STOCK MARKET LIVE: Sensex, Nifty down 2%; here are experts advice on shares and sectors

Nifty 11,600-11,425 levels is going to be crucial support: HDFC Securities

 The Nifty 50 witnessed a sharp follow-through weakness today and closed the day lower. A long bear candle was formed today with gap down opening. Technically, this pattern indicates a sharp downward reversal in the market. The Nifty is currently placed near the upper area of previous opening upside gap of 20th May at 11,591 levels. Further weakness from here is likely to fill this gap around 11,426 levels, said Nagaraj Shetti, Technical Research Analyst, HDFC securities.

Hence, the area of 11,600-11,425 levels is going to be a crucial support zone for the market, and one may expect current downtrend to halt around this area, Shetti said.

NSE's benchmark Nifty fell 2.09% to settle at 11,564.00, while BSE Sensex ended the day 792.82 points or 2.01% lower at 38,720.57.

IT sector outlook: HDFC Securities said in its report that IT sector’s growth vector is intact, however margin headwinds have increased on supply-side factors and currency. Notwithstanding the growth divergence within the sector, we expect first quarter aggregate revenue growth to accelerate (on YoY basis) to 5-quarter high, but margins slide to 8-quarter low. 
Q1 revenue growth for the sector (coverage universe) is estimated at 2.1/9.5% QoQ/YoY (vs. 8.6% in FY19). 

"We expect wide divergence in operating performance in 1Q with +100 to -230bps QoQ impacted by wage, visa cost, sub-contracting, rupee appreciation and negative cross-currency. Among tier-I IT companies -- TCS and Infosys (includes inorganic) are expected to lead US dollar revenue growth at 3.1/2.9% QoQ, respectively. Among tier-II IT companies, Hexaware (including Mobiquity), Sonata, and Majesco are expected to lead revenue growth at 5.8/3.6/3.5% QoQ, respectively," said Amit Chandra and Apurva Prasad, analysts at HDFC Securities.

 Among tier-I IT companies, we expect TECHM and HCLT to have bigger operating margin dent sequentially at -220/-150 bps QoQ (TCS/Wipro to outperform on margins), they say. Within tier-II IT companies, Mindtree and LTI are expected to have higher margin impact at -225/195bps, respectively (Majesco, Sonata, Persistent to outperform on margins).

Following a strong outperformance, NIFTY IT has converged to the benchmark (1.5/3.2% outperformance vs. NIFTY over 6M/12M) and presents stock specific opportunities, the report said. "We are more selective within the sector (vs. last year) and prefer TCS (scale & execution durability), HCLT (organic revival mode and 25% discount to Wipro valuations) within tier-1 IT. Among tier-2 IT, we prefer Mphasis (growth visibility in Direct Core/DXC, valuations), LTTS (ER&D leadership, growth momentum), Sonata and Majesco."

Key monitorables include (1) Commentary on deal pipeline/conversions and macro situation (impact on client spend), (2) Growth in Digital (biggest growth driver) and sub-segments driving the growth, (3) Margin outlook and impact of supply side factors such as wages, localisation, visa cost and sub-contracting, and (4) Large account metrics (especially for LTI, Mindtree, Persistent, LTTS), Chandra and Prasad said.

Jindal Steel and Power share (Edelweiss maintains BUY): Brokerage Edelweiss said that taking cognizance of JSPL’s Q1FY20 operating numbers, it sees higher probability of the company meeting FY20 guidance of 6.5 million tonne. "We also believe that Q1FY20 steel sales will meet our 1.31mt estimate. We maintain ‘BUY/SO’ with TP of INR210/share, implying an exit multiple of 6.2x FY21E EBITDA."

Bank Nifty fell over 2%, whith its constituents like SBI, PNB, HDFC Bank and ICICI Bank falling heavily.

Agri sector shares outlook: Brokerage Edelweiss said given the onset of a weak spell of monsoon which has deferred crop sowing, domestic agrochemical segment is expected to post a single digit growth. Improvement in global agri cycle is likely to drive a 20% YoY growth in PI’s CSM business segment while LATAM again is expected to drive UPL’s growth (ex Arysta). In fertilizer segment, similar to domestic agrochemical companies, crop sowing deferment is expected to result in volume contraction. 

Margins for both the agrochemical and fertilizer companies are expected to be stable given the normalising RM prices. "Overall, the government focus in doubling farmer’s income coupled with recent MSP hikes and expectation of normal monsoon remains the key driving factor. Based on current scenario, Dhanuka Agritech continues to remain our top pick, given the favourable risk-reward ratio."

Brokerage Edelweiss said Union Budget FY19-20, as far as the BFSI sector is concerned, provides some much-needed impetus and push to NBFCs, housing, MSME and rural segments. 

Key announcements: a) support to NBFCs via one-time partial credit guarantee to PSU banks for buying high-rated pooled assets (of Rs 1tn) of financially sound NBFCs/HFCs—LAP segment to benefit; b) support to consumption spends (no charges for cashless transactions on consumers /merchants) & interest deduction limit raised for housing loans (cut effective rate by 2% points) to support retail financing demand
 
c) shifting regulatory authority of HFCs from NHB to RBI—positive given proactive regulator, but possibility of reduction in HFCs regulatory arbitrage cannot be ruled out; and d) Rs 700 bn recapitalisation support to PSU banks (better than expectation). 
Key misses: a) no significant boost to direct intervention in financial markets to ease liquidity pressure

b) no tax break on bank deposits. Key beneficiaries: HFCs (Aavas, HDFC, LICHF, IHFL) and NBFCs (MMFS, LTFH).

Brokerage Edelweiss said Budget 2019 proposals will benefit affordable housing financiers like Aavas Financiers, Gruh Finance & Repco Home Finance, IHFL, HDFC, and LICHF.

The Nifty index witnessed a sharp fall after the Budget and endedthe day in the red, down 135 points over previous session. From opening bells the index had a negative undertone and posts a choppy session in intraday trades, saw a steep fall by the closing hours to erase off the gains which it accumulated
over the past 4 trading sessions. Advance Decline ratio stood at 6:44. Nifty OI PCR trades at 1.07. INDIA VIX closed down 3.47%, according to JM Financial data. 

Ashok Leyland share: (Zee Business TV experts panel stock recommendations): Market expert Sandeep Jain said that the investors should wait before buying into it, as the outlook of the share is bearish. The share is trading 2.64% lower at 84.7. 

Tata Motors share: (Zee Business TV experts panel stock recommendations) An expert said that Tata Motors share looks bearish. He said that the investors should wait for sometime before buying into this stock. The share was trading 3.03% lower at 155.3.

BF Utilities share (BUY): (Zee Business TV experts panel stock recommendations): Market expert Simi Bhaumik recommended a BUY in the stock. The share may break out the Rs 210-2020 levels. The share is trading 11.69% higher at 194.4 on the BSE.

Most of the Nifty sectoral indices were over 1% lower.

YES Bank: Board of YES Bank said that the financial position of the bank is sound and stable and its liquidity and operating performance continue to be robust.

Hero MotoCorp, Bajaj Auto, L&T and Tata Motors were the top losers in Nifty.

HCL Tech, ITC, Infratel, and Sun Pharma were the top gainers in Nifty.

JM Financial report on ITC, Titan stocks: 

Brokerage JM Financial expects a long period of de-rating in the ITC stock to gradually come to an end post the Union Budget presented earlier on July 6, 2019. "To us, the government has clearly shown an intent to be reasonable as far as cigarettes taxation goes. It’s true that excise duty has been brought back on cigarettes but that’s only to avoid the existing NCCD levy being contested on grounds that there is no basic excise duty on these items," it said. 

"Our analysis of the government’s FY20E revenue budget suggests a possibility for at worst a c.6% hike in the rate of cess/tax applicable on cigarettes, which is not a bad outcome at all. In fact, a moderate hike of this quantum will allow ITC to take a much-needed portfolio-level price-hike and this is, in our view, essential for ITC to progressively get to a low-to-mid-teens profit growth trajectory. ITC remains one of our favoured consumption picks. ITC apart, there isn’t anything significant from a rural income point of view; we do not expect the increase in customs on gold imports from 10% to 12.5% to impact Titan in any significant manner," the brokerage said.

BSE Sensex was trading over 420 points or 1% lower at 39,092.81.