Nifty ends below 8000, Sensex falls 109 points; BHEL drags 3%

31 Aug 2015

3:30 Market close: The market ended lower. The Sensex was down 109.29 points or 0.4 percent at 26283.09, and the Nifty slipped 30.65 points or 0.4 percent at 7971.30. About 1171 shares have advanced, 1468 shares declined, and 135 shares are unchanged.

Cipla, Dr Reddy's Labs, Lupin, GAIL and Vedanta were top gainers in the Sensex. Among the losers were BHEL, Hindalco, Bharti Airtel, ONGC and ICICI Bank.

3:10 pm Buzzing: Shares of BHEL slipped 3 percent intraday. Morgan Stanley maintains underweight rating on the stock but raises target price by 58 percent to Rs 177 per share. It believes that with BHEL's earnings per share down 77 percent in F12-15 Morgan Stanley expects a 22 percent earnings CAGR in F15-17. "We have been calling for a 3M-market share, margins and multiples, de-rating on BHEL.

Market share and margins have fallen hard over the last three years. While the multiple hasn't fallen much due to the sharp fall in earnings, with BHEL underperforming the market by 30 percent and its peers by 53 percent over the last three years, we believe the de-rating has been playing out, " it says in a note. Morgan Stanley says weaker execution (revenues) and weaker margins overshadows higher order inflows, resulting in a 23-30 percent earnings cut for F16-17.

2:55 pm Earnings: Dishman Pharmaceuticals & Chemicals' first quarter (April-June) consolidated net profit climbed 58.4 percent to Rs 37.7 crore compared to Rs 23.8 crore in the year-ago period, driven by strong operational performance.

Total income from operations grew by 10.4 percent to Rs 400.5 crore during the quarter compared to Rs 362.7 crore in same quarter last year.

Operating profit (earnings before interest, tax, depreciation and amortisation) shot up 38.4 percent on yearly basis to Rs 104 crore and margin expanded by 530 basis points to 26.1 percent in the quarter ended June.

2:40 pm Interview: The recent depreciation in the rupee has given domestic producers an opportunity to increase steel prices, says Ankit Miglani, Deputy Managing Director (MD) of Uttam Galva . Steel import hikes by the government have not helped much, he adds.

If the rupee continues to devaluate, steel prices can rise Rs 500 per tonne by September this year, Miglani told CNBC-TV18. Recent devaluation in Chinese currency is making imports more attractive for customers, he adds. That is because producers in China can offer competitive prices because of the weakness in their currency.

Miglani says demand, more than the price of imported steel, will decide domestic steel prices in coming months.

Despite the imports, there has been 100 percent sale of domestic steel, he says adding that demand grew by 7 percent in recent months.

In FY16, he expects shortage of steel due to increased demand.

2:20 pm Gold update: Supported by sustained buying from jewellers and retailers to meet wedding season demand and a firming trend overseas, gold prices rose by Rs 160 to Rs 26,860 per ten grams at the bullion market today. Silver also advanced by Rs 200 to Rs 35,000 per kg on increased offtake by industrial units and coin makers.

Traders said besides firming trend overseas, sustained buying by jewellers, driven by wedding season demand mainly kept gold and silver prices higher.

Globally, gold traded shade higher at USD 1,134.12 an ounce in Singapore. In the national capital, gold of 99.9 and 99.5 per cent purity climbed Rs 160 each to Rs 26,860 and Rs 26,710 per ten gram respectively. It had gained Rs 50 on Friday.

2:00 pm Market Check
The market continued to be rangebound in afternoon trade with the Nifty hovering around 8000 amid selling pressure. The broader markets also declined marginally.

The Sensex declined 130.66 points to 26261.72 and the Nifty fell 36.05 points to 7965.90. About 1025 shares have advanced, 1491 shares declined, and 116 shares are unchanged on the BSE.

Infosys, Reliance Industries, ICICI Bank, Bharti Airtel, SBI, Maruti, Bajaj Auto, BHEL, Tata Steel and Hindalco declined 1-3 percent. However, Lupin, Sun Pharma, Dr Reddy's Labs, Cipla, Coal India, GAIL and Wipro gained 1-3 percent.

1:50 pm Market outlook: Bhuvnesh Singh, Head of Research, Barclays feels while Q1FY16 earnings were by and large weak due to weaker-than-expected demand recovery but there were still some bright spots. According to him, operating performance was better than topline performance, the demand environment showed signs of improvement in a few sub-sectors in the consumption and industrial sectors. Barclays analysts expect an earnings bounce back in H2FY16 in several sectors like consumer, financials, healthcare and capital goods.

1:30 pm Buzzing: Shares of Gillette India rallied 7 percent intraday after more than 4-fold rise in profitability in the quarter ended June, supported by one-time facilitation income.

Profit during the quarter increased significantly to Rs 72.83 crore compared to Rs 16.8 crore in the year-ago period, supported by revenue growth and higher other income.

Revenue rose 13 percent year-on-year to Rs 539.9 crore in the same period. Other income spiked more than 10 times to Rs 71 crore from Rs 7.05 crore, driven by discontinuation facilitation payment from Pocter & Gamble International SARL (in relation to discontinuation of Duracell India business distributorship) and interest on income tax refund.

The market is still rangebound with pharma stocks surging while oil and metals support. The Sensex is up 47.55 points at 26439.93 and the Nifty is up 15.85 points at 8017.80. About 1166 shares have advanced, 1274 shares declined, and 108 shares are unchanged.

GAIL, Sun Pharma, Lupin, Cipla and Coal India are top gainers while Bharti Airtel, BHEL, Bajaj Auto, Infosys and Tata Steel are among major laggards in the Sensex.

Meanwhile, pushing for interest rate cut, Finance Minister Arun Jaitley today said inflation is under control while oil and commodity prices are also low and expressed hope that RBI will consider all these factors in its monetary policy review. "Inflation in India is broadly under control and you have low oil prices, you have low commodity prices. "Though August and September are not going to be very exciting from the point of view of monsoon, at least July was a very good month for monsoon," he said.

12:58 pm Market Update: Equity benchmarks continued to consolidate in afternoon trade with the Nifty hovering around 8000 level.

The Sensex gained 27.37 points at 26419.75 and the Nifty rose 14 points to 8015.95. About 1143 shares have advanced, 1253 shares declined, and 105 shares are unchanged on the BSE.

The Indian rupee extended losses, down 19 paise to 66.33 a dollar.

12:50 pm Buzzing: Novartis India shares gained over 1 percent after getting approval from Foreign Investment Promotion Board to transfer OTC division to GSK Consumer.

"GlaxoSmithKline Consumer has informed the company that the FIPB, pursuant to its letter dated August 20, approved proposal made by GSK to acquire company's OTC division," Novartis said in its filing.

After the approval from board of directors and FIPB, the company and GSK will proceed with completing documentation required to complete this transaction, it added.

Novartis AG, the parent company of Novartis India, agreed with GSK UK (on April 22, 2014) to create a global consumer healthcare joint venture. In connection with this JV, in January 2015, the company's board members approved transfer of OTC division as a going concern by way of slump sale to GSK for Rs 109.73 crore.

12:40 pm Interview: Raheja Developers' chairman and managing director Navin Raheja says consumers and developers are playing a who-will-blink-first game, but some small developers are already resorting to distress sales.

He says some developers are also selling houses below the production cost and any cut in prices further can be ruled out.

"I don't think there is any further possibility of developers to reduce the price further because there is no way they can reduce the price," he tells CNBC-TV18.

"The cost of land, atmosphere and sentiment when developers purchased was very good across the market, but the owing to competition they decided that they'd make better apartments with better specifications and sell it at a better price," he explains.

However, subsequently, the price of land rose steeply and many new developers also joined in without knowing the dynamics of the real sector, Raheja says.

It is the late comers who are now selling out in distress, Raheja says.

"If you look at it, last 10 years, there have been so many new developers which came without knowing the dynamics of the sector and later on they went into distress selling.

12:20 pm L&T bags order: Larsen & Toubro today said it has won a turnkey order for Rs 1,489 crore water supply project from Public Health Engineering Department, Ajmer.

"The Water & Effluent Treatment Strategic Business Group of L&T Construction has won turnkey orders worth Rs 1,489 crore in August 2015 in three packages, from Public Health Engineering Department, Ajmer, under the Rajasthan Rural Water Supply and Fluorosis Mitigation Project (Nagaur)," the company said in a statement.

The projects, funded by Japan International Cooperation Agency (JICA), are aimed at providing potable water to 986 village and seven urban towns in Nagaur district and 111 villages and two towns of Bikaner district in Rajasthan.

12:00 pm Market Check
Equity benchmarks continued to consolidate after a 2-day short covering-led rally. The Sensex gained 4.75 points at 26397.13 and the Nifty rose 7.40 points to 8009.35.

Some brokerages turned bearish on Indian equities. Macquarie cut year-end Nifty target to 8,700 from 9,600 to build-in lower earnings post weak Q1. Barclays, too, reduced 12-month Nifty target to 9,642 as it believes earnings recovery elusive.

Globally, Asian markets continued to trade mostly lower with Shanghai down more than 2 percent on reports that Beijing may finally halt its controversial market intervention.

RBI governor Raghuram Rajan told CNBC that he is not done with cutting rates yet and that he will follow the data to see how much action is possible.

In macro data to watch today, GDP in Q1FY16 is expected to come in at 7.5 percent, well above the 6.7 percent seen last year in Q1. However, what economists are watching is the GVA or gross value added and that is expected to fall to 6.81 percent from 7.4 percent in the year ago first quarter.

Lupin topped the buying list on Sensex, up 3 percent followed by Sun Pharma, Axis Bank, ONGC, Dr Reddy's Labs, Cipla and GAIL with 1-2 percent upside. However, Infosys, Bharti Airtel, BHEL, Bajaj Auto and Tata Steel declined 1-2 percent.

11:50 am GDP expecations: Services will be the key driver of GDP (gross domestic product) growth for the quarter ended June, while agriculture and manufacturing will continue to disappoint, says Sonal Varma of Nomura. "Services is basically going to be the star performer and particularly the two sections one the trade transportation segment, our view is there has been a good pick up because of some of the real activity indicators like medium and heavy commercial vehicles sales or airline passenger freight or even cargo traffic actually have been good," she says.

11:30 am Market outlook: While the near-term continues to look challenging for equity markets, long-term earnings can grow by 12-15 percent, says Hiren Ved, Director and CIO, Alchemy Capital Management. According to him, at the moment good macros are not translating into good micros. He adds that the market may correct further from current levels. But the good thing about corrections this time around is the fact that market participants did not panic. "Average market correction has been around 20 percent going by historical data," he told CNBC-TV18.

The market is flat as the Sensex is up 15.84 points at 26408.22. The Nifty is up 8.10 points at 8010.05. About 1101 shares have advanced, 961 shares declined, and 89 shares are unchanged.

GAIL, Lupin, Cipla, Sun Pharma and Axis Bank are top gainers while Bharti Airtel, BHEL, Vedanta, Tata Steel and Bajaj Auto are among losers in the Sensex.

India's first quarter gross domestic product (GDP) will be released in the evening. It is expected to come in at 7.5 percent versus 6.7 percent in the year-ago period. But economists these days look at the GVA, that is the gross value added, which is expected to fall to 6.7 percent from around 7.4 percent in the first quarter of the previous year.

Oil prices fell in Asia today, coming under pressure as dealers took profits from huge gains in the previous session and tried to gauge the outlook for the US economy and its taste for crude. Oil has been on a roller-coaster ride in recent weeks over fears of a harder-than-expected slowdown in China, the world's top energy importer, at a time when world markets are awash with supplies.

10:59 am Market recovers: Equity benchmarks recouped early losses. The Sensex rose 16.27 points to 26408.65 and the Nifty advanced 8.10 points to 8010.05.

About 1097 shares have advanced, 967 shares declined, and 88 shares are unchanged on the BSE.

10:45 am Sadbhav gets anchor money: Sadbhav Infrastructure Project has raised Rs 210 crore from anchor investors. The company alloted 2.04 crore equity shares at a price of Rs 103 aggregating Rs 210 crore, the company said in a statement. The anchor investors are HDFC Mutual Fund, Tata MF, Nomura MF, Morgan Stanley, Amansa, Tata AIA Life and SBI MF.

Sadbhav plans to raise Rs 425 crore through fresh issue of equity shares and an offer for sale of up to 32.36 lakh equity shares by existing investors including the anchor investors' portion.

The price band has been fixed at Rs 100-103 a share. The IPO, which opens today, would close on September 2.

10:30 am FII View: Bhuvnesh Singh, Head of Research, Barclays feels while Q1FY16 earnings were by and large weak due to weaker-than-expected demand recovery, but there were still some bright spots.

According to him, operating performance was better than topline performance, the demand environment showed signs of improvement in a few sub-sectors in the consumption and industrial sectors.

Barclays analysts expect an earnings bounce back in H2FY16 in several sectors like consumer, financials, healthcare and capital goods.

However, the brokerage slashed 12-month forward Nifty index target to 9,642 from 10,219 earlier due to delay in earnings recovery, Singh adds.

10:15 am Rate cut on card?: Indicating an imminent rate cut, RBI Governor Raghuram Rajan has said inflation has come down to the comfort zone quicker than expected and he is keeping a watch on data to see how much room is there for further easing of the monetary policy.

"We are on a phase of accommodation. We are still in that phase. We are looking at the data to see what more room we have," Rajan said.

Stating that RBI monetary policy has been accommodative, Rajan said he has cut interest rates three times already this year and he was "still on an accommodative setting".

10:00 am Market Check
The market continued to see profit booking in morning trade after two-day rally. The Sensex fell 130.82 points to 26261.56 and the Nifty declined 31.20 points to 7970.75, dragged by banking & financials, capital goods and metals stocks. However, pharma stocks bucked the trend.

Hiren Ved of Alchemy Capital Management feels that the market may correct further from current levels. But the good thing about corrections this time around is the fact that market participants did not panic.

"Average market correction has been around 20 percent going by historical data," he told CNBC-TV18. Also, he adds that a lot of the correction was because of external factors than domestic ones. Ved says India will continue to remain vulnerable to such corrections unless substantial growth is seen.

9:50 am Q1 GDP expectations: India's first quarter gross domestic product (GDP) is expected to come in at 7.5 percent versus 6.7 percent in the year-ago period. But economists these days look at the GVA, that is the gross value added, which is expected to fall to 6.7 percent from around 7.4 percent in the first quarter of the previous year.
 
On GVA, taxes are added and subsidies are subtracted to get GDP. Now, while subsidies have fallen marginally, taxes have increased (service tax, excise duty hikes on fuel) during the past year and hence GDP will be higher than last year, but the GVA (the actual amount of value added done by the Indian economy) will come in lower - and the real culprit is agriculture.

9:40 am IPO: Sadbhav Infrastructure Project, the subsidiary of Sadbhav Engineering, has opened its initial public offer for subscription on Monday (August 31). The price band is fixed at Rs 100-103 per share.

The issue, which will close on September 2, consists of fresh issue of equity shares for an amount aggregating up to Rs 425 crore and an offer for sale of up to 32,35,762 shares by Xander Investment Holding XVII Limited and up to 32,35,762 shares by Norwest Venture Partners VII - A - Mauritius. The issue also comprises a reservation of equity shares aggregating up to Rs 25 crore for eligible employees.

Sadbhav Infrastructure has alloted 2,03,87,914 shares at a price of Rs 103 apiece aggregating to Rs 210 crore to anchor investors - HDFC MF, Tata MF, Nomura, Morgan Stanley, Amansa, Tata AIA Life and SBI MF.

9:30 am Market outlook: The Indian economy hasn't yet touched its bottom levels, believes Saurabh Mukherjea, chief executive officer, Institutional Equities, Ambit Capital. Ambit has recently cut India's growth forecast from 7 percent to 6.8 percent. In an interview to CNBC-TV18, Mukherjea says India is currently facing a double whammy in the form of weakness in the home territory and uncertainity on China's yuan devaluation and the US Federal Reserve's hiking of interest rates.  Mukherjea advises not taking any speculative bets in the banking space and has lowered the year-end Sensex target to 28,000 from 33,000. But lower levels of 22,000, he adds, are not inconceivable.

The market has seen sharp slide in early trade. The Sensex is down 130.74 points or 0.5 percent at 26261.64, and the Nifty slips 36.10 points or 0.4 percent at 7965.85. About 319 shares have advanced, 426 shares declined, and 40 shares are unchanged.

ONGC, Bharti Airtel, Dr Reddy's Labs, Lupin and Wipro while Vedanta, Bajaj Auto, BHEL, TCS and Tata Steel are among laggards in the Sensex.

The Indian rupee has opened lower by 11 paise at 66.25 per dollar against Friday's close of 66.14 a dollar.

Agam Gupta of StandChart Bank said, "We expect the market to keep a close watch on global equities and risk sentiment, especially in light of an increase in the probability of a September rate hike by the US FOMC."

"Dips below 66/dollar will continue to attract demand from importers and any spike to the 66.30-66.40/dollar zone should lead to hedging by exporters. We expect a 65.95-66.35/dollar range for the day," he added.

The dollar traded near one-week highs on rate-hike remarks by a senior Fed official and generally positive US data .

Global cues are mixed with Asian markets kicking off the first trading day of the week lower on expectations of more volatility in Chinese markets.The US market ended narrowly mixed on Friday on the back of a sharp rebound in crude oil and good economic data.

US Federal Reserve Vice Chairman has said in an exclusive interview that the Fed has not yet made up its mind about hiking interest rates in September. Fischer said the Fed will watch the non-farm payroll numbers and also if the volatility in the market is settling down.