Sensex, Nifty Close Higher After A Volatile Session; Adani Stocks Stage A Comeback

Indian equity benchmarks closed higher after a volatile day of trading.

The S&P BSE Sensex gained 0.4% at 52,574.46, while the NSE Nifty 50 Index also gained by a similar magnitude. This after both the indices fell as much as 1.1% during the session. Maruti Suzuki India Ltd. was the biggest drag on both indices, while State Bank of India Ltd. gave the biggest boost.

Nifty member Adani Ports & Special Economic Zone Ltd. had the largest increase, rising 5.3%.

Of 30 shares in the Sensex index, 21 rose and 9 fell. Sixteen of 19 sector indices compiled by BSE Ltd. gained, led by a gauge of power stocks.

The record rally in Indian equities is susceptible to some booking of profits over the next few weeks, but foreign investors’ likely outflows from the market will be limited by the country’s strengthening underlying fundamentals, Credit Suisse analysts Jitendra Gohil and Premal Kamdar write in a note.

The analysts wrote that they expect the valuation premium to remain at elevated levels as India offers one of the fastest growth in the region.

Credit Suisse continues to remain positive on Indian equities and suggests buying economy-facing stocks in this dip; it also sees some rotation toward defensives like FMCG and IT in the near term.

Valuation premium of midcap stocks still remains below the historical average these stocks have traded against the large-caps, the analysts write; they however see “valuation froth” emerging in smallcap stocks.

Oil India reported net income for the fourth quarter that beat the average analyst estimate.

• Net income Rs 848 crore, -8.4% YoY, estimate Rs 632 crore (Bloomberg Consensus)

• Revenue Rs 2,580 crore, estimate Rs 2,740 crore

• Total costs Rs 2,700 crore, -34% YoY

• Other income Rs 1,330 crore, +34% YoY

• Dividend per share Rs 1.50

• Q4 exceptional loss of Rs 70.10 crore

Central Bank of India and Indian Overseas Bank climbed as much as 20%, leading gains for state-run lenders, after television channel CNBC Awaaz reported that government has shortlisted the two for divestment.

• The two banks may see 51% sale in first phase, the report said

• NSE Nifty PSU Bank Index +4.2% with all 13 members trading in green

Adani Ports is top gainer among the six Adani Group listed companies as they recover from last week’s plunge that started after a media report raised questions about some offshore investors’ holdings in the conglomerate’s stocks.

• Adani Ports climbs as much as 7.3%, extending gains for a second day, top performer on NSE Nifty 50 Index; plunged ~17% last week

• Adani Total Gas, Adani Power, Adani Transmission and renewable energy producer Adani Green Energy rise by their daily 5% limit

• Adani Enterprises, the group’s flagship company, adds as much as 6.4%

GMR Infrastructure Ltd. surges to a nearly seven-year high after lower interest costs helped its quarterly loss narrow by more than a third, while the company remains on track to spin off its non-airport business this fiscal year.

• The stock was the best performer among its peers.

  • Trading volume was 61.6 million shares, five times the 20-day average of 12.3 million shares for this time of day.

  • Trading in the company's put options totalled 1,903 contracts, compared with the average of 655 over the past 20 days. Trading in the company's call options totalled 9,566 contracts, compared with the average of 3,697 over the same period.

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

GMR said India's markets regulator and stock exchanges approved its proposal to spin off its non-airport business into a listed unit; a company law court is expected to meet soon to decide on the matter, according to GMR’s earnings presentation for quarter ended March

The process is at an “advanced stage of completion,” the company said.

• On Friday, GMR reported a 36% YoY decline in its Q4 loss to Rs 720 crore as finance costs dropped to Rs 760 crore from Rs 1,050 crore a year earlier.

• GMR said its net debt, excluding dollar denominated convertible bonds, fell by Rs 870 crore QoQ to Rs 25,300 crore

GMR also said it plans to continue reducing debt by monetising assets and the remaining debt will be refinanced via new dollar bond issuances.

United Breweries Ltd. rose 4.9%. Trading in the company's call options was triple the average. Trading volume was five times the average for this time of day.

• The stock was the best performer among its peers.

• Trading volume was 1.58 million shares, five times the 20-day average of 307,665 shares for this time of day.

• Trading in the company's call options totalled 11,421 contracts, compared with the average of 4,482 over the past 20 days. Trading in the company's put options totalled 774 contracts, compared with the average of 738 over the same period.

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

• Analysts have 13 buy, two hold, and two sell recommendations on the stock.

• The price target of Rs 1,371.69 represents a 4.3% decrease from the last price

Info Edge India reported net income for the fourth quarter that missed the average analyst estimate.

• Net income Rs 66.69 crore, +60% YoY, estimate Rs 90.46 crore

• Revenue Rs 290 crore, -10% YoY, estimate Rs 309 crore

• Other income Rs 40.62 crore

• Total costs Rs 249 crore, +4.2% YoY

Bandhan Bank Ltd. surged as much as 6.7%, the most since July 2020, after India’s Assam approved a proposal to grant Rs 8,500 crore for bailing out small-loan borrowers in the northeastern state.

• Assam’s proposal is aimed at providing support to about 90% of 2.6 million microloan borrowers in the state via cash grants of up to Rs 25,000, Jefferies India analysts led by Prakhar Sharma wrote in a note

• Bandhan Bank’s Assam microloan portfolio is about Rs 7,000 crore, or 12% of its overall microfinance loans and 8% of total loans, Jefferies said

• “We see asset quality concerns receding for the bank,” the analysts wrote, adding that a quick rollout of the plan will be key

• Jefferies maintains buy rating with price target of Rs 400 on Bandhan Bank

• Separately, Bandhan Bank was upgraded at Credit Suisse

The Indian rupee slumped 34 paise to 74.20 against the U.S. dollar tracking the strengthening of the American currency and a muted trend in domestic equities.

Forex traders said rising crude oil prices also weighed on investor sentiment.

At the interbank foreign exchange, the rupee opened lower at 74.20 against the dollar, registering a fall of 34 paise over its previous close.

On Friday, the rupee had settled at 73.86 against the US dollar.

Shares of the non-banking finance company fell as much as 5% after the markets regulator sought a review of parts of the deal struck with investors led by private equity firm Carlyle.

The Securities and Exchange Board of India said PNB Housing’s plan to issuesecurities by way of preferential allotment on a private placement basis shouldn’t be carried out until it undertakes the valuation of shares from an independent registered valuer, according to a stock exchange filing on Saturday.

PNB Housing has filed an appeal with a tribunal against the order, the firm said in an exchange filing on Monday.

[Read the full report here]

• The shares are down 9.6% in the past 5 days and rose 69% in the past 30 days.

• PNB Housing trades at 12 times its estimated earnings per share for the coming year.

Shares of the broking firm jumped as much as 13%, after the RBI gave it an in-principle approval to set up a small finance bank, after its bid for Punjab & Maharashtra Co-operative Bank Ltd.

• 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.

India stocks fell, tracking peers across Asia, after the U.S. Fed last week indicated a faster rollback of its easy money policy that has helped inflows to emerging markets.

The S&P BSE Sensex dropped 0.6% to 52,024.56, while the NSE Nifty 50 Index declined by a similar magnitude. ICICI Bank Ltd. was among the biggest drags on both indexes. Of 30 shares in the Sensex index, four rose and 20 fell, while six were unchanged. All but one of 19 sector indexes compiled by BSE Ltd. fell, led by a gauge of capital goods companies.

Stocks from Australia to China declined, while U.S. futures slipped as the Fed’s move to a hawkish guidance dented reflation bets. The long period of low interest rates in the U.S. had driven inflows into riskier emerging markets like India. Overseas investors sold about $42 million of local shares through Thursday, set for the first week of withdrawals in a month.

Indian sovereign bond traders will consider the minutes of the central bank’s most recent policy meeting where policy makers highlighted growth concerns due to the pandemic.

• 10-year yields fell by 1bp to 6.01% on Friday

• Minutes of June meeting indicate members assessed near term growth inflation trade-off was biased towards growth in the near term, Abhishek Upadhyay, an economist at ICICI Securities wrote in a note

  • Inflation surge in May could sway these hawkish members more quickly, but majority MPC may wish for more data for better clarity about the outlook when it meets next in August

  • RBI expected to hike reverse repo rate by 40 bps across Dec and Feb meetings in the baseline; risk is that sticky inflation close to 6% level triggers a faster pace of hikes

• USD/INR fell 0.3% to 73.8675 on Friday

  • Implied opening from forwards suggest spot may start trading around 74.01

Asian stocks slid Monday and Treasury yields fell as traders soured on the reflation trade in the wake of a hawkish pivot by the Federal Reserve.

Japan led the Asian equity retreat, with the Nikkei 225 dropping as much as 3.4%, while U.S. futures edged down after an S&P 500 slump. Hong Kong fell and Chinese shares were modestly lower. Treasury yields slipped, taking the 30-year rate below 2% for the first time since February, as the prospect of less accommodative U.S. monetary policy buffeted markets.

India's SGX Nifty 50 Index futures for June delivery fell 1.2% to 15,569.50, while MSCI Asia Pacific Index slipped 1.4%. The NSE Nifty 50 Index fell 0.1% Friday to 15,683.35.

Gold stabilis ed after slumping last week. Oil climbed above $72 a barrel as talks between world powers and Iran dragged on, potentially delaying the return of the latter’s energy exports.

Back home, NTPC, GMR Infra, Ashoka Buildcon, Insecticides may react as the companies reported quarterly results after the market closed Friday. Oil India, Info Edge are among the companies scheduled to report earnings Monday. Foreign investors sold net Rs 914 crore of stocks on June 17, according to NSDL website.