Deutsche Bank on Monday cut India’s BSE benchmark Sensex target to 28,000 from 31,000 earlier citing concerns over global growth. (Reuters)

Deutsche Bank on Monday cut India’s BSE benchmark Sensex target to 28,000 from 31,000 earlier citing concerns over global growth. This is the second time the global financial services major has revised the Sensex target in 3 months. It had earlier trimmed its year-end Sensex target to 31,000 in June on account of a more muted environment for foreign inflows and earnings cuts in preceding two quarters.

Sensex on Monday rebounded over 96 points to 25,706.87 in early trade, reversing its two-day losing trend on the back of positive IIP numbers for July.

The BSE Sensex and NSE Nifty snapped four week losing streak till Sept 11 by gaining 408.31 points and 134.25 points respectively on fresh buying in rate-sensitive stocks amid rising hopes of a rate cut by the Reserve Bank.

Deustche Bank said that combination of commodity deflation, sharp compression in global trade, deep emerging market(EM) currency depreciation and dollarisation of EM debt has raised the risks of an EM contagion.

It further added that cross border loans and debt securities to EM at $5.7 trillion could lead to fast paced tightening of credit.

Nitasha Shankar, vice president, research, YES Securities, said, “Global markets are cautious ahead of the US Fed meeting. Largely the expectations are that the US Fed will not hike rates.”

The global financial services major also said that India looks relatively better placed due to government reforms and low levels of external debt relative to nominal its GDP.

Deutsche Bank listed Tech Mahindra, TCS, Infosys, Nestle India, Godrej Consumer and Zee Entertainment as preferred stock picks. IRB Infra, Shree Cement Cummins India, JSW Energy, NTPC also figured in its list.

Macquarie, Barclays and Ambit had slashed India’s targets earlier citing delay in earnings recovery.

With inputs from Reuters

Stocks of the company will be in focus as the JK Group on Sunday said that it will acquire BK Birla flagship firm Kesoram Industries’ tyre manufacturing plant at Haridwar for up to Rs 2,200 crore. (PTI)

The BSE Sensex and NSE Nifty were trading flat in early trade on Monday ahead of inflation data to be released later in the day. At 9.24 am, Sensex was up 32.61 points at 25,642.82. Similarly, Nifty was up 5.50 points at 7,794.80 during the same time.

Below are the stocks that are likely to be in focus today:

JK Tyre Ltd: Stocks of the company will be in focus as the JK Group on Sunday said that it will acquire BK Birla flagship firm Kesoram Industries’ tyre manufacturing plant at Haridwar for up to Rs 2,200 crore. JK Tyre and JK Asia Pacific Singapore Pte Ltd, a wholly-owned subsidiary of the company, have signed a binding term sheet with Kesoram Industries Ltd (KIL) to acquire 100 per cent equity in Cavendish Industries Ltd (CIL).

Oil India Ltd: The company has received approval from the Ministry of Environment and Forest for drilling 20 wells in three blocks in Jaisalmer, Rajasthan for production of 1 mmscmd gas at an estimated cost of Rs 96 crore.

Amtek Auto: According to reports, Amtek Auto plans to raise about Rs 6,500 crore by selling assets. The proceeds will go towards reducing the company’s debt of about Rs 15,000 crore.

Indiabulls Housing Finance Ltd: The company said it has raised Rs 3,996.79 crore by allotting over 5.69 crore shares to qualified institutional buyers (QIBs).

Vivimed Labs: The company plans to divest part of its specialty chemicals business to a strategic investor or special purpose vehicle of the company or third party on slump sale basis for a consideration of not less than Rs 380 crore.

The BSE Sensex and NSE Nifty opened on a positive note ahead of inflation numbers. (Photo: PTI)

9.34 am: Sensex was down 51.50 points at 25,558.71. Shares of Sun Pharma were trading 0.50 per cent higher at Rs 850.

9.23 am: Sensex in red, down 2.07 points at 25,608. JK Tyre was trading 2.35 per cent lower at Rs 105.90. JK Tyre & Industries (JK Tyre) and its subsidiary JK Asia Pacific Singapore have signed a binding term sheet with Kesoram Industries (KIL) to acquire 100 per cent equity in Cavendish Industries (CIL) for Rs 2,200 crore. CIL houses a tyre business undertaking in Haridwar that manufactures a range of tyres, tubes and flaps. The acquisition will provide JK Tyre with additional capacity for ready expansion in the truck and bus radials segment, where it is a market leader, as well as entry into the fast growing two and three-wheeler tyre market.

9.21 am: The BSE Sensex was up 5.23 points at 25,615. NSE Nifty was down 9.30 points at 7,780.

9.15 am: The BSE Sensex and NSE Nifty opened on a positive note ahead of inflation numbers, as the WPI will be revealed during mid day, while the CPI numbers will come after market hours. Sensex opened 96.66 points higher at 25706.87. NSE Nifty opened 21.80 points higher at 7,811.10.

All the sectoral indices on the Bombay Stock Exchange were in green in the early trade. The BSE Realty index was up 0.96 per cent at 1,301.18.

Global Markets

New York: US stocks rose on Friday and the S&P 500 posted its biggest weekly gain since July as investors weighed whether the Federal Reserve will raise interest rates this month.

London: Britain’s top share index fell on Friday, led lower by a drop in house builders after weak UK construction data for July, and by struggling supermarket operators.

Tokyo: Japanese stocks edged down on Monday morning as lower oil prices hit energy firms while telecommunication shares were sold off after the prime minister called for cheaper cellphone rates.

Hong Kong: The Hang Seng Index was up 0.10 percent.

The BSE Sensex and NSE Nifty closed on a flat note on Friday at 25,610.21 and 7,789.30. (Express Photo)

The BSE Sensex and NSE Nifty are likely to open higher on Monday tracking SGX Nifty and Asian cues. The market sentiments may also get a support from the industrial output growth(came on Friday after market hours) that beat expectation and rose to 4.2% in July.

At 8.24 am (IST), SGX Nifty was up 38 points, or 0.49 per cent, at 7,817.50.

Asian shares opened positive on Monday, brushing off soft economic data from China, as investors looked to whether the US Federal Reserve is confident enough to raise interest rates for the first time in a decade.

Data published at the weekend showed growth in China’s investment and factory output missed forecasts in August, raising the chances that China’s third-quarter economic growth may dip below 7 per cent for the first time since the global crisis.

Hang Seng, Nikkei and Shanghai opened 0.8 per cent, 0.4 per cent and 0.65 per cent, respectively, higher than their previous close.

On Friday, the BSE Sensex and NSE Nifty closed on a flat note at 25,610.21 and 7,789.30.

Cipla acquires two generics businesses in the US: Cipla has announced it is acquiring two privately held generic pharma businesses, InvaGen and Exelan Pharma, in the US for a transaction value (TV) of $550m. The consideration values the two businesses at TV/sales of c2.4x based on their combined LTM June 2015 revenues of $225m. The acquisition of InvaGen will bring a product portfolio of 40 approved ANDAs (abbreviated new drug application), of which 32 are marketed products in the cardiac, CNS, anti-diabetic and diabetic segments, as well as 30 pipeline products (including five first-to-file opportunities). InvaGen will also provide Cipla with its first manufacturing base in the US as well as access to large wholesalers and retailers. Exelan Pharma will provide Cipla with access to the US government and institutional market.

Deal in line with Cipla’s stated strategy: Cipla aims to increase its US sales contribution to 20% by 2020 from 8% in FY15. We believe this deal is in line with this goal and should reduce the gap in US sales between the company and its Indian peers, such as Sun Pharma, Lupin and Dr Reddy’s, which derive 40-50% of their total sales from the US. The acquired businesses’ current portfolio and most of the ANDA pipeline known to us are largely oral products which appear competitive. Nonetheless this will scale up Cipla’s US presence and is in line with its long-term goal to participate directly in the generics industry. The valuation of the deals is justified, in our view, versus other recent deals, such as Lupin/Gavis (9.2x sales), Teva/Allergan (c6x) and Kremer Urban/Lannett (c3x).

Deal long-term positive, maintain Buy with TP of R795: We view this development as a long-term positive for Cipla, which has undergone significant transformation over the last two years. We will reflect the acquisitions in our model once there is clarity on product growth and pipeline. We maintain our Buy rating on Cipla. Our fair value TP of R795 is derived by discounting back our one-year forward target price valued using a 22x Gordon Growth based P/E and our FY17e EPS of R31.6, and adding a NPV (net present value) of R150/sh for its inhaler pipeline.

Valuation and risks

We reiterate our Buy rating on Cipla as its business outlook remains strong with a focus on increasing profitability through business rationalisation, strategic acquisitions and other initiatives. Its respiratory franchise, recently got a boost from the budesonide respules launch by its partner in the US. Cipla expects respiratory sales to increase threefold in the next five years from the current $350m level. Approval of gSeretide in the UK is a big potential catalyst in the near-to-medium term and so will be the initiation of phase III trials of gAdvair in the US.

Key downside risks: delay in gSeretide approval in the UK and slower-than-expected progress in inhalers in developed markets.