Nifty Gains For A Fourth Session As US Fed Worries Ease; FPIs Stay Net Buyers Today

Indian equity benchmarks closed higher after softer-than-expected US inflation print raised expectations that the Federal Reserve will raise interest rates at a slower pace.

The S&P BSE Sensex climbed 9% to 59,311.50 to its highest level in four months, after closing with minor losses yesterday. The NSE Nifty 50 Index added 0.7% to close at 17,652.05, its fourth straight session of gains.

"The lower than expected US CPI numbers have catalyzed a rally in global markets on the hope that the US Fed may go slow on rate hikes," Deepak Jasani, head of retail research at HDFC Securities Ltd., wrote in a note. 

The prospect of faster monetary tightening by the Fed had stoked fears of capital outflows from riskier emerging market assets like India. 

In earnings, of the 44 Nifty companies that have announced quarterly results so far, an equal number have missed and exceeded analyst estimates.

FPIs have been net buyers for ten days in a row; the longest buying streak of the year till date.

Foreign portfolio investors net bought equities worth Rs 2,298.08 crore today, as per data from the National Stock Exchange.

On the other hand, domestic institutional investors net sold equities worth Rs 729.56 crore on Thursday.

Institutions had net bought Rs 3,978.31 crore worth of equities last month in July alone; the only month of the year of 2022 so far when institutions remained net buyers.

Institutions have net bought Rs 8,396.49 crore worth of equities so far in August and net sold equities worth Rs 40,043.2 as yet in 2022.

BEML jumped as much as 20%, before paring some of its gains, after the mining company decided to fix a record date to determine eligible shareholders for issuing shares by BEML Land Assets as part of the demerger scheme.

The company also announced that it is executing an export order valuing $19.76 million with the Ministry of Economy, Planning and Regional Development (MINEPAT), Cameroon for the supply of 71 nos. Earthmoving machinery for preparation of Agricultural Land for Cassava Project under Government of India Line of Credit.

Bata India reported net income for the first quarter of Rs 119 crore vs. loss Rs 69.48 crore rupees YoY.

FIRST QUARTER RESULTS

Revenue Rs 943 crore vs. Rs 267 crore YoY, estimate Rs 906 crore (Bloomberg Consensus)

Total costs Rs 793 crore vs. Rs 372 crore YoY

Other income Rs 9.29 crore, -24% YoY

COMMENTARY AND CONTEXT

• Company continued to optimize cost structures and drive efficiencies across its value chain

• "In the face of volatile inflation, geo-political unrest, we are conscious about our cost efficiencies and accordingly various cost-savings measures across our network continue to be implemented which has reflected in the profitability metrics," CEO Gunjan Shah says

Trent reported net income for the first quarter that missed the average analyst estimate.

FIRST QUARTER RESULTS

• Net income Rs 103 crore vs. loss Rs 83.75 crore YoY, estimate Rs 108 crore (Bloomberg Consensus)

• Revenue Rs 1,650 crore vs. Rs 327 crore YoY, estimate Rs 1410 crore

• Total costs Rs 1,560 crore vs. Rs 490 crore YoY

• Other income Rs 41.51 crore, -21% YoY

Shares of Rossari Biotech climb as much as 7.5% to the highest level since April 18 after the company’s margins improved. The Indian specialty chemicals maker successfully navigated volatile raw material prices and increased prices in April to June. 

“The management expects to achieve medium-term Ebitda margins in the range of 14%-15%, while it aims at achieving 15%-17% margins over the next two years,” Priyanka Baliga, analyst at KRChoksey Shares & Securities, writes in an Aug. 10 note

Estimates revenue growth at 25% CAGR over FY22-24 led by strong product pipeline which focuses on sustainability and the environment

Positive on R&D strength of company and will monitor margin performance in coming quarters; maintains buy with price target of Rs 1,252.

Bharat Forge reported net income for the first quarter that met the average analyst estimate.

FIRST QUARTER RESULTS

• Net income Rs 244 crore, +46% YoY, estimate Rs 249 crore (Bloomberg Consensus)

• Ebitda Rs 460 crore vs estimate of Rs 424 crore

• Revenue Rs 1,760 crore, +28% YoY, estimate Rs 1,660 crore

• Total costs Rs 1,460 crore, +30% YoY

• Other income Rs 25.94 crore, -22% YoY

Aviation stocks gained, a day after the Civil Aviation Ministry said that domestic airfare caps will be removed.

The Union Aviation Ministry on Wednesday said that limits imposed on domestic airfares will be removed from August 31, after a span of approximately 27 months.

Shares of InterGlobe Aviation rose as much as 2.7% to Rs 2,084.6, but pared gained to trade 0.3% lower thereafter. SpiceJet Ltd rose as much as 6.9% at Rs 47.90.

"The decision to remove air fare caps has been taken after careful analysis of daily demand and prices of air turbine fuel (ATF). Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future," Aviation Minister Jyotiraditya Scindia said on Twitter.

Shares of Coal India slipped 0.6% after opening over 3% to hit a 52-week high on robust June quarter numbers.

The PSU major reported an almost three-fold rise in consolidated net profit at Rs 8,832.86 crore for the June 2022 quarter on the back of higher sales. Its revenue from operations during the April-June period increased to Rs 35,092.17 crore from Rs 25,282.75 crore a year ago.

The company's net sales in the first quarter rose to Rs 32,497.9 crore from Rs 23,293.65 crore earlier.

Its output in the April-June period rose to 159.75 million tonnes (MT) from 123.98 MT in the corresponding quarter of the previous fiscal.

Shares of Eicher Motors Ltd. hit a 52-week high after the Royal Enfield motorcycle maker met analysts’ estimates in the first quarter.

Eicher Motors, on Wednesday, reported more than a twofold year-on-year jump in consolidated net profit at Rs 611 crore for the quarter ended June. Sequentially, the earnings remained steady. The bottom line was aided by robust sales in international markets.

Revenue from operations rose to Rs 3,397 crore in the April-June 2022 period from Rs 1,974 crore in the year-ago period.

Jefferies India

• Sees EPS more than doubling over FY22-24 and multiple positives for Royal Enfield motorbike business including recovery in two-wheeler demand, strong exports and limited competition

• “The abnormal 35% fall in Indian two-wheeler demand over FY19-22 has created a favorable base for strong recovery,” according to note

• Royal Enfield has shown strong pricing power amid big commodity inflation

• Retains buy and ups price target to Rs 3,700 vs Rs 3,500

More brokerage takes here

Discount broker Zerodha's customers faced difficulties with the app on Thursday morning.

A company spokesperson said the price was not ticking for a few customers, and the issue has been fixed now.

Some of the affected customers took to social media to complain about the app not working early into trade and shared screenshots of the troubles.

(Source: PTI)

The Indian rupee gains, tracking advances in other emerging-market currencies after a slower-than-expected US inflation reading for July sparked optimism over a slower pace of rate hikes. Sovereign bonds edge higher. 

• USD/INR drops 0.2% to 79.3750

• The response was triggered with US inflation data lowering the expectations of a 75bps hike by Fed and it has come back to bets of 50bps, says Dilip Parmar, current analyst, HDFC Securities

• Expect rupee to either consolidate in the month of August or it could see some kind of a strength in the coming days

• Believe that 78.85-79.70 is the short-term range in which rupee could consolidate

• Going ahead, the positive factors could be FIIs turning net buyers and good FDI inflows for Q1

Shares of TGV SRAAC Ltd rose as much as 20% to Rs 111.5, the highest in a year, after its board gave an in-principle nod for a 15MW capacity addition to the solar power project.

The approval is in addition to the previous approval accorded by the board for 25MW solar power. Further, out of the previously approved 25MW, the company has successfully commissioned 10MW solar power so far.

The company also said it has prepaid term loans up to Rs 72 crore to banks.

• Trading volume was more than 20 times the 20-day average for this time of day.

• The relative strength index on the stock was above 70, indicating it may be overbought.

• Total return is 125.8% YTD vs 3.0 for S&P BSE Sensex Index

• The company has a market cap of Rs 1,194 crore

TGV SRAAC manufactures and exports a wide range of chemical products. The company produces chlor-alkali, castor derivatives, chloromethanes, toilet soap, and fatty acids. TGV SRAAC serves manufacturing, export, pharma and health care, power, infrastructure, hospitality, and educational sectors worldwide.

Indraprastha Gas Ltd. rose as much as 5.5%. Trading volume was seven times the average for this time of day.

Trading volume was 3.79 million shares, seven times the 20-day average of 519,627 shares for this time of day. One-month implied volatility was 36%.

The stock is higher for the fifth straight day. Indraprastha Gas trades at 17 times its estimated earnings per share for the coming year. It trades at 18 times trailing EPS.

Analysts have 27 buy, five hold, and three sell recommendations on the stock, according to Bloomberg data. The price target of Rs 454.47 represents a 14% increase from the last price.

Brokerage Take

Citi

• Q1 Ebitda rose 23% QoQ and profit was up 16% QoQ, beating Citi’s estimates by more than 20%

• While outlook for the sector has been muted in recent months, the co. recently confirmed that the city’s gas distributors have sought relief from the govt, which may consider measures to bring down the companies’ costs

• Recommends overweight on IGL and underweight on Petronet LNG as a pair trade

• Petronet continues to face headwinds from weakening LNG demand, which could be further compounded in the near-term by GAIL’s Russian LNG shortfall

• IGL’s ~20% YTD under-performance makes risk-reward favorable, Handa writes

Edelweiss

• Q1 Volumes grew 48% YoY and 2% QoQ to 7.9 mmscmd driven by its highest ever CNG volumes as Covid-led disruptions eased and new vehicle addition remained strong

• Ebitda margins improved 9% YoY and 20% QoQ to Rs 9/scm helped by aggressive price hikes taken during Q1

• Sees room for company to further hike prices; IGL is targeting 2x CNG stations and PNG connections in five years, which would add incremental ~5 mmscmd of volumes over four-five years

• Keeps buy; price target Rs 526

Indian Bank rose 5.1% after around 1.5 million of its shares changed hands in a large trade on the exchange.

• The shares increased to Rs 183.95, higher than any close since Oct. 27, from Rs 175.

• The stock was the best performer among its peers.

• Trading volume was 637,598 shares, double the 20-day average of 272,547 shares for this time of day.

• Analysts have 11 buy, no hold, and no sell recommendations on the stock.

• The consensus rating is 4.9, on a 1-5 scale with 1 meaning strong sell and 5 meaning strong buy.

• The price target of Rs 216.22 represents a 18% increase from the last price

All 19 sectoral sub-indexes compiled by BSE Ltd. advanced, led by a measure of IT companies.

In earnings, of the 44 Nifty companies that have announced quarterly results so far, an equal number have missed and exceeded analyst estimates. Apollo Hospitals is scheduled to announce results in the day.

• Redington India has 1.53 million shares change hands in a large trade.

• IDFC First Bank has 1.34 million shares change hands in a large trade.

• Zomato has 2.25 million shares change hands in two large trades.

• Gail has 2.22 million shares change hands in two large trades.

Indian stock benchmarks gained amid positive Asian trading, following softer-than-expected U.S. inflation data, which stoked speculation that the Federal Reserve could pivot to a shallower pace of interest-rate hikes.

The S&P BSE Sensex rose as much as 1.14% to 59,484.99, while the NSE Nifty 50 index gained little over 1% to 17,719.30 in opening trade. ICICI Bank Ltd. contributed the most to the index gain, increasing 1.9%. Tech Mahindra Ltd. had the largest increase, rising 3.2%.

In early trading, 48 of 50 shares rose, while 2 fell.

Foreign institutional investors (FIIs) were net buyers in the Indian capital market as they purchased shares worth Rs 1,061.88 crore on Wednesday, as per exchange data.

Suzlon Energy reported net income for the first quarter of Rs 2,430 crore vs. loss Rs 22.44 crore YoY.

Q1 Earnings Highlights

• Revenue Rs 1380 crore, +22% YoY

• Total costs Rs 1380 crore, +12% YoY

• Ebitda Rs 214 crore

COMMENTARY AND CONTEXT

• Q1 Profit Before Tax, One-Off Income Rs 7.21crore

• Q1 One-Off Gain Rs 2,470 crore

• To Raise Upto Rs 1200 crore Via Rights Issue of Shares

• Co. approves transfer of stake in units Varadvinayak Renewables, Gale Green Urja, Suyash Renewables to units SWE Renewables, SWE Wind Project Services, Suryoday Renewables respectively

• Co. approves sale of 51% stake in Vayudoot Solarfarms

• Suzlon Energy Q1 one-off gain on extinguishing debentures, pref shares

• Since refinancing exercise was completed towards end of May 2022, full impact of the same on finance cost will be seen from 2Q of FY23, CFO Himanshu Mody says in the statement

MRF Ltd. and Indus Towers Ltd. highlighted possible short buildup among Indian stocks in the NSE Nifty 500 Index, while Balrampur Chini Mills Ltd. and Persistent Systems Ltd. saw potential long unwinding, according to futures data analyzed by Bloomberg.

The Nifty August futures were little changed at 17,558.25, a premium of 24 points to the Nifty spot; open interest for the active contract declined 1.3% to 213,395 contracts

Out of 187 futures contracts in the NSE Nifty 500 Index, 58 saw short positioning and 47 saw long unwinding; Of the remainder, 46 contracts were for short covering and 36 were long positioning

• Indraprastha Gas Ltd. and Escorts Kubota Ltd. saw significant short covering, while Tata Chemicals Ltd. and City Union Bank Ltd. saw long positioning

The rupee may gain, tracking advances in other emerging-market currencies on optimism over a slower pace of US rate hikes. Bond traders are looking ahead to India inflation data on Friday.

• USD/INR dropped 0.2% to 79.5175 on Wednesday

• Implied opening from forwards suggest spot may start trading around 79.17

• 10-year yields fell 4bps to 7.31% on Wednesday

• Global funds bought Rs 24 crore of sovereign bonds under limits available to foreign investors, and withdrew Rs 123 crore of corporate debt

• State-run banks bought Rs 4,003 crore of sovereign bonds on Aug. 5: CCIL data. Foreign banks bought Rs 2,590 crore of bonds

• Nestle India: Reinstated Neutral at Goldman; price target Rs 20,000.

• Hindustan Aeronautics: New Overweight at Morgan Stanley

• Godrej Consumer: Reinstated Buy at Goldman; price target Rs 1,100.

• Emami: Reinstated Buy at Goldman; price target Rs 575

• Britannia: Reinstated Neutral at Goldman; price target Rs 4,000.

• Colgate India: Reinstated Sell at Goldman; price target Rs 1,400.

• Dabur India: Reinstated Buy at Goldman; price target Rs 680.

• Marico: Reinstated Buy at Goldman; price target Rs 620.

• ITC Ltd: Reinstated Buy at Goldman; price target Rs 390.

Source: Bloomberg

• Cherry-Picking The Nifty-50 ‘Chartbusters': Motilal Oswal

• Eicher Motors Q1 Review - Improving Margin Outlook: Dolat Capital

• PNC Infratech Q1 Review - Moving With Strength: IDBI Capital

India’s largest mortgage financier used an unusual trade to hedge some of its borrowings against interest rate volatility as it sought to expand its range of tools to manage risk, according to people familiar with the matter.

Housing Development Finance Corp., the nation’s biggest rupee-bond issuer this year, used a so-called total return swap to hedge rate risks on a debt issuance which closed last month, the people said, asking not to be identified discussing private arrangements. The lender had been primarily using overnight-index swaps before, they said.

Read the full story here.

Gold was steady in Asia as investors digested the impact of cooler inflation in the US on the Federal Reserve’s monetary tightening path.

Bullion initially jumped on Wednesday after the US consumer price index decelerated by more than expected in July -- suggesting the Fed could be less aggressive in raising interest rates -- but ended up 0.1% lower. Some traders pared bets on tightening, with a half-point rate increase being re-established as the likeliest outcome next month, as opposed to another three-quarter point hike.

Read more here.

Meanwhile, oil fell as US data on stockpiles and production signaled an easing of market tightness, and a key European pipeline restarted flows.

West Texas Intermediate edged lower after ending 1.6% higher on Wednesday following softer-than-expected US inflation data. US government figures showed that inventories hit the highest since December as local output climbed. In Europe, crude flows from Russia along the southern Druzhba network resumed as a payment dispute was resolved.

Read more here.

• NHPC: The company has approved monitisation of Uri-I Power Station or any other for 10-15 years in a single tranche during FY23.

• Mahindra & Mahindra: Life Insurance Corporation of India has reduced its stake in the automaker 6.42% from 8.43%.

• GAIL India: The company will consider raising funds via foreign currency bonds or term loan on Aug. 17.

Apollo Hospitals, Aster DM Healthcare, Aurobindo Pharma, Bata India, Bharat Forge, Gujarat Ambuja Exports, GE T&D India, Greaves Cotton, Garden Reach Shipbuilders & Engineers, Himadri Speciality Chemical, KNR Constructions, Trent, Suprajit Engineering, Sunteck Realty, Shilpa Medicare, Sapphire Foods India, Sandur Manganese & Iron Ores, Safari Industries (India), KSB, Page Industries, The Phoenix Mills, Quess Corp

F&O Cues

• Securities removed from ban list: Escorts Kubota

• Securities that continue to be in ban list: Balrampur Chini, Delta Corp

Indian stocks are set to rise along with their Asian counterparts following softer-than-expected U.S. inflation data, which stoked speculation that the Federal Reserve could pivot to a shallower pace of interest-rate hikes.

At 8:05 am, the Singapore-traded SGX Nifty -- an early barometer of India's benchmark Nifty 50 -- traded 1.2% higher at 17,756.

Tech shares spurred a 1% climb in an Asian equity index amid gains in Hong Kong, South Korea and China. US and European futures rose after the S&P 500 hit a three-month high and the Nasdaq 100 pulled 20% above a June low.

The advance in China’s bourses lagged as investors digested a warning from its central bank about inflation threats and a pledge to avoid massive stimulus.

The dollar edged up, paring a retreat from a day earlier that was the biggest since the onset of the pandemic. Elsewhere, crude oil held most of a jump above $91 a barrel, while Bitcoin broke past $24,000 in a sign of the brighter spirits in markets.