PremiumBenchmark indices on Thursday saw midcap and smallcap stocks, among others, supporting the indices. IT midcap Mindtree was among the top gainers on the shoulders of above-estimate quarterly results announced on Wednesday. The second half of the day saw banking stocks gaining ahead of HDFC bank results awaited on 16 October. India Vix was down 2.26% indicating positive sentiments in the market. Indian markets will be closed on Friday for Dussehra.
The rupee gained 11 paise to close at 75.26 (provisional) against the US dollar on Thursday as heavy buying in domestic equities and weakness in the greenback strengthened investor sentiment. Besides, fresh foreign capital inflows also helped the domestic unit to post gains for a second straight day, forex traders said. However, surging crude prices in the international market restricted the rupee’s gain, they added. At the interbank forex market, the local unit opened strong at 75.27 against the greenback, and moved in a range of 75.20 to 75.37 in the day trade. It finally ended at 75.26 against the American currency, registering a rise of 11 paise over its previous close. On Wednesday, the rupee had settled at 75.37 against the US dollar. On the domestic equity market front, the BSE Sensex ended 568.90 points or 0.94% higher at 61,305.95, while the broader NSE Nifty surged 176.80 points or 0.97% to 18,338.55. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, dipped 0.28 per cent to 93.81. Brent crude futures, the global oil benchmark, increased 1.30 per cent to $84.26 per barrel. Foreign institutional investors emerged as net buyers in the capital market on Wednesday, as they purchased shares worth ₹937.31 crore, as per exchange data.
Strong performance, robust outlook backed by efficient execution
CMP : 673 | Target: 775 | Upside: 15%
Buy
Wipro Ltd (Wipro) delivered an excellent performance on all fronts with revenue at ₹19,667 crore, up 8.1% quarter-on-quarter (q-o-q)and 30% year-on-year (y-o-y) in CC terms. While operating profit represented a growth of 30.8% y-o-y at ₹3,492 crore, operating margin de-grew by 180 bps and stood at 17.7% q-o-q, aided by unfavourable currency mix and wage hikes. Net profit for the quarter reported a growth of 34% y-o-y as it stood at ₹2,931 crore. The company’s management gives strong Q3FY22 guidance at 2%-4% revenue growth in CC terms and its commentary continues to be positive in the verticals such as BFSI, Hi-tech Media, Life Sciences, and Communications. The Retail vertical is expected to recover slowly across geographies in the near term. Operating Cash Flow was at ₹1,879 crore ($451.1 mn), 103.7% of net income. IT Services hiring continues to remain strong with a closing headcount at 2,21,365 to ensure timely delivery. We recommend a BUY rating on the stock and assign a 28x P/E multiple to its FY24E earnings of ₹27.7/share to arrive at a TP of ₹775/share, implying an upside of 15% from CMP.
"We were very close to the 18,400 mark but did not achieve it. The target is still open and if we can sustain there, 18,600 should be the next level for the Nifty. Considering the support is at 17,800, the risk-reward is skewed and hence traders should only seek intra-day dips to accumulate long positions on the index for higher targets."
“Nifty made a new life-time high of 18,350 today. It closed at 18,335, up by 175 points since yesterday's close. Volumes in Nifty were higher than its average which is a good sign for longs. Nifty has a strong support in the 18,050-18,110 range. Traders can use buy on dips strategy with strict stoploss for 18,380-18,420 as targets."
Sensex closed at 61,305.95, up 568.90 points, or 0.94%, while Nifty closed at 18,338.55, up 176.80 points, or 0.97%. Sensex surpassed the 61,000 mark for the first time. Nifty had touched its life-time high of . At close, HDFC Bank was the top gainer with over 3% seen as the markets factoring in the expected results of the lender to come out on 18 October. TCS and HCL Tech were among the laggards on the index. HCL Tech, which was down 1.17% at close, will be announcing its results after market hours. Adani Ports, Wipro, Grasim, ITC and HDFC Bank were among top gainers on the Nifty, while Coal India, Eicher Motors, Tata Motors, HCL Tech and TCS led stocks in the red. With HDFC Bank set to announce its results on 16 October, kicking off the earnings season for the sector, markets are expected to factor in the results at open on Monday.
The day started led by IT. Metals, PSU banks, and realty joined in supporting the market. In the latter half of the day financial services, banks, private banks, media have pushed the market further. Auto was the sole drag throughout.
Growth recovering, Higher RM costs impact margins
Demand improvement leads revenue growth: Business sentiments have improved with economic unlocking and increasing vaccination. Demand across categories have been witnessing strong traction with the re-opening of markets and retails outlets along with permission for more hours for operations. Distributors and channel partners are stocking up to capitalize on this recovery and strong demand expected in the upcoming festive season.
Healthy overall demand scenario: Demand recovery was seen during the quarter post unlocking. Our channel checks indicated strong demand in July 2021 (esp. RAC’s) due to the extended summer in North India and a demand uptick during the Onam festival in South India. Dealer check indicated that demand across categories such as ACs, TVs, Washing Machines, Refrigerators, C&Ws, and other FMEG goods witnessed an uptick despite price hikes during the past two quarters. However, it believes further price hikes may impact demand recovery moving ahead. We expect that the industry won't undertake any further price hikes to maintain prevailing demand buoyancy.
Key points to monitor: We would watch out for management commentaries on a) Sustainability of product demand, b) Price hikes taken by the companies to pass on the increased RM cost, c) Market share gains vs. unorganized players (for Polycab India and Sheela Foam), especially in light of unorganized players becoming active again, d) Updates on PLI schemes (for Dixon Technologies and Amber Enterprises, e) Demand trends in rural and urban areas, sales mix, and online sales. We would also monitor commentary on international subsidiaries and their performance (especially Symphony and Sheela Foam) as well as export opportunities going forward.
Top plays
Positive: Amber Enterprises, Dixon Technologies
Negative: Symphony Ltd.
Crude oil prices rose by ₹54 to ₹6,116 per barrel on Thursday as participants widened their positions on a firm spot demand. On the Multi Commodity Exchange, crude oil for October delivery traded higher by ₹54, or 0.89%, at ₹6,116 per barrel in 5,902 lots. Analysts said raising of bets by participants kept crude oil prices higher in futures trade. Globally, West Texas Intermediate crude oil was up 1.03% to $81.27 per barrel, while Brent crude traded 1.06$ higher at $84.06 per barrel in New York. (PTI)
Steel demand should climb again next year, even as a deepening energy crisis threatens the global economy’s recovery from the pandemic, according to the World Steel Association. Consumption will rise 2.2% to 1,896 million tonnes in 2022, a slower pace than this year’s 4.5% increase, the industry group said Thursday. The main drivers of growth will be outside China as the country’s real estate crisis undermines demand, it said. The energy crisis and supply-chain bottlenecks pose risks to the recovery, with some European steelmakers being forced to curb output as power costs soar. Worldsteel expects the rebound in car production to slow in 2022, with the sector continuing to suffer from a shortage of semiconductors. (Bloomberg)
Adani Ports, Wipro and Grasim were top gainers on Nifty as of 2:50 pm.
The Centre on Thursday said that there was shortage of coal due to rain as import was ceased but it is making efforts to fulfill the demand for thermal plants. “There was shortage of coal due to rain as import was ceased. We are supplying 2 million tonnes of coal since yesterday (Wednesday). We are making efforts to fulfill demand for thermal coal power. I visited South Eastern Coalfields yesterday," said Union Minister Pralhad Joshi in Chatra, Jharkhand.
Wipro has made sound gains on Thursday in the wake of its announcing September quarter results well above estimates. HCL Tech was in the negative, even as the company is announcing its Q2 results later in the day.
Inflows into equity funds remained low for a second consecutive month at ₹ 6,456 crore in September, down from ₹8,056 crore in August. Meanwhile, SIP inflows crossed record high level and came in at ₹10,351 crore compared to $9,923 crore in August. New fund offers (NFOs) inflows during September were at ₹6,579 crore against ₹6,863 crore in August. (Read here)
German luxury carmaker BMW on Thursday launched its new BMW 3 Series Gran Limousine 'Iconic Edition' in India with price starting at ₹53.5 lakh. Locally produced at BMW Group Plant in Chennai exclusively for the Indian market, the car is available with immediate effect across BMW dealerships in the country in both petrol and diesel variants, it said in a statement. The petrol version, powered by a two-litre four-cylinder engine with a power output of 258 hp and capable of accelerating from 0-100 km/hr in 6.2 seconds, is priced at ₹53.5 lakh. On the other hand, the diesel variant has a two-litre four-cylinder engine producing power of 190 hp and can accelerate from 0-100 km/hr in just 7.6 seconds. It is tagged at ₹54.9 lakh (ex-showroom), it added. (PTI)
Nifty has consistently stayed over the 18,300 mark, while Sensex has remained around 61,200.
Two-wheelers’ demand is set to improve in festive period with dealers expecting double-digit growth in the urban areas, supported by a pickup in business activity and the re-opening of educational institutions, according to Emkay Research. In comparison, demand is expected to be subdued in rural areas as customer sentiments are yet to normalize after the covid second wave. Dealers have built inventory levels of up to two months in anticipation of a healthy festive season. Among OEMs (original equipment manufacturers), Honda, Suzuki, Bajaj Auto and TVS Motors are expected to do better than Hero MotoCorp during the festive period, owing to higher exposure to urban markets. Royal Enfield is expected to be severely hit by semiconductor shortages. (Read here)
Nifty Metal has seen gains of about 2% in the day's trading. The growth mirrors the showing of base metals across other markets.
Soybean prices on Thursday fell by ₹2 to ₹5,375 per quintal in futures market as participants cut down their positions on weak spot demand. On the National Commodity and Derivatives Exchange, soybean contracts for October delivery fell by ₹2, or 0.04%, to ₹5,375 per quintal with an open interest of 3,975 lots. The fall in soybean prices in futures trade was mostly due to reduction of exposure by participants, marketmen said. (PTI)
Base metals are rocketing toward all-time highs as the global energy crisis crimps supply from China to Europe, threatening more inflationary pressure from rising commodity prices. Metals are extending a year-long rally as the global energy crunch deepens supply cuts across the complex. The LMEX index, which tracks the collective performance of the six main base metals, is on the cusp of setting an all-time high. Zinc prices in London soared to their highest since 2007 the day after Nystar—one of the metal’s top global producers—said it will cut output at three European smelters by up to 50% due to rising power prices and costs associated with carbon emissions. Copper is also rebounding, while aluminum is heading for its highest close since 2008. (Bloomberg)
India’s leading crypto exchange, WazirX, on Thursday said it had blocked 377 user accounts in response to requests from Indian as well as foreign law enforcement agencies for transactional and user information during April-September 2021. (Read here)
IRCTC led the index with over 12% gain.
The Adani Group has taken over the operation, management and development of the international airport in Thiruvananthapuram, saying it is now a Gateway to Goodness. Announcing the formal takeover of the airport, the business giant said in a tweet that it was privileged to serve and welcome passengers to God's Own Country. "Connecting lives with cherished travel experiences, we are pleased to share that #ThiruvananthapuramAirport is now a #GatewayToGoodness. We are privileged to serve and welcome passengers to God's Own Country filled with lush greenery, beautiful beaches, and exquisite cuisine", the group said in the tweet, both in English and Malayalam, past midnight on Thursday. The group took over the operations of the airport despite protest by both ruling LDF and opposition UDF against handing it over to private players. (PTI)
Shares of Wipro Ltd has become third IT and 13th Indian listed firm to cross ₹4 trillion market capitalization as many brokerages increased its target price after it reported better than expected earnings. The stock hit a record high of ₹739.90 with its market cap of ₹4.01 trillion. At 1pm the stock was trading at ₹730 on BSE, up 8.4% from its previous close. Earlier, RIL, TCS, HDFC Bank, Infosys Ltd, Hindustan Unilever, HDFC Ltd, ICICI Bank, Bajaj Finance, State Bank of India, ITC, Kotak Mahindra Bank and Bharti Airtel has achieved this milestone. (Read here)
The Department of Telecom (DoT) on Thursday approved 31 proposals entailing an investment of ₹3,345 crore over the next four-and-a-half years. "The investment of ₹3,345 crore in the next 4.5 years is just a beginning. Government is helping you (industry players) as a catalyst," minister of state for communications Devusinh Chauhan said. The companies selected for the PLI scheme include Nokia India, HFCL, Dixon Technologies, Flextronics, Foxconn, Coral Telecom, VVDN Technologies, Akashastha Technologies, and GS India. The DoT notified the PLI scheme for telecom and networking products on 24 February 2021, with a financial outlay of ₹12,195 crore, over the five years. The scheme for telecom gear manufacturing in India is expected to encourage the production of equipment worth ₹2.44 trillion and create direct and indirect employment for about 40,000 people. The investors can earn an incentive for incremental sales up to 20 times the committed investment, enabling them to reach global scales and utilise their unused capacity and ramp up production. "This is the first scheme among all PLI schemes, which includes MSMEs. Without this, we would have been handicapped," Coral Telecom managing director Rajesh Tuli said. (PTI)
Nifty Auto and Nifty Media were drags on the index
India's total domestic passenger vehicle sales fell 41.2% in September from a year ago, data from an auto industry body showed on Thursday, as a semiconductor crunch and high commodity prices exacerbated problems for automakers. Total domestic passenger vehicles fell 160,070 units from 272,027 units a year ago, the Society of Indian Automobile Manufacturers (SIAM) said.
Coal India has been a drag on the index given the supply crunch being faced by the power sector.
Finance minister Nirmala Sitharaman said the G20 nations’ endorsement of a proposed new global tax framework on Wednesday will help deal with the challenges arising from digitization of the economy. (Read here)
India's annual wholesale price-based inflation in September eased to 10.66% from the previous month's 11.39%, remaining in double digits for the sixth month in a row, government data showed on Thursday. Fuel and power prices rose 24.81% in September year-on-year compared with 26.09% in August, while manufactured product prices rose 11.41% compared with 11.39% in the previous month. However, wholesale prices of food rose at a slower pace of 1.14% in September from a year earlier compared with 3.43% in the previous month. (Reuters)
Sensex has seen strong run from ITC, Tech Mahindra and NTPC, the three top gainers in the instance, while Bajaj Finance, IndusInd and M&M were top losers. Infosys has cooled off to some extent after strong gains of about 4% in early trade.
Sensex has remained below the 61,200 mark, while Nifty has crossed 18,300 mark and has remained there for some time now powered by metals, IT and realty stocks. Auto has been a drag in contrast to the sector's showing in the previous session.
Potential shortage concerns underpin base metals
Gold
On Wednesday, spot gold rose about 1.9 percent to close at $1792.6per ounce. The bullion metal edged closer to the 1,800 mark in yesterday’s session as the increasing inflation worries boosted appeal shifted investors towards Gold. The gains for gold were limited as the minutes of the US Federal Reserve policy meet hinted towards commencement of withdrawal of the economic support by next month. Gold might remain under pressure as the dollar continued to firm on expectation of a tighter monetary policy by the US central bank.
Crude oil
On Wednesday, WTI Crude ended lower by 0.25% to close at $80.4 per barrel whereas MCX Crude dipped over 0.5%, closing at ₹6,062 per barrel. Oil prices eased after a solid rally since last week as increasing inflation worries reflecting the surge in Oil, natural gas and coal prices raised worries of slowdown in global growth and hampered sentiments. Rising fuel demand given the recovery in economic activities amid tighter oil supply and increasing natural gas prices might keep prices elevated. Official US Crude inventory data will be due later in the day.
Base metals
On Wednesday, most industrial metals on the LME & MCX traded higher as power crisis forced many smelters to cut down production amid increasing global demand. Also, a weaker US dollar made the dollar-denominated industrial metals cheaper for other currency holders. Zinc prices rose over 4% on the LME & MCX in yesterday’s session following the power shortage in major economies which triggered supply concerns. Increasing power consumption norms in China and increasing electricity cost driven by power shortages in major economies took a hit on the smelting capacities. However, investors should be cautious as the power issue might also impact industrial metals demand across borders.
Copper
On Wednesday, LME copper ended higher by 2% to close at $9,651 per tonne as a lower dollar, potential shortage concerns and increasing copper premium in China underpinned the red metal prices. The gains for copper were limited as in september 2021 China’s copper imports rose (month-on-month) as shipments held up by coronavirus pandemic curbs arrived in the country. In the first nine months of 2021, China's copper imports stood at 4.1 million tonnes, down 19.5% year-on-year. Increase in China’s Copper purchases countered worries of tightening supplies and depleting inventories across exchanges. Power crisis amid growing global demand might support industrial metal prices in today's session.
Birlasoft Ltd, a global enterprise digital and IT services company, on Thursday announced it has been named a Top 15 Sourcing Standout by Information Services Group (ISG), a leading global technology research and advisory firm, the company said in a regulatory filing. Birlasoft was among the leading providers in the Booming 15 category globally, as well as for the Americas region based on Annual Contract Value (ACV) won over the last 12 months, according to the 3Q 2021 Global ISG Index. This is the sixth consecutive time Birlasoft has been featured across named categories by ISG, the statement added. The ISG Index provides an independent quarterly review of the latest sourcing industry data and trends.
Nifty was past the 18,300 mark at 11:35 am
"The index has successfully achieved its first pit stop of 18,250. We should now be headed to 18,400 as the next level for the Nifty. 17,800 continues to remain the support for the markets and as long as that holds, we should buy into dips or intra day corrections in anticipation of higher targets."
-
Olectra Greentech Ltd has informed exchanges that it has supplied its new Electric Buses ‘C9- Inter-City Buses’ to Evey Trans Private Limited (Evey) and that these were launched on Wednesday for commercial Inter-City E-Bus Operations between Pune and Mumbai.
TVS Motor Company on Thursdsay announced that it has rolled out the 100,000th unit of BMW Motorrad’s 310cc series of motorcycles. In 2013, TVS Motor Company and BMW Motorrad signed a cooperation agreement to develop and produce sub-500cc motorcycles for the global market. This strategic partnership has introduced three products on the 310cc platform, namely BMW G 310 R, BMW 310 GS and TVS Motor Company’s TVS Apache RR 310. All three products are manufactured at the TVS Motor Company’s Hosur facility.
Sensex has hovered near the 61,200 mark, while Nifty is near the 18,300 mark. Metal, IT and realty lead momentum.
Specialty chemicals stocks not only have a very high future growth potential but have also performed very well in the past. Let's take a look at five specialty chemical stocks that have rallied over 200 percent in the last 1 year. (Read here)
On account of strong second quarter result expectations, State Bank of India or SBI share price today made a new lifetime high of ₹491.90 on NSE. SBI shares today opened with an upside gap of ₹0.30 per share and went on to climb its new lifetime high, logging around 1.80 per cent rise from its yesterday's close. However, stock market experts see more surges in the PSU bank stock. (Read here)
Sensex was at 61,074.75, up 337.7 points, or 0.56% at 10:45 am.
Japan dissolved its parliament on Thursday, setting the stage for an election at the end of the month that will pit new Prime Minister Fumio Kishida against unpopular opposition in a battle over who can better fix the pandemic-battered economy. Kishida enjoys reasonable public support 11 days into the job, polls show, boding well for his goal of maintaining a lower house majority for his Liberal Democratic Party (LDP) and its Komeito party coalition partner. "I want to use the election to tell the people what we're trying to do and what we're aiming for," Kishida told reporters gathered at his office. (Reuters)
IRCTC stock is on the rise and has seen over 9% change since opening.
# On expected lines, the Nifty resolved higher and achieved our target of 18,200. The index started Wednesday’s session with a positive gap (18,008-18,050) above the psychological mark of 18,000. As a result, daily price action formed a bull candle with small lower shadow, indicating continuance of upward momentum as intraday dips were bought into. In the process, Nifty scaled a fresh all-time high of 18,198
# The index has logged a resolute breakout from past three week’s consolidation (18,000-17,400) indicating acceleration of upward momentum that makes us confident of revising our target to 18,600 levels. We believe the multi sector participation signifies broader market strength wherein we believe the rejuvenated traction in banking and metal sector would lead the rally towards 18,600 as it is confluence of:
> Since April 2020, the index followed a rhythm wherein magnitude of each major rally has been at least 32%, containing in-between corrective phases of 5-6%. Current rally since April 2021 lows of 14,151, so far has gained 28%. Based on rhythm of past 15 months, we expect current rally to extend towards 18,600.
>The implied target of past three week’s consolidation (18,000-17,400) is placed at 18,600
Today's calls
Intraday – Tata Steel, Cholamandalam Investment
Positional – Axis Bank, SAIL
Wipro traded on new 52-week high value 723.65 and saw spurt in volume by more than 1.34 times.
Shares of Wipro Ltd surged as much as 7.6% to a record high on Thursday, a day after the IT services company logged a near 19% rise in quarterly consolidated net profit. The company's IT services revenue in the quarter rose to ₹193.80 billion compared with ₹147.68 billion a year earlier. Wipro's second-quarter IT service revenue growth was ahead of the top-end of the guided range, analysts at IDBI Capital wrote in a note. "Wipro has registered healthy growth in revenues on an organic basis. The company, under the new CEO, is on the verge of a turnaround," the note said. Wipro reported a consolidated net profit of ₹29.31 billion in the quarter ended 30 September, compared with ₹24.66 billion a year earlier, and beating analysts' estimates of ₹28.48 billion. Revenue at the firm rose to ₹196.67 billion versus ₹151.15 billion a year earlier.
Marico share price had a closing of ₹2.66 per share on 19th October 2001 on NSE whereas Marico share price today is ₹588 apiece levels today (at 9:18 on NSE) — appreciating around 220 times in this period of 20 years. (Read here)
Sensex at 61,111.04, up 373.99 points, or 0.62% at open
Nifty at 18,272.85, up 111.10 points, or 0.61%.
Sensex was in the green at pre-open. 26 stocks were in the green while four were in red.
India offers a spectrum of opportunities to investors and business firms, Finance Minister Nirmala Sitharaman told executives of top American companies, as she met and apprised them of various flagship programmes of the Indian government under the Atma Nirbhar Bharat. Sitharaman, 62, is currently in the American capital to attend the annual meetings of the International Monetary Fund and the World Bank. On the sidelines of these events, she has been meeting a host of top American CEOs with footprints in India and who have shown interest in seizing the investment opportunities in the country. (PTI)
"Nifty is expected to open positive at 18,250 up by 70 points. Nifty has support in 17,800-17,850 range. Nifty is in a bullish trend and traders can consider buy on dips with strict stoploss for 18,275 and 18,300 as targets."
A total of eight stocks/securities have been put the under futures and options (F&O) ban for trade by the National Stock Exchange (NSE) on Thursday, October 14, 2021. These securities are banned under the F&O segment as they have crossed 95% of the market-wide position limit (MWPL), as per the NSE. (Read here)
While we remain positive on sectors such as IT and chemicals, we believe that sectors such as consumer discretionary, BFSI and capital goods will lead the next leg of the rally in the markets. Few of the stocks where are positive from a one perspective are:
Federal Bank
Federal Bank had posted a good set of numbers for Q1FY22 despite the second covid wave as NII/ PPOP increased by 9.4%/21.8% year-on-year. GNPA and NNPA ratio deteriorated marginally to 3.5% and 1.23% while restructuring went up by 0.79% qoq to 1.83% of advances. Overall asset quality held up well in Q1FY22 despite the second covid wave.
Moreover the company has reported a 3.4% quarter-on-quarter growth in AUM for Q2FY22 which indicates strong business momentum. We expect the bank to report strong growth in AUM and improvement in asset quality from Q2FY22 which will drive NII and profit growth. We expect the Federal bank to post NII/PPOP/PAT growth of 22.8%/23.7%/23.2% between FY20-23 and remain positive on the bank. We have a BUY rating on federal Bank with a price target of ₹110.
Ashok Leyland
Ashok Leyland Ltd (ALL) is one of the leading players in India CV industry with a 32% market share in the M&HCV segment. The company also has a strong presence in the fast-growing LCV segment. Demand for MHCV was adversely impacted post peeking out due to multiple factors including changes in axel norms, increase in prices due to implementation of BS IV norms followed by sharp drop in demand due the ongoing covid-19 crisis.
MHCV segment has also started to recover over the past few months before the second lockdown while demand for buses is expected to remain muted due to greater preference for personal transportation. We believe that the company is ideally placed to capture the growth revival in the CV segment and will be the biggest beneficiary of the government’s voluntary scrappage policy and hence rate the stock a BUY with a price target of ₹175.
Sona BLW Precision
Sona BLW is one of India’s leading automotive technology companies that derive ~40% of its revenues from Battery Electric Vehicles (BEV) and Hybrid Vehicles. It supplies EV differential assemblies and gears, BSG systems and EV traction motors to global customers. ~75% of their income from sale of goods in FY21 came from end-use in the overseas markets. This global BEV segment has been fastest growing and is expected to maintain a high growth rate which is positive for Sona BLW.
The company’s capabilities have enabled them to gain market share across its products especially for products related to EV/BEV. They also have strong market share ranging from 55-90% for differential gears for PV, CV and tractor OEMs in India. Given the traction in the BEV/Hybrid Vehicle space, we believe that Sona BLW will continue to command a higher multiple which is justified by ~47% earnings CAGR over FY21-24E. We have a BUY rating on the stock with a target price of ₹821.
Carborundum Universal
Carborundum Universal (CUMI) is part of the Murugappa group and is a leading manufacturer of abrasives, industrial ceramics, refractories, and electro minerals (EMD) in India having application across diversified user industries. The company is expected to benefit from improving demand scenarios across its end user industries such as auto, auto components, engineering, basic metals, infrastructure, and power.
CUMI has shown good execution in Q1FY22 with strong performance in Abrasives and EMD segments. Within Abrasive, the company is gaining market share (supply chain issues/preference for Indian suppliers) and should benefit from good end user industry demand. EMD performance is likely to sustain owing to strong pricing and Volumes (due to China+1 strategy of its customers). We remain positive on the future growth prospects of the company due to strong demand for its products and entry into new segments by the company. We have a BUY rating on the company with a target price of ₹1060.
As we head into the auspicious occasion of Dussehra and Diwali, the Nifty continues to hit new lifetime highs due to continued improvement in economic activities. There has been a significant improvement in economic activities post the second covid wave due to relaxation in restrictions. Expectation of further improvement in demand during the ongoing festive season along with strong FII and DII flows are also providing support to the markets.
The US Fed in its latest FOMC meeting has announced that it will start with the tapering of bond purchases from the end of 2021. This is leading to concerns that we may see FII outflows which will lead to a correction in the markets like 2013. However this time around India’s fundamentals are much better as compared to 2013 and therefore it is unlikely that there will be any major pullout by FIIs though there will be a slowdown in flows.
While we expect a slowdown in FII flows over the next one year as the US Fed completes its tapering program we expect robust mutual fund flows which along with continued increase in direct retail participation will more than make up for slowdown in FII flows and keep driving markets. Moreover there is also optimism given improvement in the pace of vaccination in September. We estimate that at the current pace of vaccination the entire eligible population will be partially vaccinated by Dec’21 while almost 60% of the eligible population will be fully vaccinated therefore limiting the impact from any possible third covid wave.
While we remain positive on the markets from a one year perspective we believe that any further deterioration in the global energy crisis will lead to higher energy prices and coal shortages for a longer period of time which can have an adverse impact on growth and is one of the key risks to the current market rally. Higher energy prices for a prolonged period of time can also lead to further spike in global inflation which is already running well above the comfort zone of central banks.
A higher than expected global inflation can force central banks to tighten monetary policy more rapidly than anticipated which can cause pullback in global liquidity flows which may lead to some short term volatility in the markets. However despite any possible short term volatility in the markets we remain positive on the markets from a medium to long term perspective as we expect a rebound in corporate earnings of companies.
Markets are likely to stay firm on Thursday while trends in SGX Nifty show a positive opening of Indian benchmark indices. On Wednesday, the 50-share index ended at 18,161.75, up 169.80 points or 0.94%. The Sensex closed at 60,737.05, up 452.74 points or 0.75%. (Read here)
The prices of petrol and diesel were hiked across metros on Thursday, according to a notification issued by state-owned fuel retailers. The latest hike has taken the price of petrol now to ₹104.79 in Delhi, up from ₹104.44 per litre. Diesel rates, too, touched a record high of ₹93.52 per litre. In Mumbai, petrol cost a fresh all-time high of ₹110.75 a litre. Diesel price also rose to ₹101.40 per litre in Maharashtra’s capital. The fuel prices were hiked in Kolkata, too, where a litre of petrol and diesel now cost ₹105.43 per litre and ₹96.63 per litre, respectively.
China's annual factory gate prices grew at their fastest pace on record in September, driven by energy curbs and soaring commodity prices, piling pressure on businesses already grappling with supply bottlenecks. The producer price index (PPI) rose 10.7% from a year earlier in September, the National Bureau of Statistics (NBS) said on Thursday, the biggest rise since the data began to be compiled in 1996. Economists in a Reuters poll had expected the PPI to rise 10.5% after a 9.5% increase in August. A widening power shortage in China, caused by the country's transition to clean energy, booming industrial demand and high commodity prices, have halted production at numerous factories including many supplying big global brands such as Apple. The power crunch has hit output across the cement, steel, and aluminum industries, while utility companies have struggled to keep up with post-pandemic power demand. (Reuters)
Bitcoin prices today surged above the $58,000 mark as the world's largest cryptocurrency by market capitalization was trading more than 3% higher to $58,418. Bitcoin is nearing its record high level of almost $65,000 that it reached in April, and is up 100% this year (year-to-date) so far. (Read here)
A potential gush of foreign inflows on the back of a slew of large share sales is likely to bring reprieve to the Indian rupee, pummeled by rising oil prices. The currency, which has become Asia’s worst performer over the past month, may gain about 2% from Wednesday’s close to 74 per dollar by the end of December, according to a Bloomberg survey. Big inflows may make way for Indian shores as digital companies, including Warren Buffet-backed Paytm, plan to raise about $10 billion in initial share sales. The rupee has come under pressure as surging commodity prices rekindled worries about inflation and the financial health of the net oil-importing nation. A stronger dollar, spurred by rising wagers of US stimulus taper, has also weighed on emerging- market currencies. (Bloomberg)
Adani Ports, HDFC Bank and Wipro among the picks. (Read here)
Zee Entertainment Enterprises Ltd refuted American fund manager Invesco’s allegations of corporate misgovernance and that its board is acting in a non-transparent manner. The broadcaster said that five of the six independent directors had joined the board in the past two years, and Invesco was consulted before they were appointed. The Mumbai-based media group said Invesco’s actions over the past few weeks and open letters seem to be “motivated by concerns entirely extraneous to any corporate governance issue". (Read here)
“MIndtree reported a 12.8% quarter-on-quarter (q-o-q) growth in revenues to $351mn which was well above street estimates. In rupee terms revenue grew by 12.9% q-o-q to ₹2,586.2 crore while EBIT grew by 15.6% q-o-q to ₹470 crore. EBIT margins for the quarter expanded by 43pps q-o-q to 18.2% as against expectations of a contraction in margins. Net profit for the quarter grew by 16.2% q-o-q to ₹398.9 crore. During the quarter the company reported new deal wins of $360mn as compared to $504mn in Q1FY22. Mindtree has now posted strong growth in revenues for four consecutive quarters including a double digit dollar revenue growth in Q2FY22. During the quarter growth was driven by Retail, CPG and manufacturing which grew by 29.7% q-o-q while the travel and hospitality segment registered growth of 14.2% q-o-q. BFSI too registered strong sequential growth of 8.9% q-o-q while the CMT segment registered a growth of 5.4%. Given significantly better than expected numbers we maintain our positive outlook on the company despite expensive valuations (39.6xFY23 EPS estimate of ₹110)."
"Infosys reported a 5.7% quarter-on-quarter (q-o-q) growth in revenues to $3,998 million which was well ahead of estimates. Topline growth was driven by digital which grew by 10.0% q-o-q. In rupee terms, revenue grew by 6.1% q-o-q to ₹29,602 crore while gross profits grew by 4.3% q-o-q to ₹9,796 crore. Gross margins contracted by 57bps q-o-q to 33.1% largely on account of higher sub contracting costs which was partially offset by better utilization. Operating profits grew by 5.6% q-o-q to ₹6,972 crore while EBIT margins contracted by 10bps q-o-q to 23.6%. Net profit for the quarter grew by 4.4% q-o-q to ₹5,421 crore. Infosys also maintained its deal momentum as the company reported deal wins of $2.15 billion compared with $2.6 billion in Q1FY22. Overall, Infosys has reported better than expected numbers especially on the revenue growth front. Post the Q2FY22 numbers, we maintain our positive outlook on Infosys with a price target of ₹2,016 (32xFY23 EPS estimate of ₹63.0)."
Singapore's central bank unexpectedly tightened monetary policy on Thursday, saying the move would ensure medium-term price stability amid mounting cost pressures caused by supply constraints and the global recovery. The city-state joins a group of economies that have begun to dial back heavy pandemic-era monetary stimulus, as the threat of inflation outweighs the growth risks posed by the coronavirus. The Monetary Authority of Singapore (MAS) manages monetary policy through exchange rate settings, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed band. It adjusts its policy via three levers: the slope, mid-point and width of the policy band, known as the Nominal Effective Exchange Rate, or S$NEER.
HCL Tech, ZEEL and FMCG are among stocks to watch today. (Read here)
Global stocks, including those in Asian markets, rose Thursday as traders assessed the durability of the economic recovery to inflationary pressures and a looming reduction in the Federal Reserve’s pandemic-era stimulus. Equities climbed in Japan, South Korea and Australia. Financial markets in Hong Kong are closed on Thursday for a holiday. US futures pushed higher after Wall Street snapped a three-day losing streak, with the tech-heavy Nasdaq 100 outperforming the S&P 500. Longer term Treasuries pared a rally, while a key part of the Treasury yield curve has flattened to around a one-year low. US inflation held above 5% and Fed minutes signalled a tapering of bond purchases from mid-November or mid-December. Meanwhile, a 30-year Treasury auction drew strong demand. Crude oil stabilized above $80 a barrel and gold was near the highest in nearly a month. Singapore’s dollar rose after the central bank unexpectedly tightened monetary policy settings. Upcoming China inflation figures will offer a window on the impact of supply chain disruptions and a jump in energy prices.
Stocks
S&P 500 futures rose 0.3% as of 10:01 a.m. in Tokyo. The S&P 500 rose 0.3%
Nasdaq 100 futures increased 0.4%. The Nasdaq 100 rose 0.8%
Japan’s Topix index climbed 0.3%
South Korea’s Kospi added 1.1%
Australia’s S&P/ASX 200 Index gained 0.8%
Download the App to get 14 days of unlimited access to Mint Premium absolutely free!
