth forecast for the current fiscal year to 1 percent from earlier 1.2 percent but increased to 1.3 percent for next fiscal from earlier forecast of 0.1 percent.
It left annual government bond purchases at 80 trillion yen.
9:15 am Market Check: The 50-share NSE Nifty started off August series on a flat note after yesterday's rally as investors eagarly awaited for GST Bill.
The Sensex was down 10.22 points at 28198.40 and the Nifty declined 2.75 points at 8663.55.
Axis Bank, L&T, Tata Steel, Adani Ports, Coal India, Eicher Motors, Bosch, Tata Power and Tata Steel were early gainers while BHEL, ICICI Bank, Bharti Airtel, NTPC, SBI, Bharti Infratel and ACC were losers.
The Indian rupee opened flat at 67.04 per dollar against previous close 67.04.
Bhaskar Panda of HDFC Bank says the USD-INR pair is in a range again as supplies remain consistent. The pair is expected to remain in a range of 66.90-67.30/dollar for the coming week, he feels.
Asian markets were lower with the Nikkei losing 0.4 percent ahead of the Bank of Japan's monetary policy decision.
Wall Street ended mixed on Thursday as investors looked beyond disappointing earnings from Ford and bought shares in Apple, while Alphabet surged after the bell following its quarterly report.