Sensex, Nifty under pressure; Infosys, Axis Bank, BHEL fall

Moneycontrol Bureau

10:45 am CLSA on Tata Motors: CLSA has maintained its buy rating on Tata Motors, the country's largest commercial vehicle maker and the owner of luxury car maker Jaguar Land Rover (JLR).

The brokerage believes the stock is pricing in a 10 percent compound annual rate of decline for JLR’s China volume over FY15-17 and margins there contracting to 390 basis points below those in other regions, as well as zero value for the India business.

It sees this scenario as extremely pessimistic and unlikely, especially since JLR has strong buffers for superior volume/pricing resilience in China.

China contributes 20 percent to total revenue of JLR. In last few months, JLR's China monthly sales growth has been falling due to lower demand and fears of slowdown in luxury car market.

CLSA expects the share price to improve once volume and quarterly net-profit growth recover in 2H16 (October 2015-March 2016).

It sees strong returns in stock even if it assumes conservative China scenarios.

10:15 am Oil Update: Oil prices edged lower as data showed Saudi Arabian exports fell to the lowest in five months despite record output, while a resurgence in US drilling activity seen earlier this month seemed to fizzle out.

Both international and US crude futures posted their third consecutive weekly losses last week on expectations of increased exports from Iran following a deal to ease sanctions against the OPEC producer.

Saudi Arabia's crude oil exports fell in May to their lowest since December, with official data showing daily shipments stood at 6.935 million barrels a day (bpd) compared to 7.737 million bpd in April.

10:00 am Market Check

The market remained marginally under pressure, dragged by banking & financials. The Sensex declined 46.91 points to 28416.40 and the Nifty fell 21.10 points to 8588.75.

However, the broader markets outperformed benchmarks with the BSE Midcap and Smallcap indices rising 0.2 percent. About 1141 shares have advanced, 718 shares declined, and 97 shares are unchanged on the Bombay Stock Exchange.

Infosys, HDFC, ITC, Axis Bank, Tata Motors, SBI, BHEL and ICICI Bank dropped 0.2-1 percent.

ACC fell 2 percent, reacting negatively to its quarterly numbers released on Friday evening with EBIDTA per tonne down 28 percent Y-o-Y and 36 percent Q-o-Q. CLSA has cut CY15-17 estimates by 10-16 percent but continue to believe that the worst is over for the sector. UltraTech Cement also declined nearly 2 percent ahead of earnings today.

Federal Bank crashed 7 percent as the bank reported a 35 percent fall in profits Y-o-Y with provisions up over 5 times Y-o-Y. Gross non-performing assets worsened 55 basis points Q-o-Q primarily due to one account of over Rs 100 crore from the steel sector slipping.

Karnataka Bank also lost nearly 6 percent as profit in Q1 fell by 10 percent. Oberoi Realty and CRISIL gained 1.5 percent each while CARE Ratings fell 3 percent post earnings.