PremiumIndian shares slid to two-week lows on Thursday and saw a third straight day of losses, as technology stocks continued their descent and heavyweight Reliance Industries slipped, while tyre maker CEAT dropped after posting weak results. The indexes have fallen nearly 3% from three-month peaks hit earlier this week, as global markets weakened on rising U.S. yields and worries about a faster pace of policy tightening.
The 30 stock S&P BSE Sensex of the Bombay Stock Exchange ended at 59,464.62 points, which is 634.20 points or 1.06 per cent lower from its previous day's close. The benchmark Sensex traded deep in the red for the third consecutive session. The Sensex had lost 656 points and 554 points in the previous two trading sessions, respectively.
The Sensex started the Thursday trade marginally down at 60,045.48 points, which also remained the highest level for the day. The index slumped to a low of 59,068.31 points.
The broader Nifty 50 of the National Stock Exchange ended at 17,757.00 points, which is 1.01 per cent or 181.40 points down from its previous day's close. The Nifty slumped to a low of 17,648.45 points after opening in the positive at 17,921.00 points.
IT stocks witnessed heavy selling pressure for the third straight day. Infosys tumbled 2.23 per cent to ₹1826. HCL Technologies slumped 1.97 per cent to ₹1175.50. TCS fell 2.09 per cent to ₹3834.
Other major Sensex losers included: Bajaj Finserv 4.58 per cent down at ₹17259.95; Hindustan Univeler 1.93 per cent down at ₹2266.15; Dr Reddy Laboratories 1.92 per cent down at ₹4599.35 and Sun Pharma 1.92 per cent down at ₹822.00. Only eight of the 30 scrips that are part of the Sensex ended in the positive.
On the Nifty, 15 stocks advance while 35 declined. Among sectoral indices, FMCG, Pharma, and IT lost over 1 per cent each. Nifty Metal was the only index trading in the green.
Sonata Software's IT Services segment was strong in Q3FY22 and the growth was driven by CPG/Retail. The domestic business, which was up 32% on a yearly basis continued to shine. However, IT Services margins were flattish on a seqnential basis adjusted for forex, and after absorbing Q3 wage rises.
The finance ministry on Thursday released ₹47,541 crore as advance instalment of tax devolution to states, taking the total to ₹95,082 crore during January 2022.
The second tranche is part of the additional amount of ₹90,082 crore that was decided to be issued under tax devolution over and above the budgeted amount in FY22.
Insights
Bank Nifty has seen a decrease in Open Interest of -10.32% with a decrease in the price of -1.13% indicating Long unwinding.
Nifty has seen a decrease in Open Interest of -10.33% with a decrease in the price of -1.77% indicating Long Unwinding.
Option data indicates a probable trading range of Bank Nifty for the day between 38,500 to 37,500 & that for NIfty at 18,150 to 17,750.
BANK NIFTY Strategy: PUT Spread
View: Moderately Bearish.
Rationale: - Traders could initiate this spread strategy to make modest returns with limited risk and reward. The spread suggested consists of buying one lot of 38,100 strike PUT Option and simultaneously selling one lot of 37,600 strike PUT Option.
*Kindly enter & exit all the legs in strategy together and square-off the strategy before the expiry session closes.
Rallis India's December quarter (Q3) performance was marred by higher raw material cost. Consolidated net profit declined 19.1% year-on-year, disappointing investors. The stock fell over 6% on the National Stock Exchange on Thursday.
IT Company HCL Technologies Ltd (HCL) has expanded its strategic transformation partnership with ams OSRAM to digitize one of the optical solutions leader’s key business processes and drive enterprise resource planning and customer relationship management systems standardization across the organization.
Bajaj Finserv's consolidated net profit for the quarter ended December 2021 dipped around 2.6% to ₹1,256 crore as compared to ₹1,290 crore in the year-ago quarter. Shares of Bajaj Finserv were trading over 4% lower on the BSE in Thursday's afternoon deals after its Q3 announcement.
Asian Paints Ltd on Thursday reported a consolidated net profit of ₹1,015 crore for the December quarter, a fall of 18% from ₹1,238 crore reported in the same quarter last year.
Revenue from operations, meanwhile rose 26% to ₹8,527 crore for the reporting period as against ₹6,788 crore in the last year period.
Sturdy Growth; Robust Demand Continues
L&T Infotech (LTI) reported better-than-expected Q3FY22 results. The company reported revenue of ₹4,138 Cr (above our expectations) and registered a growth of 9.8% QoQ in CC terms. In line with the revenue growth, operating profit showed a notable growth of 14% QoQ and stood at ₹743 Cr.
The company's Operating Margins expanded 60bps QoQ to 20.1% led by strong volume growth and its superior service mix. Net income for Q3FY22 stood at ₹61 Cr, registering a growth of 11.1% QoQ. LTI deal pipeline remained robust during the quarter and demand witnessed across verticals and geographies remained healthy and broad-based.
The management is confident of achieving sustainable revenue growth as it factors in a strong deal pipeline moving forward. It also foresees momentum gaining from the next quarter onwards on account of a healthy deal pipeline and ram up in the new deal wins.
We recommend a BUY rating on the stock and assign a 40x P/E multiple to its FY24E earnings of ₹185/share to arrive at a TP of ₹7,360/share, implying an upside of 10% from CMP.
Private sector lender Axis Bank has revised interest rates on fixed deposits (FDs) with effect from 20 January. Axis Bank offers FDs across different tenures, ranging from 7 days to 10 years.
1) Antique
2) Axis Securities
3) CLSA
4) Elara Capital
5) HDFC Securities
6) IIFL Securities
7) Motilal Oswal
Tatva Chintan’s Q3FY22 revenue growth was 12% lower than our estimate on higher dip in SDA revenue. However, margin expansion of 130bps QoQ despite inferior revenue mix was a positive surprise on better product mix in PTC and PASC. It sees moderate growth even in Q4FY22, but it is building inventory to service higher demand on normalisation. It has acquired two new large customers in SDA which should help accelerate volume off-take and only one large customer is now left to approve its product.
New initiatives are fast crystallising with the company seeing commercial prospects for two products using continuous flow method in next 12-18 months which provides longevity to revenue growth. We have increased our EPS estimate for FY22/23/24 by 29%/9.4%/6.5% on higher-than-expected margin delivery.
Accordingly, we increase our target price to Rs3,110 (from Rs2,920) valuing the company at 40x FY24E EPS. Maintain BUY.
Domestic brokerage house Motilal Oswal has reiterated Indian Hotels as its top stock pick in the hospitality industry driven by its continuous focus on leveraging its brands, expanding its operations through management contracts.
The rupee appreciated by 15 paise to 74.29 against the US dollar in opening trade on Thursday, even as the domestic equity market was trading with significant losses.
At the interbank foreign exchange, the rupee opened at 74.43 against the American dollar, then inched higher to 74.29, registering a rise of 15 paise from the last close.
In the previous session, the rupee settled at 74.44 against the greenback.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.02 per cent higher at 95.53.
AGS Transact Technologies IPO (Initial Public Offering) opened for subscription on 19th January 2022 and it will remain open for bidding till 21st January 2022. On second day of subscription, the public issue worth ₹680 crore has been subscribed 100 per cent sand this is expected to go further northward as people in wait and watch mode may turn up for the bidding on final date of subscription. As per the market observers, shares of AGS Transact Technologies are available at a premium of ₹8 in grey market today.
Balu Forge Industries Ltd (BFIL) has announced that it has recently acquired the Precision Machining unit of the Mercedes Benz Truck Factory from Mannheim, Germany.
The acquisition will be installed in the new machining facilities of BFIL in Belgaum, Karnataka and it will cement the company's position as a leading precision player throughout the globe. Additionally, the expansion will enable BFIL to produce crankshafts and other precision machined components for original equipment manufacturers in the class 7 and class 8 trucks and heavy-duty vehicle category.
Despite weakness in markets for last 3 trade sessions, AK Spintex share price has hit 5 per cent upper circuit on previous 3 sessions whereas it has opened with an upside gap of over 4 per cent today. In fact, the textile stock has emerged one of the few multibagger stocks in 2022 as it has surged from ₹27.95 (close price on 31st December 2021 on BSE) to ₹80.90 (today's high at BSE), logging around 190 per cent rise in just 14 trade sessions of the New Year 2022. When asked about the reason for such sharp rise in the counter, the company replied to BSE that the rise in counter is completely 'market driven.'
Shares of PTC India Financial Services Ltd (PFS) declined as much as 19% on the BSE in Thursday's deals in their worst intraday trade since May 2015. The negative reaction comes after three independent directors resigned over corporate governance issues and other matters in an unusual development.
The initial public offering (IPO) of payment solutions provider AGS Transact Technologies has been fully subscribed on the second day of the issue so far. The price range for the three-day share sale, that opened on January 19, is fixed at ₹166-175 per share.
For the quarter ending December 2021, L&T Infotech's (LTI) consolidated net profit grew 18% to ₹612 crore as compared to ₹518 crore in the year-ago period whereas revenue from operations rose 31% to ₹4,137 crore. Shares of L&T Info slipped 0.4% at ₹6,660 on the BSE in Thursday's opening deals.
What should investors do with the IT stock after strong Q3 results?
Indian truck and PV (passenger vehicle) demand is recovering from the worst slowdown in decades, and Tata Motors is gaining share, as per Jefferies. It believes that that auto stock is in the early phase of a multi-year turnaround led by confluence of improved strategy and cyclical recovery.
JSW Energy Ltd posted a strong set of December quarter (Q3FY22) results, benefiting from robust power demand in the country. The company’s total hydropower generation jumped 13% year-on-year and short-term generation grew by 3%. Even so, overall generation was lower by 3%, according to the company. Maintenance activities at the 300MW (megawatt) Ratnagiri power plant adversely affected overall power generation.
Shares of tyre manufacturer Ceat Ltd fell around 4% on the National Stock Exchange in opening deals on Thursday to hit a new 52-week low of ₹1,048.95 apiece, reacting to its disappointing quarterly earnings performance.
Ceat's consolidated net sales rose 9% year-on-year (y-o-y) to ₹2,413 crore, but the company reported a net loss for the quarter at ₹20 crore, hit by higher interest and depreciation costs. In the year-ago period, the company had reported a net profit of ₹132 crore.
Continuing its strong execution, Larsen & Toubro Infotech (LTI) impressed with robust (~9.2% QoQ, CC) and broad-based growth in Q3FY22 across verticals and service lines. Robust performance in manufacturing (+19% QoQ, CC) included 2% growth on account of pass-through revenues in India engagements. EBIT margin stood at 17.9% for the quarter aided by growth and operational efficiencies.
Share of offshore effort increased 40bps QoQ to 84% and management expects these levels to stay elevated on the back of the ‘Great Resignation’ theme. Confident commentary and stable margin outlook despite impending cost pressures is encouraging. What differentiates LTI from most other IT companies is its strong growth despite a tall base of FY21. We believe despite industry leading growth in FY22E, revenue growth in FY23E, too, will remain robust (28% YoY, US$) even if demand moderates during FY23. We upgrade our FY22E-FY24E EPS by up to 12% on the back of strong performance and solid outlook. LTI remains our top midcap.
BUY and we value it at ~40x FY24E EPS.
Commercial lines delivering on both growth and loss ratio augurs well
The growth in the health plus segment, fire segment and marine segment was 5.4%, 16.3% and 10.6% QoQ, respectively while motor de-grew -2.8% QoQ: After the second wave, ICICI had gone back to group health corporate clients and had effected price increases of 15-20% and higher in some cases. 90% of these corporate customers have been retained at the higher price as they are willing to pay a higher price for better service. The competitive intensity in Motor OD is very high and chip shortage also continues to be an issue for OEM sales. There has been price aggression in the Motor OD segment from 1QFY22 itself. ICICIGI does not expect this to correct this financial year but from the next financial year. ICICIGI expects to outgrow the motor segment market from 4QFY22 onwards.
Loss ratio for Motor TP and Fire segments declined 390 bps and 2490 bps QoQ, to 71% and 40%, respectively: Loss ratio for Motor OD, however, jumped 900 bps QoQ to 72%.
There is a rise in claims frequency compared with 1HFY22, when it was lower due to the lockdown. Management remained hopeful that a price hike for Motor TP from the regulator will transpire in the next financial year. Health plus loss ratio rose 370 bps QoQ to 75%. There has been an elevated frequency in Non-Covid cases, particularly due to Dengue and Malaria and also a rise in elective surgeries but all these are seeing a decline in 4QFY22.
We maintain ‘Buy’ rating on ICICIGI with a revised price target of ₹1825: We value ICICIGI at 36x FY23 P/E for an FY21-24E EPS CAGR of 24%.
6 stocks to buy or sell today — 20th January.
Hit by investors’ weakening sentiment, cryptocurrency prices continued to decline as Bitcoin traded below $42,000. The world's largest digital token was down over 1% to $41,900. Bitcoin has slipped more than 9% since the start of this year. Meanwhile, the global cryptocurrency market cap today tanked 2% to $2.07 trillion, as per CoinGecko.
The same six stocks, that were part of F&O stock ban list in the previous session, remain under the ban for trade on Thursday, January 20, 2022 under the futures and options (F&O) segment by the National Stock Exchange (NSE). These securities have been put on ban under the F&O segment as they have crossed 95% of the market-wide position limit (MWPL), as per the NSE.
Vodafone Idea, Steel Authority of India (SAIL), Indiabulls Housing Finance, Escorts, Granules India and Bharat Heavy Electricals Limited (BHEL) continue to be under the F&O ban by the stock exchange for today. The NSE updates the list of securities in ban for trade everyday.
Here is the list of the top 10 stocks that are likely to be in focus on Thursday.
The rupee snapped its 3-day losing streak to settle 14 paise higher at 74.44 (provisional) against the US dollar on Wednesday, tracking positive regional peers, even as the domestic equity market settled with significant losses.
At the interbank foreign exchange market, the rupee opened lower at 74.70 a dollar, registering a decline of 12 paise from the last close. During the day, it pared losses and witnessed an intra-day high of 74.32.
The domestic unit finally settled at 74.44 (provisional) against the American currency, up 14 paise over its last close.
Exotic foreign-exchange derivatives are making a comeback in India, reflecting the central bank’s efforts to deepen the financial markets.
After the Reserve Bank of India’s allowed lenders to offer derivative products earlier this month, banks such as ICICI Bank Ltd. and Axis Bank Ltd. sold barrier forex options to customers including Reliance Industries Ltd. and Supreme Petrochem Ltd.
The return of exotic forex derivatives as well as the introduction of swaptions are part of efforts to give corporates more risk-management options as India’s global trade integration expands. Still, the authorities have tightened rules given that India had to ban derivative products in the aftermath of the 2008 financial crisis when a large number of firms were left with huge losses on bets gone wrong.
Oil prices slipped back on Thursday after hitting their highest levels since 2014 in the previous session on the back of strong demand and short-term supply disruptions, underlying factors that limited losses as investors took profits.
Brent crude futures dropped 72 cents, or 0.81%, to $87.72 a barrel, as of 0152 GMT. The global benchmark touched $89.13 a barrel in the last session, its highest since October 2014.
Most Asian stocks rose Thursday, shaking off a tumble in U.S. shares, as traders evaluated the latest reduction in Chinese borrowing costs.
Equities rose in Japan, China and Hong Kong. U.S. futures were steady after the S&P 500 swung between gains and losses before closing down 1%. An ongoing shift away from technology shares left the Nasdaq Composite in correction territory, more than 10% off a November high.
Chinese lenders lowered borrowing costs again after the central bank cut policy loan rates and pledged more easing for an economy struggling with a property slowdown and partial shutdowns to stem Covid. The yuan fixing was set at the strongest level since May 2018.
Treasury yields declined but remain higher for the week on concerns about elevated inflation and the prospect of Federal Reserve interest-rate hikes. A dollar gauge edged down, crude oil fell and gold was around a two-month high. Australia’s currency advanced on a tumble in unemployment.
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