Closing Bell

Equity benchmark Sensex ended 284 points higher on Wednesday after ralling over 650 points initially. Equities met with selling pressure as traders preferred to book profits in late session.

Prominent gainers that provided support were M&M, Kotak Bank, Bajaj Finance, SBI, Nestle, ICICI Bank, ONGC, HDFC Bank.

However, notable losers were NTPC, IndusInd Bank, Maruti, HeroMotoCorp, Infosys, Tata Steel and Bajaj Auto

After hitting a high of 34,488.69, the 30-share index ended higher by 284.01 points or 0.84 per cent higher at 34,109.54.

Similarly, NSE Nifty gained 82.45 points or 0.83 per cent to 10,061.55.

In the previous session, the BSE barometer soared 522.01 points or 1.57 per cent to settle at 33,825.53, and the broader Nifty jumped 152.95 points or 1.56 per cent to 9,979.10.

On a net basis, foreign portfolio investors bought equities worth Rs 7,498.29 crore in the capital market on Tuesday, provisional exchange data showed.

Nifty 50 June Futures (10,108)

The positive global cues, had helped the Sensex and the Nifty to commence the session with a gap-up open and continues to trade in the positive territory. The Dow Jones and S&P 500 index has jumped 1 per cent and 0.8 per cent respectively in the past session. Following the US markets, the Nikkei 225 had climbed 1.3 per cent to 22,613 and Hang Seng index advanced 1.2 per cent to 24,271 levels in today's session.

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Broker's call

ICICI Securities

V-Guard Industries

The second half of March happens to be a strong revenue booking period for V-Guard due to significant offtake of summer based products and annual closing of incentive schemes of various products. According to the company, the lockdown situation impacted revenue, EBITDA to the tune of Rs 250 crore, Rs 70 crore, respectively, in FY20. Adjusted with Covid-19 impact, FY20 revenue, EBITDA would have been up 6%, 47%, respectively.

Further, the company’s improved product mix, benign raw material prices helped drive gross margin up ~330 bps YoY in FY20. It has further guided that while Q1FY21 performance is likely to be impacted by loss of sales of almost 40 days, the business recovery post relaxation from lockdown is encouraging. About ~60% of V-Guard dealers have resumed operations till date (mostly in non-containment area) resulting in sales recovery of ~70% in May compared to the same period last year. The management guided at a normal inventory at trade level by the end of June 2020, which means a relative fast recovery in primary sales for re-filing inventory.

Though, the revenue, is likely to be down 23% for FY21E,  there  would be sharp business recovery from FY22E onwards and intact margin profile.

Valuation & Outlook

Despite lower sales, the company has closed the year with highest ever annual gross margin, mainly due to a better product mix and supportive input prices.

The margin will sustain, going forward, with focus on increasing in-house manufacturing and reduction in margin gap between south and non-south regions (that is ~1.5%). Further, a strong balance sheet condition and prudent working capital management of the company would help V-Guard to tide over the rough phase. We maintain our BUY rating on the stock with a revised target price of Rs 210/share.

Broker's call

Anand Rathi

KEI Industries: long-term prospects intact; maintains Buy

KEI’s flattish Q4 growth was quite encouraging. The growth in the cable industry will continue, given the vast opportunities, while wires will see demand from smaller towns.  KEI has a strong order-book, diversified customers and a healthy balance sheet. 

The Rs 1.5 bn order for 400kVA cables (EHV) sets KEI among the world’s top manufacturers. After strong 20%/20%/42% CAGRs in revenue/EBITDA/PAT over FY16-20, the company is likely to bounce back from FY22.

KEI can have sustainable growth prospects. The brokerage firm has a Buy recommendation, with an unchanged target of Rs 411 (14x FY22e P/E). FCF generation continuing would help in a re-rating of the stock. Also, KEI’s likely entry into FMEG, like its peers, in the next 2-3 years could drive valuations.

A flattish, though encouraging, Q4. KEI’s flattish revenue/PAT, though short of estimates, were quite encouraging. The healthy 9.6% EBITDA margin was down 134bps y/y, 101bps q/q. Overall volumes were up 9% y/y (18% in FY20) with sales of institutional cable growing 23% y/y while EPC/ retail sales declined 25%/21% y/y. EHV sales and exports continue to be robust.

The longer working capital cycle (by 13 days to 79) was the result of an increase in inventories/debtors. Good collections was seen during Apr-May,  the growth in the cable industry will continue while wires will see demand from smaller towns.

Strong prospects, intact. The strong order book (of Rs 33 bn, including Rs 7.3 bn of EHV and Rs 16.4 bn exports), diversified customers and healthy balance sheet are positives.

Risks: Volatile RM costs, delay in industrial capex.

Services PMI at 12.6 in May as activities contract sharply due to pandemic

The index is at a level which, prior to the coronavirus pandemic, is unparalleled in over 14 years of data collection and points to an extreme drop in services activity

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Bajaj Auto marginally up

Shares of Bajaj Auto were marginally up on Wednesday. The stock has gained Rs 26.85, 1 per cent, to Rs 2,822.95 on the NSE today.

Bajaj Auto reported a decline of 70% in sales at 127,128 units in May 2020 compared to 419,235 units in May 2019. Total sales include domestic sales of 40,074 units and exports of 87,054 units.

Sources: MSFL Research

Saregama hits 20% upper circuit

The stock of Saregama has locked in 20 per cent upper circuit, gaining Rs 55.65, at Rs 333.95 on the BSE today.

The stock has risen sharply after the company announced that it has entered into a global deal with Facebook to license its music for video and other social experiences across social media platform Facebook and Instagram.

The company said that this partnership will allow users to choose from a wide variety of music to add to their social experiences such as videos, stories via music stickers and other creative content. People will also be able to add songs to their Facebook profile, the company said in a statement.

Saregama is India’s oldest music label with a catalogue of more than one lakh songs across many different genres including film songs, devotional music, ghazals and indipop in more than 25 languages.

BSE UPPER CIRCUIT STOCKS

STOCK FUTURES

STOCK FUTURES

Broker's call: TVS Motor

Chola Securities

TVS Motor (Underperformer)

CMP: ₹364.25

Target: ₹328

TVS Motor’s revenue declined by 20.6 per cent y-o-y (-15.6 per cent q-o-q) to ₹3,481.4 crore on account of a 30 per cent y-o-y/22.9 per cent q-o-q decline in volumes in 4QFY20.

Broker's call

ICICI SECURITIES

Market Outlook on Nifty

Equity benchmarks extended gains over a fifth consecutive session as the Nifty rose 153 points or 1.6% and ended at 9979. The market breadth remained strong with A/D ratio 3:1 as Nifty small cap relatively outperformed with gains of 2.3%. Sectorally, financials, auto and metal outshone while FMCG took a breather.

Technical Outlook

The price action formed a bull candle carrying a higher high-low for a fifth consecutive session, indicating continuance of positive momentum. In the process, the index retraced 50% of CY20 decline (12430-7511), at 9970 and approached our earmarked target of 10000

The index is likely to witness a gap up opening above psychological mark of 10000, indicating continuance of upward momentum. Going ahead we believe, index need to decisively close above intermediate resistance of 10160 for further up move, as on March 13 the index had arrested intraday pullback of ~18% at 10160, which would now act as immediate resistance. Failure to close above 10160 would lead to temporary breather amid stock specific action that would make market healthy as over past five sessions Nifty has rallied ~1000 points that has hauled daily stochastic oscillator in overbought territory (95), indicating possibility of temporary breather cannot be ruled out, that would make market healthy. Thus, any cool off from here on should not be considered as negative instead it should be capitalised on as incremental buying opportunity in quality stocks

Key point to highlight is, broader market have seen rejuvenation of upward momentum as Nifty midcap and small cap resolved out of past five weeks consolidation, indicating acceleration of upward momentum, auguring well for durability of ongoing rally

On the downside, a strong support is placed at 9500 as it is confluence of a) 50% retracement of last leg of up move (8997 – 9032), at  9464, b) as per change of polarity concept key hurdle of 9500 would now act as support

In the coming session, the index is opening on a positive note on the back of strong global cues. The bias continue to remain positive as the index forming higher high-low. Hence, after positive opening, use intraday dips towards 9955 - 9982 for creating long position for target of 10074.

Broker's call

ICICI SECURITIES

Intra-day F&O recommendations

1. Sell Nifty 10100 Call (June 4 expiry) in the range of | 54-56

2. Buy Bank Nifty in the range of 20550-20600

3. Buy Ujjivan Financial in the range of | 189.00-190.00

4. Sell Coal India in the range of | 145.00-145.50

Morning Session

Equity benchmark Sensex rallied over 500 points in early trade on Wednesday, led by strong buying in HDFC duo, ICICI Bank and Reliance Industries as positive domestic and global cues enthused investor sentiment.

Massive influx of foreign funds also supported market sentiments, traders said.

After hitting a high of 34,422.71, the 30-share index was trading 356.40 points or 1.05 per cent higher at 34,181.93.

Similarly, NSE Nifty surged 109.60 points or 1.65 per cent to 10,088.70.

Bajaj Finance was the top gainer in the Sensex pack, rising around 6 per cent, followed by ICICI Bank, Axis Bank, IndusInd Bank, ONGC, Tech Mahindra and HDFC Bank.

On the other hand, Bharti Airtel, HCL Tech and HUL were among the laggards.

In the previous session, the BSE barometer soared 522.01 points or 1.57 per cent to settle at 33,825.53, and the broader Nifty jumped 152.95 points or 1.56 per cent to 9,979.10.

On a net basis, foreign portfolio investors bought equities worth Rs 7,498.29 crore in the capital market on Tuesday, provisional exchange data showed.

IndiGo jumps 8 per cent despite showing loss

The stock of Interglobe Aviation (IndiGo) has moved up over 8 per cent on the BSE today despite the airlines reported net loss of Rs 870 crore in March quarter.

The stock has been on the declining trend past three months. It has fallen from a high of Rs 1,214 and touched a low of Rs 850 on March 23 this year. Subsequently, the stock was rising cautiously from this level. Today, it has achieved 8 per cent gain and was quoted at Rs 1,020.45 clearing one-month high of Rs 1,006.

IndiGo reports net loss of Rs 870.8 crore in March-quarter

The closure of flight operations has affected the profitability of IndiGo, the Delhi-based low cost airline.

Indigo reported a net loss of Rs 870.8 crore for the quarter that ended on March 31 as against a net profit of Rs 595.8 crore previously.

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Sharekhan to foray into discount broking business

Sharekhan, a BNP Paribas-owned full services brokerage house, has announced its plan to enter into the discount broking business through a new subsidiary.

This new business initiative is being launched under ‘Project Leapp’.

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Sterlite Technologies (Rs 105.9)

Investors with short-term perspective can buy the stock of Sterlite Technologies at current levels. The stock recorded a 52-week low at ₹59.8 in early March this year and began to move sideways. It subsequently took support in the band between ₹59 and ₹63 and started to trend upwards in early April. 

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