Nifty ends above 12,000 for 1st time, Sensex surges 553 points; autos lead

CNBC

Market Closing:

Benchmark indices ended at record closing highs as the three-day Monetary Policy Committee meeting started. The fall in crude oil prices, stronger rupee and hope of rate cut after weak Q4 GDP data boosted sentiment.
The BSE Sensex rallied 553.42 points or 1.39 percent to 40,267.62 and the Nifty50 jumped 165.70 points or 1.39 percent to 12,088.50 but the market breadth was negative. About 1,396 shares declined against 1,185 advancing shares on the BSE.
Bajaj Auto, Asian Paints, Indiabulls Housing, TCS, HCL Technologies, Reliance Industries and Hero Motocorp were leading gainers among Nifty50.
GAIL was among losers.
Among midcaps, Just Dial, Triveni Engineering, Ashok Leyland, Strides Pharma, BEML, Dabur, Jubilant Foodworks and DLF rallied.
Jet Airways, V-Guard Industries and Gati were under pressure. 
Just In
The US Food and Drug Administration inspected Cadila Healthcare's manufacturing facilities located at St. Louis, MO, USA of Nesher Pharmaceuticals (USA) LLC (100 percent subsidiary of Zydus Pharmaceuticals USA), from May 13 to 31, 2019.
The inspection concluded with 3 observations at one facility and 8 observations at the other facility of Nesher Pharmaceuticals with a recommendation for ’Voluntary Action Indicated (VAI)’, the company said in its filing.
This was a product specific pre—approval inspection with general cGMP and there were no Data Integrity (DI) related observations, it added. 
Nifty Inches Towards 12,100
Benchmark indices continued to trade at around record high levels on hope of rate cut after weak GDP data in Q4 and further fall in oil prices.
The Sensex climbed 507.31 points or 1.28 percent to 40,221.51 and the Nifty50 rallied 147.40 points or 1.24 percent to 12,070.20.
Acquisition
Suprajit Engineering entered into an asset purchase agreement to acquire the Halogen Bulb manufacturing facility (near Chennai) from Osram India Pvt. Ltd.
With this acquisition, Suprajit's Halogen Bulb's annual capacity will increase from 87 million to about 110 million, the company said, adding Suprajit will emerge as one of top 3 manufacturers of Halogen Bulbs in the world. 
Market At Record High:
Benchmark indices touched fresh record high in afternoon on hope of repo rate cut or some big reforms from government to boost economy.
The BSE Sensex rose 412.01 points to 40,126.21 and the Nifty50 climbed 123.70 points to 12,046.50 but the market breadth is weak.
About 1,333 shares declined against 1,050 advancing shares on the BSE.
Rate Cut Hope
In terms of liquidity driven rally, in an interview to CNBC-TV18, Gautam Shroff of Edelweiss Securities said, “I think flows will continue only if we see action from the government and the Reserve Bank of India (RBI) together. So action is something which is much required. We have a policy this week. Anywhere between 25 basis points (bps) and 50 bps, if they do 50 bps then the market will surely cheer that because 25 is almost like a given and that is already priced in. So that is something that will help in action and flows will continue only after we see that decision come through.”
Elara Capital Sees 52% Potential Upside in Bharti Airtel
Management confirmed a bulk of capex over FY18-19 was toward optic fiber rollout to connect towers, and peak capex is behind it, said Elara Capital which expects elevated access charges, with the new minimum tariff strategy encouraging correction of traffic asymmetry, the positive effects of which will be visible only in FY21.
The brokerage expects debt reduction to be pushed out, as monetization of Bharti Africa and Bharti Infratel is likely only toward second half of FY20 or later.
Elara reiterated buy with a new target price of Rs 530 from Rs 510 based on 6.5x (unchanged) FY21E EV/EBITDA adjusted for minority holding in Bharti Infratel.
Stake Buy
Canada-based insitutional investor CDPQ bought 1.54 percent stake in M&M for Rs 1,244 crore from promoter.
M&M said proceeds from share sale will be used for company's operational requirements.  
Acquisition
Quess Corp said its subsidiary acquired 53,87,155 equity shares of Allsec, representing 35.35 percent of the total share capital of Allsec by way of a block trade on the National Stock Exchange of India Limited.
Accordingly, as on date, the subsidiary holds 93,49,095 equity shares of Allsec, representing 61.35 percent the total share capital of Allsec, it added.
Just In
Dilip Buildcon said its wholly owned subsidiary DBL Mangloor Highways Private Limited has received the appointed date i.e. April 12, 2019 by the National Highways Authority of India.
The project included four laning of NH-161 from Mangloor to Telangana/Maharastra border in Telangana under Bharatmala Pariyojana on Hybrid Annuity Mode.
Market Extends Rally:
Benchmark indices extended rally in late morning deals with the Nifty50 reclaiming 12,000 and Sensex 40,000 on fall in oil prices and hope of repo rate cut in a policy meeting that began today.
The BSE Sensex rallied 302.70 points to 40,016.90 and the Nifty50 jumped 85.60 points to 12,008.40.
Stake Sale in DHFL
Aion Capital is in the fray to buy majority stake in DHFL and may sign a term sheet soon to explore transaction, reports CNBC-TV18 quoting sources.
Lone Star, Piramal Enterprises and Oak Tree are also in talks with DHFL, sources said.
Aion Capital and DHFL did not respond to CNBC-TV18's query.
Aion Capital is a joint venture between Apollo Global & ICICI Ventures. DHFL's total AUM size is at around Rs 1.26 lakh crore.
Nikkei India Manufacturing PMI
Economic growth in manufacturing industry moved up a notch in May as companies responded to strengthening demand conditions by lifting output, quantities of purchases and employment to greater extents, IHS Markit said.
Business sentiment also ticked higher. Price pressures remained relatively muted, with goods producers leaving selling prices unchanged on the back of a mild rise in overall cost burdens, it added.
At 52.7 in May (against 51.8 in April), the Nikkei India Manufacturing Purchasing Managers’ Index pointed to the strongest improvement in the health of the sector for three months. Moreover, the current growth sequence was stretched to 22 months, it said.
May Auto Sales
Ashok Leyland said it sold 13,172 units in May, lower by 4 percent against 13,659 units sold in same month last year.
Medium and heavy commercial vehicle sales declined 14 percent year-on-year to 8,946 units.
Domestic sales grew by 6 percent to 12,778 units YoY in May 2019.
Stake Sale
Promoter sold 1.54 percent stake in Mahindra & Mahindra at Rs 648 apiece.
Post stake sale, promoter stake reduced to 18.90 percent from 20.44 percent.
Hero Motocorp Climbs 5%
Hero Motocorp shares rallied nearly 5 percent intraday after May sales data was better than depressed estimates by analyst.
The country's largest two-wheeler maker sold 6.5 lakh units in month of May, down 8 percent against 7.06 lakh units sold in same period last year.
But numbers were better than Nomura expectations of 6.2 lakh units.
Market Update
Benchmark indices remained strong on fall in oil prices and US bond yields.
The Sensex rose 164.33 points to 39,878.53 and the Nifty gained 44.60 points at 11,967.40 but the market breadth was in favour of bears.
About 933 shares declined against 826 advancing shares on the BSE.
KTM and Bajaj Auto Agree On New Electric Vehicle Alliance
KTM Industries AG and Bajaj Auto have decided to initiate a serial production project for PTW (powered two wheeler) electric vehicles in the power range of 3 to 10 kW (48 volt) at the level of KTM AG.
This platform will support different product variants - scooters, mopeds, small mopeds, under brands of both partners, the company said, adding this further step in the field of electro mobility is a logical addition to the existing activities with PEXCO in the HUSQVARNA e-bike sector.
The serial production will start at Bajaj's production site in Pune, India by 2022.
Goldman Sachs Lowers US Views
Goldman Sachs Group Inc analysts on Sunday downgraded their second-quarter economic growth forecasts for the United States because of risks stemming from trade conflicts with Mexico and China, Reuters reported.
The analysts also said they saw a rising probability of the US Federal Reserve cutting rates but not enough of a chance to pencil such a cut into its baseline forecast. Their second-quarter gross domestic product growth forecast is now 1.1 percent, down from 1.3 percent little more than a week ago.
Bajaj Auto Gains 2% After Sales Data
Bajaj Auto reported a 3 percent increase in its sales at 4.19 lakh units for May, against 4.07 lakh units sold in same month last year.
Domestic sales increased 5 percent to 2.35 lakh units against 2.24 lakh units while exports increased 1 percent to 1.83 lakh units against 1.82 lakh units.
Motocycle sales jumped 7 percent to 3.65 lakh units, but three-wheeler sales fell 16 percent to 54,167 units compared to same month previous fiscal.
Market Update:
Benchmark indices extended gains in early trade with the Sensex rising 205.27 points to 39,919.47.
The Nifty50 jumped 49.50 points to 11,972.30, driven by HDFC and HDFC Bank.
Market Outlook
Arvind Sanger is the founder and managing partner of Geosphere Capital Management told CNBC-TV18 that GDP numbers for Q1FY20 should be worse than Q4FY19 and economy continued to decelerate.
Trade war & preference to tariffs have raised risks significantly, he said.
He feels the RBI cutting the rates not a solution to weak economy. "RBI rate cut might trigger sell on rally action."
Sanger said he is not willing to bet on overall market, will buy into specific sectors.
Market Opening:
Benchmark indices opened marginally higher with Nifty reclaiming 11,950 levels despite correction in global markets.
HPCL, BPCL, IOC, Hero Motocorp, Bharti Infratel, HDFC, GAIL and Wipro gained.
Tata Motors, Yes Bank, Eicher Motors, M&M, Hindalco and Maruti are under pressure.
Rupee Opening:
The Indian rupee has opened at 69.50 a dollar on June 3, higher by 17 paise compared to Friday's close of 69.67 a dollar.
Market Pre-Opening
Benchmark indices were higher in pre-opening trade despite correction in global peers amid trade worries.
The BSE Sensex rose 86.15 points to 39,800.35 and the Nifty50 gained 56.80 points at 11,979.60 in pre-opening trade.
Market Trend
By looking at weekly option data, 12,000 Call has significant open interest (OI), which is acting as a hurdle on the upside. However, ongoing positive trend in the index will remain intact until it holds 11,800 levels, ICICI Direct said.
The brokerage feels the index will consolidate in the range of 11,800-12,000 for a couple of trading sessions.
Nifty futures ended at a discount of 6 points with a rise in IVs by 2.86 percent on May 31. The highest Put base is at 11,500 strike with almost 23 lakh shares while the highest Call base is at the 12,500 strike with 17 lakh shares.
Asian markets Update
Major stocks in Asia were trading lower amid increasing concerns over the state of global trade which could hit global growth.
China's Shanghai Composite was down 0.7 percent, Japan's Nikkei fell over a percent and Hong Kong's Hang Seng declined 0.5 percent,
Gujarat Gas in Focus
HDFC Securities has intitiated coverage on Gujarat Gas with a buy rating and target price of Rs 222, implying 20 percent potential upside from current levels.
City gas distribution (CGD) companies deserve higher valuation multiples than utilities considering they are (1) Unregulated, (2) Relatively less capex-intensive, and (3) Competing for sales against viable alternatives (in industrial/commercial markets), the brokerage said.
It believes their pricing freedom derives from the fact that superior returns in CGD can be reinvested and help increase the share of gas in India’s energy mix from 20 percent (from 6 percent currently) by 2025. This premium can only expand with time.
Fiscal Deficit
On the fiscal front, the latest data shows that the Government has been able to meet the revised fiscal deficit estimate of 3.4 percent of GDP. However, there has been Rs 1.45 lakh crore reduction in expenditure with Rs 69,140 crore cut in subsidies (major cut in food subsidy of Rs 69,394 crore), covering for Rs 1.57 lakh crore reduction in total receipts.
Now that FY19 estimates are revised, the FY20 might seem to be on the higher side, Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI said, adding given growth slowdown that the country is facing, the question arises whether the government should continue to focus on fiscal consolidation path or keep the deficit numbers constant for the next two years before reducing it further and try to propel growth.
Sticking to a particular number is not that important. Instead, the Government should strive to make credible, transparent and achievable fiscal rules, he said.
GDP Data for Q4 Was Weak
GDP growth plunged to 20-quarter low to 5.8 percent in Q4 FY19. With this, the full year FY19 GDP growth comes to 6.8 percent (5-year low) compared to 7.2 percent in FY18. GVA growth for FY19 stood at 6.6 percent compared to 6.9 percent in FY18.
Agriculture and Allied Activities grew at 2.9 percent in FY19, compared to last year growth of 5.0 percent. However, the projection of just-normal monsoon this year boosts the outlook of this sector for FY20, ?Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI said.
Market Update
SGX Nifty indicated higher opening in equity markets despite correction in global peers following fresh trade concerns between US and Mexico.
SGX Nifty was up 40 points at 11965.50.