Market Live: Sensex falls over 150 pts, Nifty below 10,050; Services PMI at 4-year low

11:25 am FII view: Here is Morgan Stanley’s view on the Reserve Bank of India’s policy announcement.

“We maintain our view that the central bank is unlikely to take up any further easing measures beyond this rate cut, given that both we and the central bank project inflation to rise from here. Indeed, post this rate cut, we believe that the RBI’s focus will shift back towards the resolution process of non-performing loans in the banking system, and also addressing the transmission mechanism and its approach to and enhancing its toolkit in managing liquidity conditions.”

11:05 am Market Check: Equity benchmark indices were off the day’s lows and saw a marginal recovery during the previous hour, with the Nifty looking to test 10,000-mark.

The Sensex was down 127.74 points at 32349.00, while the Nifty traded lower by 38.70 points at 10042.80.The market breadth was negative as 753 shares advanced against a decline of 1,376 shares, while 113 shares were unchanged.

Banking stocks continued to sulk for the second consecutive session, with PSU banks and Nifty Bank down by 1.7 and 0.8 percent, respectively.

Coal India, BHEL and Hindalco lost the most on both indices, while Lupin, TCS, Aurobindo Pharma and IOC were the top gainers.

10:58 am Interview: Bata India has put its best foot forward this quarter after posting a decent set of numbers.

Everything went right in the last quarter for the company. Same-store-sales-growth (SSSG) improved to 10 percent in Q1 versus 3 percent in FY17, Rajeev Gopalakrishnan, Managing Director and Chief Executive Officer said.

Company is focused on the premiumisation in the top 30 stores. Bata has opened close to 40 stores in the last quarter and it is now targeting 120 stores in FY18.

Wholesale saw some glitch in terms of goods and services tax (GST) but retail grew 15 percent in the last quarter.

Higher SSSG and premium products aided margins, he added.

End of season sale was preponed to June, so the company witnessed a dull period in July, the footfalls was down by 15-20 percent.

“In August-September, we will come back very strongly because we have taken all the right steps to get the best of the best stock availability in the next six months’ time. We are very much upbeat that in the next six months, we will be doing a better show,” said Gopalakrishnan.

10:45 am Earnings Estimates: Oil retailer Indian Oil Corporation (IOC) is expected to report standalone profit at Rs 3,013 crore for April-June quarter, down 19 percent compared with Rs 3,720 crore in previous quarter.

Revenue during the quarter is seen falling at Rs 94,563 crore from Rs 1.22 lakh crore in previous quarter, according to average of estimates of analysts polled by CNBC-TV18.

Operating profit is seen rising sharply to Rs 6,213 crore from Rs 4,408 crore and margin may expand to 6.5 percent from 4.4 percent on sequential basis.

Analysts expect gross refining margin of USD 4.6 a barrel (including inventory loss) for IOC in Q1FY18 against USD 8.9 a barrel in Q4FY17 (included inventory gain of USD 2/bbl)/

They expect refinery throughput at 17.9mmt for Q1FY18 against 16.1mmt in Q1FY17 and 17.1mmt in Q4FY17, higher due to contribution from the Paradip refinery.

Key issues to watch for would be utilisation of Paradip refinery, gross refining margin, capex plans and forex/inventory changes.

10:37 am Services PMI: IHS Markit survey said business conditions in India’s service economy deteriorated markedly in July following the implementation of the goods and services tax (GST).

Output and new work declined for the first time since January, with rates of reduction the quickest since September 2013. This had an adverse effect on the labour market, with employment contracting over the month. That said, firms expressed a lack of knowledge regarding the GST and expect more clarity in the near-term to lead to activity growth. Confidence for the year ahead was, in fact, the strongest since August 2016.

On the price front, input cost inflation eased from June, while charges were raised to the greatest extent since early-2013. The seasonally adjusted Nikkei India Services PMI Business Activity Index plunged from June’s eight-month high of 53.1 to 45.9 in July, its lowest level since September 2013. The headline figure signalled the first downturn in output since the start of the year, and one that was marked.

With manufacturing production also sliding markedly, private sector output dipped to the greatest extent since March 2009. The seasonally adjusted Nikkei India Composite PMI Output Index fell sharply from 52.7 in June to 46.0.

10:26 am Market Outlook: Pramod Gubbi sees a correction around the corner and remains cautious. Further, the GST-led disruption is also continuing longer than expected.

As the Indian market scales to new highs, skeptics also see a correction/consolidation around the corner. Ambit Capital, in this scenario, remains cautious, given the fundamental view on the valuations.

“As prices go up, chances of correction are higher…potential of risks are more than ever before,” Pramod Gubbi, Head, Equities, Ambit Capital, told CNBC-TV18.

Having said that, the excess liquidity in the system could result in shallow or phase-based correction, he said. For instance, the first phase of fall could be arrested by available cash in the market. From this point, the market could rise higher. This shall be followed by a second phase, which will see a further dip in the market, he added.

10:10 am Market Check: Benchmark indices fell further in morning, with the Nifty breaking 10,050 level, weighed by banking & financials stocks.

The 30-share BSE Sensex was down 167.35 points at 32,309.39 and the 50-share NSE Nifty fell 47.40 points to 10,034.10.

About 1,181 shares declined against 721 advancing shares on the BSE.

9:58 am Buzzing: Shares of Sical Logistics advanced 5.6 percent intraday on the back of robust Q1 (April-June) numbers.

The company’s consolidated net profit was up 72.30 percent at Rs 11.2 crore versus Rs 6.5 crore, in a same period last year.

Its revenue was up 14.4 percent at Rs 244.7 crore versus Rs 213.9 crore.

The company’s operating profit (EBITDA) increased 41 percent at Rs 44 crore and EBITDA margin rose 340 bps at 18 percent.

The company at its meeting held on August 2, has decided to provide corporate guarantee to the extent of Rs 40 crore to Kamarajar Port on behalf of the company’s subsidiary for execution of the modification project.

9:43 am Inflation Outlook: Sonal Verma of Nomura feels near-term economic outlook is likely to stay benign owing to GST effects. He said, however, this is a transitory phase and expects growth to be back at above 7 percent and inflation above 4 percent over the next 6-12 months.

According to him, the challenge for the RBI is whether to focus on the near-term benign outlook, which maybe getting influenced by disruptions or to focus on the medium-term outlook that will be sustained once these effects fade.

If the RBI chooses to focus on near-term dynamics, then core inflation will continue to moderate and headline CPI inflation is likely to marginally undershoot the RBI’s projection of a little above 4 percent by Q12018, Verma said. Beyond Q1FY18, he expects CPI inflation to overshoot 4 percent.

9:29 am FII View: Abhay Laijawala of Deutsche Bank said equity market valuations continue to scale new highs.

MSCI India’s current valuation at 19.1x forward PE is significantly higher than the historical average of 15.8x. Valuations are not as expensive on price-to-book ratios, he feels.

Dissecting the valuations on PE for earnings-based sectors and price to book for more cyclical sectors shows relatively not-as-discomforting internals, he said.

He feels, industrials, IT services, utilities and healthcare appear relatively inexpensive relative to their trading history. Telecom and consumer staples appear relatively expensive.

Laijawala maintains sectoral preference for cyclical sectors.

9:15 am Market Check: Equity benchmarks extended losses in opening trade Thursday, with the Nifty struggling below 10,100 level, dragged by banks after RBI policy.

The 30-share BSE Sensex was down 40.79 points at 32,435.95 and the 50-share NSE Nifty fell 12.60 points to 10,068.90.

HDFC Bank, Axis Bank, ICICI Bank, Infosys, ONGC, HUL, Kotak Mahindra Bank, IndusInd Bank, M&M and SBI were under pressure.

IOC gained 1.3 percent ahead of earnings later today. HPCL, Sun Pharma, Wipro, TCS, Eicher Motors, Cipla and Aurobindo Pharma were trading higher.

Nifty Bank lost 0.5 percent. UCO Bank, Union Bank of India, Canara Bank, Bank of India and Allahabad Bank lost up to 3 percent.

HEG, ENIL, Godrej Consumer Products, Colgate, Emami, Voltas and Marico fell up to 3 percent.
Bata India was up 3.4 percent after earnings. Sical Logistics and TBZ also gained up to 3 percent.