Sensex sheds 250 pts, Nifty breaks 8300; banks, oil drag

Moneycontrol Bureau

10:55am GAIL loses ground

Shares of GAIL slipped 2 percent after CLSA reiterated sell rating on the stock with a cautious outlook that there is more downside likely. The brokerage has also slashed its target price to Rs 425 per share and lowered earnings per share (EPS) due to cut in Brent crude price.

“We estimate that current stock price is building in Brent of USD 100 per barrel. The stock is trading 50 percent above its historical average price to equity (PE). We find these valuations unsustainable,” it says in a report.

As per CLSA, new EPS estimates are 14-27 percent below consensus signalling clear risk of downgrades for GAIL.

10:45am Sugar stocks in demand

Investors are hurriedly buying shares of sugar stocks in early trade on government’s impetus for the industry. Sugar stocks like Balrampur Chini, Bajaj Hindusthan and Shree Renuka Sugars rallied 7-8 percent as the government has fixed a price of Rs 48.50-49.50 per litre for procurement of ethanol for blending with petrol, a rate much higher than the price oil companies presently pay to buy the sugarcane extract.

Abinash Verma, DG, Indian Sugar Mills Association (ISMA) says in a euphoric note that almost all private sugar companies will benefit from it as sugar industry is likely to see better realisations with new price. He also adds that procurement may increase up to 10 percent If supplies increase.

“Indian revenue may rake in nearly Rs 5,000 crore after the new rate is implemented.  Oil marketing companies (OMCs) have been paying Rs 47.50 at oil depot for procurement,” Verma says in an interview to CNBC-TV18.

10:30am Havells under pressure

Shares of Havells India slipped as much as 6.66 percent intraday after brokerage UBS downgraded the stock to sell from neutral, citing rich valuations and elusive growth recovery.

The brokerage cut FY15 revenue growth guidance to around 12-14 percent from 17-20 percent earlier on weaker than expected demand recovery, after having a meeting with the company's management for getting business outlook.

The key message from the meet was a clear disconnect between growth expectations on the street and actual on-the-ground improvement, says the report.

The cut in FY15 revenue growth guidance implies likely growth moderation in 2HFY15 (October-March), says UBS, adding Sylvania 2H performance is also likely to be impacted by higher pension liabilities and forex volatility in Latin America.

10:15am FII View

Gautam Chhaochharia, UBS says Indian financials is its most preferred sector as declining interest rates should support asset quality and earnings. “Top picks on this theme are LIC Housing Finance, Shriram Transport, SBI and IndusInd Bank,” he adds.

“Our Nifty target for 2015-end is 9,600. Our other most preferred stocks are Asian Paints, Bharti Airtel, HDFC Bank, ICICI Bank, Maruti, MCX, ONGC and Reliance Industries. Our least preferred stocks are Bajaj Auto, Cipla, Hero Motocorp, HUL, Infosys, Jubilant Foodworks and United Spirits,” says Chhaochharia.

10:00am Market Check

Equity benchmarks fell nearly a percent in morning trade following downtrend in Asian equities. The 30-share BSE Sensex dropped 266.23 points to 27564.87 and the 50-share NSE Nifty slipped 76.75 points to 8278.90 weighed by banks, oil, auto, capital goods and metals stocks.

The broader markets too were under pressure, falling nearly a percent. About 571 shares have advanced, 1225 shares declined, and 53 shares are unchanged on the Bombay Stock Exchange.

Shares of Infosys, ICICI Bank, Larsen & Toubro, Tata Motors, State Bank of India, ONGC, Axis Bank, Dr Reddy's Labs, Gail India, Sesa Sterlite and NTPC lost 1-2.5 percent. Index heavyweights Reliance Industries and ITC declined over 0.5 percent.

However, HDFC, Sun Pharma, Mahindra & Mahindra, Hindustan Unilever and Bharti Airtel bucked the trend, up 0.2-0.5 percent.

Major Asian stocks like Hang Seng, Nikkei and Seoul Composite dropped more than a percent followed by Shanghai with 0.6 percent loss that was up in morning trade.