Indian equity markets were choppy on Wednesday on mixed global cues. Asian stock markets were mixed while Europe opened higher ahead of a Federal Reserve decision on how sharply to raise interest rates to cool U.S. inflation.
London, Frankfurt and Shanghai advanced. Tokyo and Sydney declined. Oil prices edged lower. Wall Street futures were higher after the benchmark S&P 500 index lost 0.4% on Tuesday.
Sensex, Nifty end lower ahead of Fed's rate hike decision; metals top drag, auto stocks soar
India’s benchmark indices ended lower for the fourth straight day on Wednesday, having swung between gains and losses through the session. Investors were largely focussed on the US Federal Reserve’s policy announcement, due later today.
Traders expect the Fed rate hike to be three-quarters of a percentage point, or triple the usual margin. They worry aggressive action to cool inflation that is running at a four-decade high might tip the world's largest economy into recession.
US index futures gained along with stocks in Europe as policy makers on both sides of the Atlantic grapple with soaring inflation, slowing economic growth and volatile markets.
Back home, Sensex fell 152.18 points to end the day at 52,541.39, while the broader Nifty shed 39.95 points to close at 15,692.15.
Auto, capital goods, pharma, stocks rose, while power, IT, metal, oil & gas, realty and FMCG stocks witnessed selling. Midcap and smallcap indices ended higher.
RIL, Infosys biggest drags on Sensex
Oil demand to return to pre-Covid level in 2023: IEA
Global oil demand will return to pre-pandemic levels next year as China's consumption recovers from Covid lockdowns, the International Energy Agency said Wednesday.
Soaring oil prices and weaker economic growth will temper the growth of demand in the second half of this year, said the Paris-based agency.
But "resurgent Chinese oil consumption will more than compensate for a slowdown" in oil demand among the 38-nation Organisation for Economic Co-operation and Development that gathers mostly developed countries, the IEA said.
China has enforced a zero-Covid policy that has led to lockdowns in Shanghai, its economic hub.
The IEA expects global oil demand to grow to 99.4 million barrels per day in 2022 -- higher than its previous estimates but still one million barrels lower than in 2019.
Demand is set to grow to 101.6 million barrels per day in 2023, according to the IEA, which advises developed countries on energy policy.
BNP Paribas recommends BUY on Dr Lal Pathlabs, Metropolis Healthcare
Adani Transmission's $700 million revolving facility tagged Green Loan by Sustainalytics
Market Outlook: Sahaj Agrawal, Head of Research -Derivatives at Kotak Securities
Nifty June series continues to trade with a negative bias – no strong reversal confirmation seen yet. Short term momentum parameters also suggest possibility of high volatility in the near term coinciding with the Fed decision on interest rates. Critical medium term trend support is seen at 15500 below which trend gets challenged. Advice being extremely selective for the near term.
DMRC invites bids from 18 banks to raise loans to 'purchase Airport Line assets': PTI
DMRC has invited bids from 18 banks to raise loan to the tune of ₹2,700 cr for "purchase of Airport Line assets," according to letters sent to these banks by the urban transporter.
This comes in the backdrop of the Supreme Court early May upholding a Delhi High Court order directing the Delhi Metro Rail Corporation (DMRC) to pay over ₹4,600 crore of arbitral award along with interest to the Delhi Airport Metro Express Private Limited (DAMEPL) in two equal installments in two months.
Tata Communications’ growth plan fails to engage investors
Shares of Tata Communications Ltd. slid to a new 52-week low of Rs856.25 on the NSE, on Wednesday after the company’s growth plans failed to enthuse its investors.
At a recently held analysts' meet, the company’s management reiterated its strategy on platform transformation with a focus on innovations and new launches to boost revenue. The company has maintained its medium-term RoCE (return on capital employed) and operating margin guidance at 25-30% and 23-25%, respectively. However, no timeline was shared on its revenue growth target, which was a key disappointment. (Read here)
European indices rise
US index futures gained before a crucial Federal Reserve policy decision later Wednesday, with markets pricing in the biggest rate hike since 1994. Treasury yields dipped and the dollar retreated from a two-year high.
Stocks in Europe climbed, the euro strengthened and the region’s bonds advanced after the European Central Bank said it’s planning an unscheduled meeting Wednesday to tackle volatile market conditions. Officials will sign off on the reinvestment of bond purchases conducted under the now-halted pandemic emergency program.
India looks to rains, not just rates, to cool hot inflation
As India faces a crippling surge in food and fuel prices, its policymakers will be counting mostly on this year's monsoon rains, not just interest rate hikes, to take inflationary pressure off the country's households and businesses.
Like its international peers, the Reserve Bank of India is expected to raise rates aggressively over the next year to take some of the heat out of prices, but the global drivers of the country's inflation mean there are limits to what domestic monetary policy can achieve, analysts say.
With 75% of India's price acceleration expected to come from food items, the focus for central bankers will be on the success of monsoon rains to boost production and replenish stockpiles, which would ease supply constraints and anchor price expectations. (Read here)
EU to sign Egypt-Israel gas deal today: Bloomberg
UAE to suspend exports of Indian wheat for four months: Reuters
The United Arab Emirates (UAE) has ordered a four-month suspension in exports and re-exports of wheat and wheat flour originating from India, the world's second biggest producer of the grain, state news agency WAM said on Wednesday.
The Gulf nation's economy ministry cited interruptions to global trade flows as the reason for its move, but added that India had approved exports of wheat to the UAE for domestic consumption.
India's exports rise 20.5% to $38.94 billion in May; trade deficit widens to $24.29 billion
India's merchandise exports in May rose by 20.55% to $38.94 billion, while trade deficit ballooned to a record $24.29 billion, according to the government data.
Imports during May 2022 grew 62.83% on year to $63.22 billion, as per the data.
Trade deficit stood at $6.53 billion in the same month last year.
Cumulative exports in April-May rose about 25% to $78.72 billion, while imports during the period increased 45.4% to $123.41 billion.
Fitch Ratings on India's cement industry
Fitch Ratings expects India’s cement demand to rise by mid-to-high single digits over the medium term. This is after an estimated mid-teen rebound in the financial year ended March 2022 (FY22) from FY21 when demand declined by mid-single digits amid the Covid-19 pandemic.
We believe sustained GDP growth after the 8.7% recovery in FY22 will underpin growth across various construction end-markets. We expect cement demand from infrastructure and affordable housing markets to increase by low double digits, largely on the government’s growing impetus, evident from rising public spending and a significant project pipeline.
The rebound in urban housing activity in the last few quarters from multi-year cyclical lows will be sustained, in our view, leading to mid-to-high single-digit cement sales growth from the end-market. Similarly, a revival in corporate capex after a focus on cash conservation during 2020-2021 will support growth in industrial construction.
The impact of inflationary pressure on cement demand from the Russia-Ukraine war has been limited so far, but downside risks to our estimates will rise if macroeconomic conditions deteriorate significantly. We estimate the price hikes by cement producers will not fully counter the spike in energy prices since the start of the war. This will lead to markedly lower profitability in the April-June 2022 quarter.
ICICI Securities on GR Infraprojects
GR Infraprojects has built an efficient business model powered by robust execution skills and delivered strong revenue growth with elevated margins.
However, recent development with regard to CBI’s raid would remain a key overhang on the stock’s performance. Till we get decent clarity, we revise our rating from BUY to REDUCE
Target Price and Valuation: We value GRIL at | 1,080 based on SOTP valuation Key triggers for future price performance:
Decent order book position and execution pick-up to translate into 12.4% topline CAGR over FY22-24E. Current order mix with built-in raw material price variation clauses provides margin sustainability at ~16%
Canara Bank to consider capital raising plan on 24 June: BSE filing
Canara Bank's board of directors will meet on 24 June to consider and approve capital raising plan for FY23.
JSW Steel May crude steel production jumps 31%
JSW Steel crude steel production in May on a standalone basis jumped 31% year-on-year to 17.89 lakh tonne, the company said on Wednesday.
The flagship company of the $22 billion JSW Group said production of flat-rolled products rose 29% on year to 12.84 lakh tonne last month.
Apollo Hospitals Q4FY22 Result Update - Below estimates; outlook remain positive: Senior Research Analyst at Prabhudas Lilladher
Muted quarter impacted by lower hospital profitability and higher losses from 24x7. Guided mid-teens revenue growth with +150 bps margins improvement for hospital segment in FY23.
Apollo Hospitals consolidated EBIDTA grew by 11% to Rs4.1bn, below our estimate of Rs4.9bn, impacted by lower profitability in hospital segment and higher losses from 24x7. We expect hospital profitability to normalize from Q1FY23 while losses from 24x7 likely to remain at elevated levels in FY23.
We estimate 20% EBITDA CAGR over FY22-24E. Our FY23E & FY24E EBIDTA stands reduced by 11% and 7% as we factor in higher losses from 24x7. We value APHS on an SOTP basis. We ascribe 22x EV/EBITDA multiple to the hospital segment, 30x EV/EBITDA to offline pharmacy and 20x EV/EBITDA to AHLL. We ascribe zero value to the 24/7 business and arrive at a price target of Rs5,000 (Rs5,772 earlier). Recommend BUY rating.
Tata Steel shares turn ex-dividend
Union Cabinet also approves proposal for private firms to operate 5G networks
Union Cabinet approves DoT's proposal to hold 5G auctions: Government
The Union Cabinet chaired by the Prime Minister Narendra Modi on Wednesday approved a proposal of the Department of Telecommunications (DoT) to conduct spectrum auction through which spectrum will be assigned to successful bidders for providing 5G services to public and enterprises.
Digital connectivity has been an important part of policy initiatives of Government through its flagship programs such as Digital India, Start-up India, Make in India etc.
A total of 72097.85 MHz of spectrum with a validity period of 20 years will be put to auction to be held by the end of July 2022. The auction will be held for spectrum in various Low (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz), Mid (3300 MHz) and High (26 GHz) frequency bands.
It is expected that the mid- and high-band spectrum will be utilised by telecom service providers to rollout 5G technology-based services capable of providing speed and capacities which would be about 10 times higher than what is possible through the current 4G services.
There will no mandatory requirement to make upfront payment by successful bidders. Payments for spectrum can be made in 20 equal annual instalments to be paid in advance at the beginning of each year. This is expected to significantly ease cash flow requirements and lower the cost of doing business in this sector. The bidders would be given an option to surrender the spectrum after 10 years with no future liabilities with respect to balance instalments.
Nifty FMCG, metal indices worst hit, auto gains
Ather Energy in talks with various state govts to set up third manufacturing plant: PTI
Hero MotoCorp-backed electric two-wheeler maker Ather Energy is in talks with several state governments to set up a new manufacturing facility in the country, according to sources.
The company is said to be in talks with officials of several state governments, including Andhra Pradesh, Maharashtra, Gujarat, Telangana and Karnataka, to set up an additional manufacturing plant with an annual capacity of about 15 lakh units.
The sources said the company is in the last leg of negotiations and is likely to finalise the location within the next month.
Paytm operating performance update as of May
Paytm lending business at an annualised run rate of over ₹23,000 crore (approximately $3 billion) of loan disbursements through the platform in May 2022; operating performance gains further momentum
● Lending business witnesses rapid growth, with 5.5 million loan disbursals during the two months ending May 2022 (y-o-y growth of 471%). This aggregates to loan value of ₹3,576 Cr ($476 million) in the first two months of the quarter (y-o-y growth of 829%)
● Continued leadership in Offline payments with number of devices deployed crossing 3.4 million as of May 2022
● Increased user engagement on Paytm Super App with average monthly transacting users (MTU) at 74.3 million for the two months ending May 2022, up 48% y-o-y
● 105% Y-o-Y increase in merchant payment volumes (GMV) for the two months ending May 2022 at ₹1.96 Lakh Cr ($26.2 billion)
Rupee inches 5 paise higher to 77.99 against US dollar in early trade
The rupee opened on a flat note and inched higher by 5 paise to 77.99 against the US dollar in opening trade on Wednesday. Forex traders said lacklustre domestic markets, elevated crude oil prices and persistent foreign capital outflows weighed on the local unit. At the interbank foreign exchange, the rupee opened at 77.99 against the dollar, registering a rise of 5 paise over its previous close. On Tuesday, the rupee had closed at its lifetime low of 78.04 against the US dollar.
Equity investors are fast losing hope as recession fears tighten
Lately, inflation prints have been bearers of bad tidings, especially for equity investors.
Adding to the already gloomy mood is the BofA Securities' recent global fund managers survey, highlighting dwindling hopes of a Fed pause on rate hikes.
Fears of stagflation are at the highest since the 2008 financial crisis, while global growth optimism has sunk to a record low, showed the June survey report. (Read here)
Oil prices edge higher, but expected U.S. interest rate hike looms
Oil prices made gains on Wednesday, rebounding from losses earlier in the session amid concerns over fuel demand and the broader economy ahead of an expected big hike in interest rates by the U.S. Federal Reserve.
In volatile trading Brent crude futures for August were up 15 cents, or 0.1%, at $121.32 a barrel, after falling to as low as $120.65 earlier in the session on the back of a 0.9% decline on Tuesday.
U.S. West Texas Intermediate crude for July rose 15 cents, or 0.1%, to $119.08 a barrel, after hitting a low of $118.22 earlier in the day, having dropped 1.7% a day earlier.
Rupee gains 5 paise to 77.99 against US dollar in early trade: PTI
Nifty falls in opening deals
Sensex subdued as investors await US Fed's policy decision
China's factories perk up, but weak consumption points to slow economic recovery: Reuters
China's economy showed signs of recovery in May after slumping in the prior month as industrial production rose unexpectedly, but consumption was still weak and underlined the challenge for policymakers amid the persistent drag from strict COVID curbs.
The data, however, provides a path to revitalise growth in the world's second-biggest economy after businesses and consumers were hit hard due to full or partial lockdowns in dozens of cities in March and April, including a protracted shutdown in commercial centre Shanghai.
Industrial output grew 0.7% in May from a year earlier, after falling 2.9% in April, data from the National Bureau of Statistics (NBS) showed on Wednesday. That compared with a 0.7% drop expected by analysts in a Reuters poll.
Nifty under pressure in pre-open, slips below 15,700
Sensex flat in pre-open
Market views: Vikram Kasat- Head- Advisory and Western Region at Prabhudas Lilladher
NIFTY: BUY on Intraday declines till 15650, TGT 15750/15820, SL 15600. However a breach below 15600 would be fatal which could lead towards 15300 within no time.
BANKNIFTY: One can play the range for the day in between 33000-34000 - BUY on declines till support zones and SELL on rise near the higher end of the range
Top Long OI: VOLTAS (28%), GSPL (9%), TATASTEEL (2%), PVR (2%), TORNTPOWER (2%).
Top Short OI: CROMPTON (17%), BAJAJ-AUTO (17%), HONAUT (9%), IBULHSGFIN (9%), POLYCAB (9%).
Delivery based buying: SIEMENS, AUBANK, CHOLAFIN, AUROPHARMA, ADANIENT.
Delivery based selling: PAGEIND, POLYCAB, ZEEL, CROMPTON, IBULHSGFIN.
Gold up on lower yields as investors await big Fed rate hike move
Gold prices on Wednesday were lifted from near one-month lows by weaker Treasury yields, ahead of a potentially aggressive interest rate hike from the U.S. Federal Reserve as it seeks to combat inflation amid mounting fears of an impending recession.
Spot gold was up 0.5% at $1,817.12 per ounce in Asian deals, after dropping to its lowest since 16 May at $1,803.90 on Tuesday. US gold futures rose 0.3% to $1,818.50.
The Federal Open Market Committee is expected to announce its decision on interest rates later today.
Govt asks oil PSUs to come up with monetization plan
The ministry of petroleum and natural gas has asked state-run oil and gas companies to come up with new plans for asset monetization after the original plan for monetizing their oil and gas pipelines through infrastructure investment trusts (InvITs) was shelved. (Full report here)
Market technicals: Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One
The swing support of the 15650-15700 odd zone was firmly protected, implying the resilience of the technical support. The subdued closing assures the firmness of domestic market, wherein any sign of respite from the global bourses could trigger strong momentum hereon. In terms of technical levels, any breach below the mentioned support could drag the market towards the 15500 mark. At the same time, on the higher end, the 15850-15900 could be seen as immediate resistance followed by the psychological mark of 16000.
We would advocate keeping a close tab on the global developments over the upcoming Fed policy meet that might dictate the near-term trend in the global market. Meanwhile, avoiding aggressive overnight bets and keeping a stock-centric approach to deal with such market conditions is advisable.
Stocks to Watch
Shares of SBI, NTPC, Bharti Airtel, Asian Paints, IDBI Bank, among others, will be in focus today.
Indiabulls Housing Finance, RBL Bank, and Delta Corp. are under the NSE F&O ban for 15 June. Securities in the ban period under the F&O segment include companies in which the security has crossed 95% of the market-wide position limit.
SGX Nifty down marginally in early deals
Nifty futures on the Singapore Exchange were down 19 points, or 0.12%, at 15,703.00 in early deals on Wednesday, hinting at a flat-to-weak start for Indian benchmarks.
On Tuesday, sliding for the third straight session, the Sensex dropped 153.13 points to settle at 52,693.57 - its lowest since 30 July 2021. The Nifty50 declined 42.30 points to end at 15,732.10.
Asia shares muted; all eyes on Fed policy announcement
Stocks struggled for traction Wednesday and US equity futures made modest gains ahead of a Federal Reserve meeting that’s expected to deliver a hefty interest-rate hike to fight inflation.
Shares dipped in Japan, Australia and South Korea after the S&P 500 closed down for a fifth straight day -- its longest losing streak since January. Hong Kong contracts were steady following a jump in US-traded Chinese shares.
S&P 500 futures rose 0.4%, while Nasdaq 100 futures rose 0.7%.
Japan’s Topix index fell 0.7% and the benchmark Nikkei 225 index was down 0.2%. Australia’s S&P/ASX 200 Index fell 0.7%, South Korea’s Kospi was down 1%, while Hong Kong’s Hang Seng rose 0.7% and China’s Shanghai Composite Index added 0.3%.
Overnight, Wall Street stocks mostly fell as markets awaited a key Federal Reserve decision and digested another report showing elevated inflation. The Dow Jones Industrial Average finished down 0.5 percent at 30,364.83. The broad-based S&P 500 fell 0.4 percent to 3,735.48, while the tech-rich Nasdaq Composite Index gained 0.2 percent to 10,828.35.
Traders anticipate a 75-basis-point hike from the Fed on Wednesday, the biggest since 1994. A closely watched part of the US yield curve inverted briefly Tuesday, signalling concerns that restrictive policy will sap the economy.
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