News and Impact
Expect market to open on a flat note on account of global cues. US markets gained marginally on last Friday after Amazon announced strong Q3 results but forecast soft Q4 guidance. Asian markets (Hong Kong and Nikkei) Index gained 0.3% each. China market shut today. SGX Nifty declined 18 points and US Future is up 20 points (0.1%)
Impressive Interim Budget and quarterly results may support Indian market. But only concern of increased Oil price ($63/bbl) and USDINR (above 71). Divi’s Lab, Jubliant Life, Dr Reddy, Jindal Steel and Titan announced impressive on last Friday.
Today’s will be first day of post budget. Expect FMCG, Auto and Realty stocks will be positive as benefit of interim budget.
RBI credit policy, quarterly results and global markets will be determine the market trend this week. RBI Credit policy will be announced on 7th Feb. Street expectation of RBI may cut interest rate after a Jan. CPI fell to 17-month low. Expect PSU Banks may momentum ahead of RBI credit policy.
Sector to be watch today – Pharma (strong Q3 results), FMCG (Budget benefit), Auto (Budget Benefit) and Tech stocks (good Q3 results).
Brokers Radar – Titan CLSA TGT 1100, Macquarie TGT 1185. SBI – CLSA TGT 380.
Prime Minister Narendra Modi's government on Friday announced cash handouts for small farmers, a pension scheme for informal workers and a doubling of tax relief for the lower middle class in an interim budget designed to shore up its popularity ahead of national elections due before May. Finance Minister Piyush Goyal presented the budget to Parliament amid media reports that the government was suppressing data showing the country's unemployment rate has hit a 45-year high of 6.1 percent. This was the last budget of Modi's government, which will be seeking a second five-year term in national elections in May. The new government will determine the full-year budget for 2019-20. The interim budget focused mainly on farmers, who comprise more than 60 percent of India's 1.3 billion people, and can sway the election's outcome.
The budget may raise the market's hopes that Prime Minster Modi will be re-elected, though the link between populist measures and election outcomes is not clearly evident historically. Expect the combination of expansionary fiscal and neutral monetary policy at the global and domestic level to keep the equity market volatile. Apart from consumer and auto stocks, expect the budget as positive for real estate, infrastructure, cement and building material companies.
A direct income scheme (the Prime Minister’s KisaanSammanNidhi) of Rs6,000 per family per year for small and marginal farmers owning less than two hectares. The fiscal implication of this scheme is pegged at Rs20,000 crore for FY19 and Rs75,000 crore for FY20.- Positive for FMCG Stock – Dabur, Hindustan Unilever, Marico.
The income-tax rebate for those earning salary less than Rs5 lakh a year would benefit the lower middle-income class. Tax forgone on the scheme has been estimated at Rs18,500 crore in FY20. – Positive for Auto (Maruti), Two wheeler (Bajaj Auto, TVS Motor, Hero Motocorp, Eicher), Voltas, VIP, Titan, ITC
The pension scheme for the unorganized sector having a monthly income of less than Rs15,000. With a premium of Rs100/month, the government has assured a monthly pension of RS3,000 at retirement at the age of 60 years to all these estimated 10 crore people. The outlay has been put at Rs500 crore. Positive for FMCG Stock – Dabur, Hindustan Unilever, Marico.
Exemption on levy of income tax on notional rent on a second self-occupied house is also now proposed. Currently, income tax on notional rent is payable if one has more than one self-occupied house – Expect positive for Real Estate stocks – Oberoi Realty.
TDS threshold on interest earned on bank/post office deposits is being raised from Rs.10,000 to Rs.40,000 and TDS threshold for deduction of tax on rent is proposed to be increased from Rs. 1,80,000 to Rs.2,40,000 for providing relief to small taxpayers – Positive for FMCG and Auto stocks.
Reliance Communications Ltd. said it plans to propose a similar debt resolution plan in the bankruptcy court as was being earlier pursued with creditors – Negative – Avoid on the stock
Watch on NIIT Tech – Media news that the company to sell its stake to overseas company.
Major Results this week - ACC, GAIL, Tech Mahindra, Marico, HPCL, PNB, Tata Chemical (Tuesday), Adani Ports, Cipla, Cummins, , Graphite, IGL,, JSW Steel, Lupin (Wednesday), Aurobindo Pharma, Britannia, Cadila, Tata Motor (Thursday) and BPCL, Engineers India, M&M, Nalco, SUN TVT, VIP (Friday)
Auto January monthly sales data (Maruti and Escorts inline with expectation while Ashok Leyland and Eicher reported better tahn expectation. Tata Motor and M&M poor monthly number) - Maruti reported flat YoY growth sales at 151721 sales (expectation 172300 units), Tata Motor reported lower than expected Jan monthly sales volumes of 54915 unit (down 8% YoY) - expectation 59750, M&M reported lower than expected UV sales but inline with expected tractors sales. M&M Jan monthly sales volumes of 55772 unit (up 5% YoY) - expectation 69500, Ashok Leylad reported sales volumes of 18533 unit (up 9% YoY) - expectation 17750, Escorts reported sales volumes of 5991 unit (up 13% YoY) - expectation 6000 and Eicher reported sales volumes of 72701 unit (up 7% YoY) - expectation 68000 unit.
Laurus Labs gets tentative USFDA approval for HIV drug - The company has also received an EIRR from the US health department for its Visakhapatnam Unit 6 – Positive for Laurus Labs.
Care Ratings downgraded Rs 1.2 lakh crore worth of bonds, loans and deposits issued by Dewan Housing Finance Ltd. citing the sharp reduction in its share price and the significant rise in bond spreads – Negative for Dewan Houing.
Jubliant Life reported better than expected Q3 results. We have a buy rating on the stock. Company reported Q3 net profit Rs2.6bn (up 22.6% YoY) - expectation Rs2.42bn and income Rs23.5bn (up 6% YoY) - expectation Rs22.2bn.
Divi’s Lab reported better than expected Q3 results. We have a neutral on the stock. DIVI’s reported strong revenue growth of ~29% YoY to INR13.4b v/s our est. of INR12.2b, partly due to low base of last year. EBITDA margin improved significantly by ~600bp YoY to 39% due to improvement in gross margin and better operating leverage. Revenue growth coupled with margin expansion led to ~53% YoY growth in EBITDA to INR5.2b v/s our est. of INR4.8b. PAT stood at INR3.8b, which included forex loss of INR411m. Excluding this, PAT grew ~73% YoY to INR4.1b v/s our est. of INR3.4b.
Jindal Steel reported lower than expected Q3 results on account of declined volume. However, company reported better than expected margin. Stock declined sharply in the past, current risk reward ratio is favourable. We have a buy rating on the stock. - JSP’s 3QFY19 consolidated EBITDA declined 6% QoQ (+29% YoY) to INR20.1b led by a 6% decline in steel volumes in India and margin compression in Oman Steel & Jindal Power (JPL). But, the same was partly offset by improved margins in India. Interest cost declined 4% QoQ to INR10.4b, while Adj. PAT turned marginally negative at INR258m.
SBI reported lower than expected Q3 results but Asset quality improved compare to last quarter. We have a buy rating on the stock. Company reported Q3 net profit Rs39.5bn vs loss Rs24.16bn (expectation Rs53.4bn), provision Rs60.1bn - expectation Rs92bn, GNPA 8.7% vs 9.95% - expectation 9.3%, loan growth 12.1% vs 9%, NPA 3.95% vs 4.84% expectation 4.3%, NIM 2.97% up 17bps and NII Rs227bn (up 21% YoY).
Titan’s reported robust Q3 results of all prospects. We have a buy rating on the stock. Company reported Q3 consolidated revenue growth of 34.6% YoY to IN58.7b as against our est. of INR53.7b. EBITDA grew 40% YoY to INR5.9b as against our est. of INR5.5b and recurring PAT grew 45.8% YoY to INR4.1b against our est. of INR3.7b.
BSE reported lower than expected Q3 results on account of lower transaction charges. We have a long term buy on the stock. Company reported 3QFY19 consolidated operating revenues declined 22% YoY to INR1.02b, below our estimate of INR1.07b. The miss was on account of lower-than-expected transaction charges. EBITDA at -INR93m was below our estimate of INR93m, but included one-time charges totaling INR120m. PAT came in at INR449m (-23% YoY), 7.2% above estimate explained by one-off in tax (ETR 4.6% v/s est. of 20%).
Berrger Paints reported lower than Bloomberg expectation of Q3 net profit on account of fall in margin. Company reported Q3 net profit Rs1.34bn - Bloomberg expectation Rs1.46bn and income Rs16.2bn - Bloomberg expectation Rs15.63bn
Dr Reddy reported better than expected Q3 results and improved EBITDA margin. Company reported Q3 net profit Rs4.85bn (up 13.5% YoY) – expectation Rs3.46bn, EBITDA margin 22.5% - expectation 19.7% and income Rs38.5bn (up 1.2% YoY).
Tech Mahindra acquisition - Company to buy overseas company Dynacommerce Holding, Tech Mahindra to pay EU4.39mn cash, settle EU11.5m of company's debt - Positive for Tech Mahindra
Equitas Holding Q3 standalone profit Rs30.8mn. Equitas Holding approves with Equitas small Finance Bank, Equitas small Finance Bank to give shares to Equitas Holders, Equitas small Finance Bank to be listed on BSE, NSE.
SBI has Rs9bn exposure to IL&FS, SBI to monetize stake in SBI general and SBI Cards in FY20
Nikkei January Manufacturing PMI at 53.9 vs 53.2 previous month
Yes Bank announced that Pralay Mondal has tendered his resignation as Senior Group President - Negative for Yes Bank - Any sharp declined will be long term buying opportunity
BHEL wins Rs3.5bn orders for Railway line construction - Positive
Carborundum Universal lower than Bloomberg expected Q3 results. Company reported Q3 net profit Rs580.9mn - Bloomberg expectation 688.5mn and sales Rs6.93bn - Bloomberg expectation Rs7.07bn
Jagran Prakashan reported lower than expected Q3 results. Company reported Q3 net profit Rs703.8mn (down 17% YoY) - expectation Rs786mn and sales Rs6.14bn (up 2.6% YoY) - expectation Rs6.27bn
Results - Aditya Birla Fashion, Bayer Corp, Bombay Burmah Trading, Coal India, Exide Industries, Firstsource Solution, Future Retail, Glaxo Pharma, Greaves Cotton, Grindwell Norton, Honeywell Automation, IDBI Bank, Indian Overseas Bank, IRB Infra, KEI Industries, Lakshmi Machine, Lakshmi Vilas Bank, Navneet Education, SREI Infra, SRF, Star Cement, Sun Pharma Advance, TI Financial, Welspun India and Whirlpool.