Sensex, Nifty Snap 3-Day Winning Streak As Stimulus Angst Weighs On Global Equities

Closing Bell

Indian shares snapped a three-day winning streak as global equity markets retreated amid concern that monetary policies in Europe and the U.S. may turn less supportive of growth.

The S&P BSE Sensex dropped 0.4 percent to 28,220 while the NSE Nifty lost 0.3 percent to 8,743. This is after the indexes rose for the third day in early trade after the new RBI Governor Urjit Patel cut interest rates at his first policy review.

The market breadth, however, was encouraging at 937 advances, 673 declines and 263 stocks remaining unmoved.

Closing Bell

Indian shares snapped a three-day winning streak as global equity markets retreated amid concern that monetary policies in Europe and the U.S. may turn less supportive of growth.

The S&P BSE Sensex dropped 0.4 percent to 28,220 while the NSE Nifty lost 0.3 percent to 8,743. This is after the indexes rose for the third day in early trade after the new RBI Governor Urjit Patel cut interest rates at his first policy review.

The market breadth, however, was encouraging at 937 advances, 673 declines and 263 stocks remaining unmoved.

Be that as it may, for the Nifty to move to the next level, i.e. beyond the 9,000-mark, will be a difficult proposition, said Ashu Madan, COO at Religare Securities. “Despite getting surprise rate cut by the central bank, we closed lower. Imagine if we had not got the rate cut. The market is capped both on the upside and the downside,” he told BloombergQuint in a telephonic conversation.

“The Nifty will remain in the 8550-8600 and 8900-9000 range at least for next two months with heightened volatility,” he said adding “the conviction to go long is very less.”

Madan is bullish on autos (including tyre makers) and cement and bearish on capital goods, telecom and information technology. He is neutral on banks.

Also Read: It’s A ‘Sell On Rise’ Market; Reliance Is The Stock To Watch: Ashu Madan

Reliance Infra Jumps on Sale of Transmission Assets to Adani

Shares of the Anil Ambani-led firm gained as much as 2.7 percent to Rs 606 after it announced sale of its transmission assets to Adani Transmission. The Gautam Adani group stock climbed for a fourth day by 7.5 percent to Rs 43 apiece.

Reliance Infrastructure said it has signed a binding term sheet with Adani Transmission for a sale of 100 percent stake in its transmission assets. This includes the company’s three transmission projects, the company press release stated.

The proceeds from the deal will be used to reduce debt. The company also said that it is in advanced talks for sale of its roads and power businesses.

European Stocks Drop Amid ECB, Fed Angst

European Stocks Drop Amid ECB, Fed Angst

European shares fell along with Asia’s emerging-market stocks and currencies as the prospects of monetary policies turning less accommodative in the world’s largest economies dampened risk appetite.

Motherson Gains After Nomura Initiates Coverage

Shares of the auto ancillary maker rose as much as 2.1 percent to Rs 335 after research firm Nomura initiated coverage on the stock with a “Buy” rating.

Motherson is a play on strong volume growth expected in India’s PV industry, rising content per car and premiumisation. Globally, rising polymer usage and advanced mirror technology will continue to drive new order wins. Access to upcoming technologies from its JV partner and global leader, SWS, gives it a competitive edge.

Nomura research note. 

Nomura has a price target of Rs 387, which is a 17.8 percent upside on its October 4 closing.

Also Read: Bharat Forge Shares Drop On U.S. Truck Sales Slowdown

Services Growth Eases Amid Slowdown In Manufacturing: PMI

India services sector grew for a fifteenth straight month, although it came off from a 43-month high, pointing to a slower rate of expansion amid a slowdown in manufacturing.

The Nikkei India Services Purchasing Managers’ Index (PMI), which tracks changes in activity at services sector companies on a monthly basis, stood at 52 in September, down from 54.7 in August.

A reading above 50 means the sector is expanding, while a reading below that level means contraction.

Service sector performance in India continued to improve relatively modestly in September, a trend that has been evident throughout the year-to-date. With manufacturing also on a softer footing, the growth of private sector output and new orders eased in the latest month.”

Pollyanna De Lima, economist at IHS Markit, and author of the report. 

Reflecting softer expansions in activity at both service providers and manufacturers, the seasonally adjusted Nikkei India Composite PMI Output Index fell from August’s 42-month high of 54.6 to 52.4 in September.

Sharda Cropchem Jumps 19% After Motilal’s Buy Rating

Shares of the agrochemical firm rose as much as 18.9 percent, to a new 52-week high, after brokerage house Motilal Oswal initiated coverage on the stock with a “Buy” rating.

The broking firm cited rising wallet share in existing products, geographic expansion and new product launches as the reason for its bullish view.

We value the company with a price/earnings to growth ratio of 1 implying 19times FY18 EPS for a per share target price of Rs 500 (upside 28 percent).  

Motilal Oswal research note. 

Also Read: Jubilant Life Arm Gets Australian Drug Regulator’s Nod For Lung Scan Drug

Opening Bell

Indian shares extended gains for a fourth day following a surprise interest rate cut by the Reserve Bank of India yesterday.

The S&P BSE Sensex climbed as much as 0.5 percent to 28,477 while the NSE Nifty reclaimed the 8,800 level briefly after an opening 0.4 percent gain. The market breadth was healthy at 993 advances, 343 declines and 417 stocks remaining unchanged.

The Nifty PSU Bank index was the best performing sectoral gauge on the NSE followed by Nifty Media index. Meanwhile, the Nifty IT index was the least performing index weighed down by a combination of strengthening rupee and Eurozone concerns.

Opening Bell

Indian shares extended gains for a fourth day following a surprise interest rate cut by the Reserve Bank of India yesterday.

The S&P BSE Sensex climbed as much as 0.5 percent to 28,477 while the NSE Nifty reclaimed the 8,800 level briefly after an opening 0.4 percent gain. The market breadth was healthy at 993 advances, 343 declines and 417 stocks remaining unchanged.

The Nifty PSU Bank index was the best performing sectoral gauge on the NSE followed by Nifty Media index. Meanwhile, the Nifty IT index was the least performing index weighed down by a combination of strengthening rupee and Eurozone concerns.

Movers & Shakers: ICICI Bank, Jindal Steel & Power, Oil & Gas Stocks And More

Money Market Heads Up

Data to Watch

• 10:30am: Nikkei India Services PMI for Sept. (Prior 54.7)
• 10:30am: Nikkei India Composite PMI for Sept. (Prior 54.6)

RBI Turns Dovish With 25 Basis Point Rate Cut

The Reserve Bank of India (RBI) on Tuesday cut its benchmark interest rate by 25 basis points, citing a decline in inflation in the economy. All six members of the monetary policy committee voted in favour of the rate cut, the RBI said.

The decision, the first to be taken by the monetary policy committee, is not out of line with market expectations. Four of ten economists polled by BloombergQuint had forecast a 25 basis point repo rate cut while others had suggested that the RBI may wait until December to cut rates. (Click HERE for a detailed report)

Today's #RBIPolicy suggests another rate cut in December, says @jpmorgan's Sajjid Chinoy. pic.twitter.com/gQ1IedzdxL

— BloombergQuint (@BloombergQuint) October 4, 2016

Also Read:

• Patel’s Big Day Out Signals Abrupt Shift From Rajan’s Era
• RBI To Deal With Bad Loans With ‘Firmness’ And ‘Pragmatism’
• What India Inc, Brokerages And Ratings Agencies Made Of RBI’s Rate Decision

#RBIPolicy | Concerned that RBI governor "batting for the government," says Currency Expert Jamal Mecklai. pic.twitter.com/pWe1NwClhX

— BloombergQuint (@BloombergQuint) October 4, 2016

Stocks to Watch

• HDFC to report 7 percent YoY rise in Q2 dividend income to Rs 456 crore
• KPR Mills to consider stock split
• NBCC India: Won contracts valued at Rs 1117 crore in September
• Bajaj Hindusthan Sugar, Balrampur Chini Mills, Shree Renuka Sugars: Sugarcane crushing in Maharashtra delayed on heavy rain; to start on December 1 versus usual October 1 commencement
• ICICI Bank: Cuts lending rate by 5 bps to 9.05 percent

ICICI Bank (almost) cuts its lending rate.https://t.co/rTLxsiFrVq

— BloombergQuint (@BloombergQuint) October 5, 2016

• Maruti Suzuki: Total production stood at 1,46,434 units, up 24 percent in September.
• Yes Bank: Successfully raised Rs 2,135 crore through infrastructure bonds issue, which was subscribed 2.13 times.
• Idea Cellular: Aim to simplify holding structure by consolidating its scattered tower holdings. (Economic Times)
• Vedanta: Mulling prospects to revive the Madras Aluminium Company. (Business Standard)
• BPCL: Plans Rs 1,000 crore terminal on the west coast to import LPG. (Mint)
• Biocon: Gears up to launch new drugs to treat diabetes and cancer. (Mint)

For a complete list of stocks to watch, click HERE

IPO Watch

• Endurance Technologies to sell shares at Rs 467-472 in IPO starting today; offer to close October 7.

Company raised Rs 349 crore via share allotment to anchor investors (Quick read HERE)

Indian Oil Corporation to invest $2.3 billion on refinery expansion.https://t.co/Retts13iIM

— BloombergQuint (@BloombergQuint) October 4, 2016

Talking Points

• India’s Patel leads new panel to cut key rate to 5-year low
• IMF sees India growing 7.6 percent in 2016, 2017
• India’s gold imports said to drop 33 percent in September to 44.6 tonne
• India spectrum bids at Rs 60,969 crore on the third day of auction, official say

No takers for 700 MHz and 900 MHz even on Day 3https://t.co/TvhNAAmkbE

— BloombergQuint (@BloombergQuint) October 4, 2016

• ICICI Bank cuts MCLR by 5 bps; 1-year MCLR at 9.05 percent
• Indian Oil raises petrol, diesel prices to offset dealer commission revision
• Pakistan says India distracting military from terrorism fight

The Indian economy is at a crossroads says @JohanAurik of @ATKearney and co-chair of the @wef India Economic Summithttps://t.co/n9VX0J8stg

— BloombergQuint (@BloombergQuint) October 5, 2016

• RBI’s decision to lower key interest rate is net positive for economy, Economic Affairs Secretary Shaktikanta Das says
• Sugar cane crushing in India’s Maharashtra delayed on Rains
• Essar’s 1,200MW Mahan plant to Be fully operational by March
• Global funds buy Rs 344 crore of local stocks; domestic funds sell Rs 172 crore on October 4: Provisional data

A new funding route for startupshttps://t.co/nbsiPpZij6

— BloombergQuint (@BloombergQuint) October 4, 2016

Good Morning!

The Nifty Futures on the Singapore Exchange, an early indicator of Nifty performance in India, was little changed at 8,797.

U.S. stocks closed lower on Tuesday, amid concerns the European Central Bank (ECB) could start winding down its quantitative easing programme ahead of schedule. The ECB will probably wind down bond purchases in steps of 10 billion euros a month once a decision is taken to end quantitative easing, Bloomberg reported citing unnamed ECB official.

US markets slip and Asia opens lower on Fed rate hike and ECB tapering fears. https://t.co/lXE8uk7ls9 pic.twitter.com/q4IYRLTxmD

— BloombergQuint (@BloombergQuint) October 5, 2016

Traders have been monitoring central banks for any signs they may be willing to pull back on stimulus measures, with bets on an interest-rate increase from the Federal Reserve in 2016 rising following hawkish comments from Fed officials. Investors see a 61 percent chance of the Fed raising rates in December, up 11 percentage points from a week earlier.

Asian stocks climbed, after an initial retreat, as the yen dropped most since August and oil rallied as data indicated American oil stockpiles shrank last week.

The ECB will probably gradually wind down bond purchases before the conclusion of quantitative easing.https://t.co/85lhWRz7wW

— BloombergQuint (@BloombergQuint) October 4, 2016