Sun Pharmaceutical share price dipped as much as 7 per cent in the morning trade on Monday after the pharma major reported a 46 per cent fall in its consolidated net profit. (Photo: PTI)

Sun Pharmaceutical share price dipped as much as 7 per cent in the morning trade on Monday after the pharma major reported a 46 per cent fall in its consolidated net profit at Rs 1,106.66 crore for the second quarter ended September 30. The company posted net profit of Rs 2050.22 crore in the corresponding quarter last year.

At 11.30 am, Shares of Sun Pharma was trading 4.75 per cent down at Rs 765.50. The scrip opened at Rs 763.50 and had touched a high and low of Rs 772 and Rs 745.95, respectively, in trade so far. Sensex was down 1.06 per cent at 25,986.53.

Consolidated net sales of the company declined to Rs 6,803.31 crore for the quarter under review as against Rs 7,979.31 crore for the same period a year ago.

The promoters holding in the company stood at 54.71 per cent while institutions and non-institutions held 35.62 per cent and 9.67 per cent, respectively.

In the past one year, share price of Sun Pharma plunged around 10 per cent to Rs 803.70 on November 6. Sensex declined 5.7 per cent during the same period.

Nestle India stocks will be in focus as it informed the bourses that it has begun rollout of its Maggi noodles from Monday. (Reuters)

The BSE Sensex as expected in the aftermath of Bihar Assembly elections witnessed a knee-jerk reaction on Monday and opened 456 points down at 25,809. NSE Nifty opened 166.05 points down at 7,788.25.

At 9.26 am, Sensex was down 456.73 points at 25,808.51. NSE Nifty was down 142.25 points at 7,812.05 during the same time.

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

Sun Pharma:  The drug major was the biggest loser among the Sensex companies as its shares fell by 5.3 per cent intraday. At 10.30 am, Sun Pharmaceuticals shares were trading 4.54 per cent down at Rs 767.20  after its earning for quarter ending in September failed to meet the street expectations. Sun Pharma reported a 46.02% fall in its consolidated net profit to Rs 1,106.66 crore for the quarter ended September 30, 2015.

Dr Reddy’s: Dr Reddy’s Laboratories: Decline of Dr Reddy’s Laboratories shares continued for the second consecutive session after the drug maker on Friday said that it has received a warning letter issued by the US drug regulator relating to its two active pharmaceutical ingredients (API) manufacturing facilities in Andhra Pradesh and Telangana. Its shares were trading 2.25 per cent down at Rs 3548.05.

Nestle India: Share price of the company was trading 0.15 per cent up at Rs 6181 as it informed the bourses that it has begun rollout of its Maggi noodles from Monday.

State Bank of India: Shares of the public sector bank continue to rally on Monday and were trading 1.01 per cent up(at around 10.40 am) at Rs 245.70 after the bank posted an impressive earnings for Q2FY16. SBI reported a 25.13 per cent jump in its net profit year-on-year(y-o-y) while the bank’s Net Interest Income(NII) went up by 74% y-o-y.

Glenmark Pharma: Shares of the drug major were trading 1.46 per cent down at Rs 946.90 today after the company informed the bourses that it has got a final approval from United States Food and Drug Distribution for Clotrimazole and Betamethasone Dipropionate Cream US.

Hester Biosciences (HBL): The company is expanding its footprint in Nepal and Africa to tap the growing vaccine market in the regions. The company is setting up a JV unit in Nepal to manufacture Nigerian strain PPR and other animal vaccines.

Tata Steel: Amid a crisis in Britain’s steel sector, Tata Steel has warned its suppliers that if they do not slash prices by up to 30 per cent in the long term then they risk losing the steel giant’s business.

Aurobindo Pharma: Aurobindo Pharma on Friday reported 21.4 per cent rise in consolidated net profit at Rs 451.76 crore during the July-September quarter.

Sun Pharma: Drug major Sun Pharmaceutical Industries reported 46.02 per cent dip in its consolidated net profit at Rs 1,106.66 crore for the second quarter ended September 30, 2015 on account of lower sales, volatile currency movements and supply constraints.

Essar Steel: As it tries to brace itself against the major headwinds faced by the sector, Ruias-promoted Essar Steel said it is looking for buyers to raise fresh capital to fund capital expenditure and pare some of the debt.

Reliance Communications: Reliance Communications reported a 1.9 per cent rise in consolidated net profit at Rs 156 crore for the second quarter ended September 30.

Bharat Heavy Electricals (BHEL): The company has secured prestigious orders, cumulatively valued at Rs 4,614 crore, for setting up two supercritical thermal power projects involving one unit each of the country’s highest rating 800 MW sets, in Andhra Pradesh.

Godrej Properties: Godrej Properties has cut its net debt by 25 per cent to nearly Rs 2,200 crore during the quarter ended September, helped by a big-ticket deal where it sold large office space in Mumbai for Rs 1,479 crore.

Coal India: State-run Coal India (CIL) will invest Rs 6,000 crore to set up 1,000 MW of solar power generation capacity over the next five to six years. The company will fund 70 per cent of the project cost through debt, which will come mostly from banks, while the rest will be through internal resources.

Tata Motors:  Due to a sharp decline in the profitability of its luxury segment and an exceptional cost incurred on account of damage to its vehicles due to an explosion at China’s Tianjin port, Tata Motors on Friday reported consolidated net loss of Rs 411.1 crore for the July-September quarter.

The BSE Sensex and NSE Nifty are likely to open in red on Monday tracking SGX Nifty and mixed Asian markets. (Photo: PTI)

The BSE Sensex and NSE Nifty are likely to open in red on Monday tracking SGX Nifty and mixed Asian markets. With the BJP-led NDA getting trounced in Bihar assembly polls, the stock market is expected to turn volatile, with experts anticipating a knee-jerk downward move on Monday.

At 8.31 am, SGX Nifty was down 148 points, or 1.89 per cent at 7,828.

“The market was building on this outcome over the week gone by, with Nifty slipping below 8,000. We could see a knee-jerk reaction on Monday and then a phase of recovery and consolidation over the Diwali-shortened week,” said, K Sandeep Nayak, chief executive officer, Centrum Broking.

Karthik Rangappa, vice president, research & education, Zerodha, said, “We expect the market to stay weak for few more trading sessions. Market’s Friday close of below 8,000 and the election outcome on Sunday are both weighing down on the markets. Long term investors should watch out for stock specific valuations, as they may get attractive if the weakness in the markets persists.”

Asian stocks were mixed, with Japanese and Chinese shares up, while the dollar stood at a 7-month high against peers on Monday after robust US jobs data bolstered expectations of a the Federal Reserve interest rate hike in December.

Data on Friday showed nonfarm payrolls increased 271,000 in October, the largest gain since last December. The US unemployment rate fell to 5 per cent, the lowest since April 2008.

Back home, benchmark indices closed on a flat note on Friday. Sensex closed 38.96 points down at 26,265.24 while Nifty settled the day 1.15 points down at 7,954.30.

(With agency inputs)

Non-interest income grew 10% y-o-y on the back of ~60% y-o-y growth in investment income, while core fees increased by only 6% y-o-y. (Reuters)

Stable performance once again. ICICI Bank reported a steady quarter with headline impairment ratios declining 10bps. Fresh slippages were 2.2% of loans and it does appear that the bank could report lower impairments than that of FY2015. Retail loan growth is impressive at 25% y-o-y (year on year) and NIM (net interest margin) stable q-o-q (quarter on quarter) . Healthy CASA (current account savings account) ratio, steady shift towards retail loans, healthy tier-1 ratio and improving macro conditions are driving our positive rating. Maintain BUY with TP (target price) at Rs 375 (from Rs 390 earlier).

Underlying trends unchanged; transition to retail continues at a steady pace

ICICI Bank reported 12% y-o-y earnings growth on the back of 12% y-o-y revenue growth and 11% y-o-y growth in provisions. On the positive side  (i) retail loans led overall loan growth (44% of overall loans and growing at a healthy pace of 25% y-o-y)  (ii) NIM has held at 3.5% q-o-q (iii) CASA grew 13% y-o-y with savings account deposits growing 14% y-o-y. Overall CASA ratio is at 45%, with the average CASA ratio at 41% (iv) Fresh slippages were at 2.2% with negligible fresh restructuring. Overall, impaired loans declined 10bps q-o-q to 6.7% of loans (v) Cost income ratio has been maintained at 38%, but staff costs have still grown 12% y-o-y. The bank has announced a minor stake sale of 9% in general insurance, which values the business at Rs 172 bn.

Guidance unchanged; revenue growth is the key concern

Similar to the last quarter/year, the management has maintained its guidance on loan growth with greater focus on retail, impairments/credit costs and fee income. 1HFY16 performance gives adequate comfort in meeting these target metrics. However, the key concern is revenue mix that needs to be addressed at the earliest to show better RoEs. Subdued loan growth is delaying leverage and the bank’s ability to drive revenue growth on the back of NIM is limited from hereon. We are yet to see improvement in the contribution or the quality of revenues in non-interest income, resulting in the bank keeping tight control of costs and drop in coverage ratios.

Maintain BUY; it is our top pick in the sector

We maintain our BUY with a TP of Rs 375 (Rs 390 earlier), factoring in the earnings revision. We value (i) the bank at 2X book (adjusted for NPLs and subsidiaries) and 15X EPS for RoEs in the range of 15% and 13% CAGR in earnings (ii) international subsidiaries at 0.6X book (iii) life insurance at R32/share. ICICI Bank remains our preferred idea in the banking space as we like the transition in the retail portfolio and focus on low risk corporate business, strong liability franchise backing this growth on a profitable basis and improvement in RoEs over the medium term.
Slippages increase ~50 bps q-o-q; total stressed loans decline
Gross NPL and net NPL increased marginally q-o-q to 3.8% and 1.7%, but total restructured assets declined ~30 bps q-o-q to 2.9%. Fresh slippages increased to 2.2% of loans from 1.7%. Of this ~40% of the slippages were from standard restructured loans which, although higher than 20% in the last quarter, are lower by 50% average in FY2015. Stability in absolute NPL is positive given strong growth in the retail loan book.

Loan growth at 13% y-o-y, retail growth is strong at 25% y-o-y

We maintain our positive view on the loan mix shift at the ICICI Bank. In the current quarter, loans grew 13% y-o-y with healthy growth in retail (25% y-o-y) and slower growth in the corporate segment. The current growth in corporate book is mainly from working capital loans and loans to better rated companies and PSUs. The share of retail loans has increased ~100 bps q-o-q to 44% from 37% in FY2013. The bank is likely to change the mix in the retail loan portfolio with a higher share of loans coming from the unsecured loan portfolio, as compared to secured loans currently.

Strong performance on retail deposits continues

Overall deposit growth was 9% y-o-y, with CASA growth higher at 12% y-o-y. CASA ratio improved 100 bps q-o-q to 45.1%. Daily average CASA ratio was flat q-o-q at 41%. We are convinced on the liability business of the bank and see it sustaining at closer to current levels.

Reported NIM flat q-o-q at 3.5%

NIM was flat q-o-q at 3.5% but up 10 bps y-o-y. Domestic NIM continued to decline with 6 bps q-o-q decline to 3.8%, while international NIM increased by 12 bps to 2.0%. The improvement on the international side has come from active refinancing, thus reducing the cost of funds overseas and also reduction in excess liquidity on the balance sheet.

Non-interest income – 10% y-o-y growth driven by treasury; core fees growth soft

Non-interest income grew 10% y-o-y on the back of ~60% y-o-y growth in investment income, while core fees increased by only 6% y-o-y. Retail fee growth would be closer to 15% y-o-y while corporate fees have declined. This growth has largely come from the retail segment (63% of the fees) as the performance of the corporate banking portfolio was fairly weak.

Prior to that, FPIs had made a net investment of Rs 22,350 crore last month, making it the highest investment by these investors since March, when they had poured in Rs 20,723 crore into Indian markets. (Reuters)

Foreign investors have pulled out more than Rs 4,300 crore from Indian capital markets in the past five trading sessions due to muted quarterly earnings and fears of a possible rate hike by the US Federal Reserve.

The move comes after Foreign Portfolio Investors (FPIs) inflow had hit a 7-month high in October.

As per data compiled by the depositories, net outflow in equities stood at Rs 2,667 crore between November 2-6, while it was Rs 1,689 crore for debt, translating into a total of Rs 4,356 crore (USD 666 million).

Prior to that, FPIs had made a net investment of Rs 22,350 crore last month, making it the highest investment by these investors since March, when they had poured in Rs 20,723 crore into Indian markets.

The huge inflows during October also reversed the outflows seen during the past two months. FPIs pulled out over Rs 23,000 crore from the capital markets (equities and debt) in the past two months on fears of an economic slowdown in China, which triggered a global sell-off.

Last week’s announcement by US Fed Chair Janet Yellen that a December rate hike is very much on the table as the economy has performed well, has prompted investors to withdraw money.

Investors’ mood remained fragile because of disappointing quarterly earnings by blue-chips and uncertainty over Bihar assembly election results as market experts believe that the poll outcome will influence the course of economic reforms.

“Markets believe developments in Bihar elections may be a catalyst to the investment mood of FPIs and FIIs in the near term,” said Hiren Dhakan, Associate Fund Manager at Bonanza Portfolio.

Since the beginning of the year, overseas investors have made a net investment of Rs 25,030 crore in equities and Rs 53,408 crore in debt market.