Bloodbath on D-Street as Sensex, Nifty slide 2.5%; metals, banks top drags

India's benchmark equity indices slumped over 2.5% on Monday amid a sell-off in global markets. The rupee plunged 20 paise to close at an all-time low of 78.13 against the US dollar, as a lacklustre trend in domestic equities and stronger greenback overseas weighed on investor sentiment.

A global selloff intensified following a surprise US inflation print that put pressure on the Federal Reserve to step up monetary tightening. Treasury yields traded at a multi-year high.

S&P 500 futures sank 2.5% and Nasdaq 100 contracts slid 3.1%. The S&P 500 is flirting with a bear market after Friday’s shock consumer prices report ignited a more than $1 trillion selloff. The Stoxx 600 traded at its lowest level since early March.

Back home, the Sensex fell 1,456.74 points to end the day at 52,846.70, having touched an intraday low of 52,527.08. The Nifty was down 427.40 points or 2.64% at 15,774.40. About 650 shares advanced, 2759 declined, and 117 were unchanged.

All sectoral indices ended lower, with bank, capital goods, auto, IT, metal, IT, realty, PSU Bank, oil & gas indices down 2-3% each. Midcaps and smallcaps also ended deep in the red.

ONGC Videsh Ltd, the overseas investment arm of state-owned Oil and Natural Gas Corporation (ONGC), is facing temporary disruptions in moving its share of oil from the Sakhalin-1 project in Far East Russia due to sanctions against Russia, its Managing Director Alok Gupta said.

OVL holds a 20 per cent stake in Sakhalin-1 where ExxonMobil's Russian subsidiary, Exxon Neftegaz, is the operator. Exxon has announced its exit from the project following Russia's invasion of Ukraine and has reportedly begun withdrawing expatriates from the project.

Sakhalin-1 produced around 271,000 barrels of oil per day in January and February 2022, according to the Russian Energy Ministry data, against the average of 227,000 bpd last year. Output has slipped after sanctions against Russia made it difficult to ship oil from the project.

Production slipped to just over 60,000 barrels per day between May 1 and 15, Moscow-based news agency Interfax reported.

European equities slid to the lowest level since early March as investors worried that surging inflation will fuel more aggressive monetary tightening, increasing risks of a recession.

The Stoxx 600 dropped 2%. S&P 500 futures fell 2.6%, with the underlying index set to near a bear market. Yields on 10-year US Treasuries were at 3.23%, the highest since November 2018, and a selloff in European government bonds also gathered pace, with the yield on German’s two-year government debt rising above 1% for the first time in more than a decade.

India, the world's biggest rice exporter, has ample stocks of rice and there is no plan to restrict exports, the top official at the food ministry said on Monday.

India banned wheat exports in a surprise move last month.

"We have more than sufficient stocks of rice, so there is no plan to consider this," Food Secretary Sudhanshu Pandey said responding to a question whether India would consider any curb on rice exports.

The upturn in the interest rate cycle could be a significant headwind for the real estate sector that has been on a strong recovery path after surviving the worst of the pandemic, Knight Frank India said in a report released today. (Read here)

Three things investors should do as market crashes today:

Market correction can be utilized as a good opportunity for investors to rejig its portfolio.

- Focus on how in the past these deep corrections may have given us the opportunity to position our self for profitable trade/ investing. If we look around us we will find many businesses whose prospects look good in these difficult time. Use this time to invest in top company/ leaders from these sector/ sus sector

- Many times, we miss to add some of the stock we like very much. In this correction we get opportunity to acquire these stock as much reasonable valuation.

- Exit from the stock where you are not confident about future growth trajectory or there are concerns due to change in macro environment.

The National Company Law Appellate Tribunal (NCLAT) on Monday rejected Amazon's plea challenging the decision of fair trade regulator CCI to suspend the approval for the e-commerce major's deal with Future Coupons.

The NCLAT said "the appellant Amazon has not made full, whole, forthright and frank disclosures of relevant materials. It had furnished only limited disclosures pertaining to acquiring its strategic rights and interest in FRL (Future Retail Ltd)" and executing the commercial contract.

In December, the Competition Commission of India (CCI) had suspended the approval given by it in 2019, for Amazon's deal to acquire a 49% in Future Coupons Pvt Ltd (FCPL).

The regulator had said Amazon suppressed information while seeking clearances for the transaction back then and also slapped a fine of ₹202 crore on the company.

This includes a ₹200 crore penalty for Amazon's to notify the combination in the requisite terms and two penalties of ₹one crore each for suppressing the actual scope and purpose of the combination.

However, NCLAT slightly modified the orders of CCI and said the penalty of ₹one crore each imposed was "on the higher side" and reduced it to ₹50 lakh each.

Jeweller Rajesh Exports has agreed to invest $3 billion in India's southern Telangana state to set up the country's first electronic-display plant, the state government said late on Sunday.

Voltas struggled to generate positive economic value during FY22 due to a decade-low RoE. We note its EVA creation was impacted for first time in past decade. It also lost market share by 180bps in FY22 after gaining for a decade. Voltas Beko customer acceptance has increased and it reported 45% volume growth in FY22, to claim ~3% market share in home appliances segment. We model Voltas to report revenue and PAT CAGRs of 15.3% and 24.2% over FY22- FY24E, driven by: (1) high single-digit price hikes, and (2) likely market share recovery. 

At current valuations, we believe stock price upside is capped. Hence, we maintain HOLD rating with a DCF-based target price of Rs1,033 (implied P/E 44x FY24E).

Weakness was seen in the equity market across the globe, led by higher-than-expected inflation data in the US market, leading to a rise in the bond yields. US bond yields are now trading above 3.15% levels, indicating the aggressive rate hike expectation by the US FED in the upcoming FOMC meeting, scheduled this week. The market is now eyeing the outcome of the FED meeting, and how the central bank influences the path of interest rates trajectory to maintain growth and inflation dynamics. In the domestic market, India's VIX rose by 11% led by weaker global cues, a stronger dollar, and the expectation of Hawkish commentary by the US FED. FII behaviour is likely to be volatile this week, and a clear trend is likely to emerge only after the volatility settles at a lower level for a longer time. Investors should focus on the asset allocation and use this volatility in a calibrated manner to build long-term positions in quality companies, where the earnings visibility is high.

Mumbai-based Keystone Realtors Ltd, which operates under the ‘Rustomjee’ brand, has filed a draft red herring prospectus with Securities and Exchange Board of India (Sebi) to raise up to ₹850 crore via an initial public offering (IPO).

The initial share sale comprises a fresh issue of ₹700 crore and an offer for sale (OFS) of up to ₹150 crore by its existing shareholders and promoters. The OFS consists of up to ₹75 crore worth share sale by chairman and managing director Boman Rustom Irani, up to ₹37.50 crore by Percy Soraji Chowdhry, and up to ₹37.50 crore by Chandresh Dinesh Mehta.

Of the nearly 81 World Trade Organization member countries, led by Singapore, seeking a ban on export restrictions for the World Food Programme at the ongoing ministerial underway in Geneva, most have not contributed to the United Nation’s programme, as per data.

Although India has been opposing such a move to restrict its policy space to ensure domestic food security, it contributes to the WFP, and in fact was the highest contributor in 2015. (Read here)

Relaxo is the largest footwear manufacturer in India. It manufactures quality and affordable footwear comprising slippers, sandals, sports, and casual shoes. The company boasts of several popular brands including Relaxo, Sparx, Flite, and the Bahamas which stand as leaders in their respective domains. Its product mix comprises Hawai and Bahamas which account for ~25% of total sales value (60% shoes & 40% sandals) while Flite and Sparks account for ~37% of total sales each.

· Open footwear on a recovery track: The company’s Q4FY22 performance stood tepid, especially for the open footwear category (~75-80% of Relaxo’s sales). On a positive note, its closed footwear reported robust recovery on account of the opening of schools, colleges, and work offices. We believe a significant pent up demand will be released as the rural economy revives, thereby benefiting the company’s operating performance moving forward.

· Key catalyst: Normal Monsoon, Higher MSP: Normal monsoon forecast, the recent announcement of a hike in MSP, and higher remittances will be key catalysts aiding in the revival of the rural economy, which in turn, will kick-start the overall consumption cycle.

· Low pressure on profitability: Hyper-inflation in key raw material prices, coupled with subdued volume growth, has been posing pressure on profits. However, we believe the company’s margins are likely to inch up going forward as the pick-up in the volumes and market share gains from the unorganized/smaller players trigger operating leverage.

· Superior financial matrix: Relaxo has maintained healthy operating cash flow and asset turns. Moreover, its robust EBITDA Margins over the years have made it one of the most capital-efficient businesses in the industry. We believe a strong balance sheet with zero net debt and efficient working capital should help Relaxo prosper in the long run.

Recommendation: We recommend a BUY on the stock with a near-term TP of ₹1,100/share implying an upside of 11% from the CMP.

Equity investors became poorer by over ₹5.47 lakh crore in early trade on Monday amid an extremely weak trend in the broader market with the Sensex plunging over 1,500 points.

The 30-share BSE benchmark tanked 1,568.46 points to 52,734.98 in early trade. The broader NSE Nifty slumped 451.9 points to 15,749.90.

In line with weak trend in equities, the market capitalisation of BSE-listed firms eroded by ₹5,47,410.81 crore to ₹2,46,36,948.05 crore in morning trade.

Bitcoin plunged to the lowest in about 18 months in Asia trading Monday as the impact of Friday’s shock US inflation data continued to reverberate through global risk assets.

The world’s largest digital token tumbled as much as 8.9% to $24,903.49 -- its lowest since December 2020. Other cryptocurrencies also declined as a broader sell-off continued. The MVIS CryptoCompare Digital Assets 100 Index, which measures 100 of the top tokens, dropped as much as 9.7

Asian stocks dropped and bond yields surged on Monday following a fresh high in American inflation that heaped pressure on the Federal Reserve to intensify monetary tightening. The yen reached a 24-year low.

Equities shed 2.7% across Asian markets. Tech shares in Hong Kong declined by almost 4%, weighing on the broader Hang Seng index, while there were also heavy losses in Japan.

Least preferred DCB, CUB and KMB in our coverage universe.

Nifty

The Nifty gave away all its previous day’s gains and ended Friday’s session with a loss of more than 250 points. SGX is suggesting the Nifty opening below the 16000 Put base strike. If it sustains below it that will take it towards the recent low of 15750.

Bank Nifty

On Friday, Bank Nifty slipped lower on the back of selling pressure in private sector banks. According to option data, the Bank Nifty is likely to face selling pressure at higher levels as 35000 Call strike holds sizable OI, which should act as immediate resistance. Immediate support is at 34000 levels.

The yield on the benchmark 10-year bond hit 7.60%, the highest since 28 February 2019.

India and other Asian nations are becoming an increasingly vital source of oil revenues for Moscow despite strong pressure from the U.S. not to increase their purchases, as the European Union and other allies cut off energy imports from Russia in line with sanctions over its war on Ukraine.

Such sales are boosting Russian export revenues at a time when Washington and allies are trying to limit financial flows supporting Moscow's war effort.

India, an oil-hungry country of 1.4 billion people, has guzzled nearly 60 million barrels of Russian oil in 2022 so far, compared with 12 million barrels in all of 2021, according to commodity data firm Kpler. Shipments to other Asian countries, like China, have also increased in recent months but to a lesser extent.

We have been continuously alluding to the key support of 16300 – 16260 on a closing basis. These levels are finally broken which has negated the minor upward trend that emerged during the previous week after surpassing the 16400 mark. The market is unable to show any kind of strength at higher levels; but despite this, we are still not getting convinced with the weakness. We would rather reassess the situation in the first half of this week and all eyes on crucial levels like 16000 on the lower side and 16400 on the upside.

The pragmatic strategy would be to stay light on positions and stock specific also, we are seeing a lot of whipsaws on either side. In fact, it has become a nightmare in trading stocks in the last couple of weeks. Let’s see how things pan out going ahead and we are still hopeful of some recovery in the coming days. If this has to happen, US markets need to provide that much-needed relief.

The rupee slipped 36 paise to its all-time low of 78.29 against the US dollar in early trade on Monday, tracking the strength of the American currency overseas as investors flocked to the safe-haven currency amid an overall risk-averse sentiment.

Forex traders said weak Asian currencies, a lacklustre trend in domestic equities and persistent foreign capital outflows weighed on investor sentiments.

At the interbank foreign exchange, the rupee opened at 78.20 against the American dollar, then lost ground to quote at 78.29 -- its record low level, registering a fall of 36 paise from the last close.

On Friday, the rupee tumbled 19 paise to close at a fresh lifetime low of 77.93 against the US dollar

The National Company Law Tribunal (NCLT) has adjourned till 14 June hearing of Amazon's petition opposing initiation of insolvency proceedings against debt-ridden Future Retail Ltd.

After hearing the arguments of Rajiv Nayar, counsel of the e-commerce giant, the NCLT Mumbai bench said it will continue the hearing of the matter on 14 June.

A plea seeking initiation of insolvency resolution proceedings against Future Retail Ltd (FRL) was filed by Bank of India (BoI), the lead banker in the consortium of lenders of the company.

On 6 June, the Mumbai bench of the tribunal held a virtual hearing in the matter. BoI's petition is yet to be admitted.

On weekly charts, Nifty has formed a long bearish candle indicating further downtrend from current levels. If the index falls below 16150, it could fall to 16000-15850 levels. A fresh pullback rally is possible only after the 16300 breakout. Above which, the index could move up to 16400-16500.

Canadian private equity major Brookfield and its associates have signed definitive agreements with IndInfravit Trust to fully sell five of its operational road projects for a consideration of $1.2 billion.

The sellers from Brookfield side are BIF India Holdings and Kinetic Holdings, which are companies owned by funds managed by Brookfield Asset Management Inc.

Ambit acted as the exclusive financial adviser to IndInfravit.

The transaction is subject to certain regulatory and other customary conditions, including approval from relevant regulatory authorities, lenders and unitholders of IndInfravit.

The roads portfolio comprises three toll roads and two annuity roads, with approx. 2,400 lane kms in Andhra Pradesh, Bihar, Maharashtra and Uttar Pradesh. The Roads Portfolio has been operational, on an average, for approximately 9 years, and have an average residual concession period of 20 years.

Earnings of listed corporates touched 4% of gross domestic product in FY22. The sample comprises around 4,900 companies for which results are currently available. These companies form a bulk of sales and profits for listed firms in India. The results of companies which are yet to be declared won’t make any material difference to this calculation. (Read here)

Jindal Steel and Power Ltd (JSPL) is raising ₹15,000 crore from a clutch of banks led by State Bank of India (SBI), three people aware of the development said, in one of the largest corporate loan agreements in recent times. (Read here)

Shares of Reliance Industries, M&M, LIC, Coal India, BPCL, Jindal Steel, among others, will be in focus today.

Nifty futures on the Singapore Exchange fell 316.50 points, or 1.96%, to 15,868.50 in early deals, indicating a gap-down start for Indian benchmarks.

On Friday, the benchmark Sensex cracked 1,016.84 points to close at 54,303.44, while the broader Nifty50 shed 276.30 points to end at 16,201.80. 

Asian stocks opened lower and bond yields surged on Monday following a fresh high in American inflation that heaped pressure on the Federal Reserve to intensify monetary tightening.

Equities shed about 2% in Japan and South Korea. US equity futures slid, with Nasdaq 100 contracts down 2% and those for the S&P 500 1.3% lower. The declines come in the wake of steep losses on Wall Street that contributed to the worst drop in global shares last week since October 2020.

In Asian deals, S&P 500 futures fell 1.3%, while Nasdaq 100 futures fell 2%. 

Japan’s Topix index was down 2%, and South Korea’s Kospi index shed 2.6%.

Friday, on the Wall Street, stocks were deep in negative territory after US government data showed inflation reached 8.6% in the 12 months ended in May, the steepest rise in consumer prices since December 1981, on the back of surging energy and food prices.

The Dow Jones Industrial Average fell 2.73%, the S&P 500 lost 2.91% and the Nasdaq Composite dropped 3.52%. The three indices posted their biggest weekly declines since January, tumbling roughly 5% each.