The BSE Sensex opened in green on Monday tracking global cues. The BSE Sensex opened 91.83 points up at 27,306.43. Nifty opened 30 points up at 8,262.55.

Here are some stocks which are likely to remain in focus today:

Reliance Industries: Reliance Industries shares were trading 4.53 per cent up at Rs 953.50 in the early trade. Reliance Industries on Friday (post market hours) reported highest ever quarterly net profit of Rs 6,720 crore for three months ending September 30 on spike in refinery and petrochemicals margins. Net profit for July-September quarter of the 2015-16 fiscal rose 12.5 per cent to Rs 6,720 crore, or Rs 22.8 per share, from Rs 5,972 crore, or Rs 20.3 a share, in the same period of last fiscal, the company said in a statement.

HCL Technlogies: HCL Technologies Ltd, India’s fourth-largest software services exporter by revenue, reported a 8 per cent fall in quarterly net profit on Monday, but met street estimates as its core manufacturing clients added more projects. The IT major announced its Q1 result on Monday before market hours. Revenue in dollar terms rose 8 per cent to $1.54 billion. In September, HCL Tech said its revenue in US dollars would have adverse impact of 80 basis points on a sharp depreciation of multiple currencies against the dollar. The share price of HCL Technologies was down 1.5 per cent in the early trade.

Lanco Infratech: The share price of Lanco Infratech gained over 4 per cent in the early trade on Monday. Lanco Infratech got a favourable order from the Hon’ble Supreme Court on 16 October, 2015 for its subsidiary company Lanco Kondapalli Power Limited (LKPL) dismissing the appeals filed by Andhra Pradesh Power Coordination Committee and AP DISCOMS and also upholding the orders passed by APTEL and APERC in favour LKPL. As a result of this favourable order LKPL is entitled for the reimbursement of Income-tax of about Rs.175 Cr paid by it, for the financial years 2001 to 2012 along interest till the date of payment after adjusting the adhoc amount of Rs. 70 Crore already received.

Maruti Suzuki: Maruti Suzuki India announced after market hours on Friday that it has introduced all-new Ertiga packed with several new features and technologies. The petrol variant of the vehicle is available from Rs 5.99 lakh to Rs 8.26 lakh while the diesel variants are available from Rs 7.55 lakh to Rs 9.25 lakh ex-showroom Delhi.

Infosys: Infosys announced after market hours on Friday, a collaboration with IBM, in which Infosys will tap Bluemix, IBM’s Cloud platform to rapidly prototype, develop and deploy the next generation of Cloud apps for its global client base. The collaboration includes the launch of Bluemix-powered Innovation Lab for co-creation of apps with clients; training of Infosys developers on Bluemix and cloud app development skills; as well as Infosys’ adoption of Bluemix Dedicated to leverage its vast library of cognitive computing and analytics solutions and other services to build client apps. The share price of Infosys was up 0.93 per cent at Rs 1103.90 in the early trade.

(With inputs from agencies)

The BSE Sensex and NSE Nifty are likely to open flat with negative bias on Monday tracking SGX Nifty.(Photo: PTI)

The BSE Sensex and NSE Nifty are likely to open flat with negative bias on Monday tracking SGX Nifty.

At 8.28, SGX Nifty was down 0.07 per cent at 8,255.

Asian shares held near two-month highs on Monday as a batch of Chinese data showed the world’s second-largest economy slowing further but not in danger of a hard-landing.

The US market rose on Friday as investors appeared to shrug off lackluster corporate earnings and mixed economic data.

Back home, foreign portfolio investors bought shares worth a net Rs 436.79 crore on Friday as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 102.49 crore on Friday. Sensex and Nifty gained 204.76 points and 58.65 points at 27,214.60 and 8,238.15, respectively.

Weak rupee and strong commentary could prevent any material EPS (earnings per share) estimate cuts after disappointment in Q2 revenues. However, P/E (price-to-earnings ratio) is at a 12% premium to Infosys, which could narrow, in our view.

Q2FY16 revenues missed expectations: TCS reported revenues of $4156m (+3% q-o-q, +5.8% y-o-y), below our estimate and the Street’s. EBIT (earnings before interest and taxes) margins (27.1%) and net income (R60.55 bn) were largely in line with Street estimates but lower than our expectations. TCS has missed Street expectations on revenues for the last four consecutive quarters.

However, strong commentary balanced out lower than expected performance in Q2FY16, in our view: Management indicated very strong order booking, broad-based across geographies and industry verticals, ruling out any concern with respect to the demand environment. Further, it maintains its commentary around a stable pricing environment.

The only headwinds which management pointed out were Diligenta and Japan, which could continue to decline in the near term.

Larger peer’s commentary for 2H remains divergent… Infosys’ outlook for 2H was clouded by unchanged F16e guidance and weak commentary pointing to incremental headwinds in business over and above seasonality. On the contrary, TCS maintained its positive outlook on demand, indicating seasonality in 2H to be in line with 2H last year
…but performance has converged: Despite divergent commentary around the outlook for 2H, we note that constant currency revenue growth for Infosys (~13% y-o-y) and TCS (~14% y-o-y) converged in 1HF16. Based on historical trends for TCS and guidance for Infosys, we expect that both companies could end up with constant currency revenue growth of 12-13% y-o-y for F16e.

Currency offsets cut to US$ revenue growth forecasts: After Q2FY16 revenues weaker than our expectations, we lower our US$ revenue forecasts for F16-18 by ~1% and margin assumptions by ~30bps. However, assuming a weaker rupee rate (~R65/US$) leads to cuts of less than 1% to our F16-18 EPS estimates. We forecast US$ revenue growth of ~9% y-o-y in F16 and Ebit margin of 27.1% for F16. Key downside risk remains weaker than expected 2H/lack of margin improvement in 2H compared to the current levels. One year forward P/E is 19.6x vs. 17.4x for Infosys and as the revenue growth gap closes, we believe multiples could also converge.

Sept-15 quarter’s results highlights

Reported revenues of $4156m (+3% q-o-q, +5.8% y-o-y) vs. Street consensus estimate of 3.6% q-o-q growth and our estimate of 4% q-o-q. Volume growth was 4.9% q-o-q, constant currency realisation dipped -1% q-o-q, and constant currency revenue growth was 3.9% q-o-q. Operating margin was 27.1% (+78bps q-o-q, +22bps y-o-y) vs. our estimate of 27.7% and Street consensus of 27.2%. Net income grew to Rs 60.55 bn (+6% q-o-q, +14.5% y-o-y) vs. our Rs 61.6 bn forecast and Street consensus of Rs 60.6 bn.

Key management commentary

According to management, the demand environment remains strong barring a few parts of the business (Diligenta, Japan). Latin America grew in Q2 and is expected to continue to grow in constant currency terms. According to management, order booking in 2Q16 was 30% higher than the highest ever order booking in any quarter historically. The energy vertical continues to face challenges; however, exposure to the vertical is small and unlikely to have any meaningful impact on revenue growth. Management expects 2H to remain weak, in line with previous year’s seasonality, with no incremental headwinds. The pricing environment remains stable and realisations could follow a historical trend of weakness in 1H and some strength in 2H.

Results positives

Revenue growth was broad-based across key verticals like BFSI, Retail, Life Sciences and Healthcare. Manufacturing was weak, primarily due to a decline in Japanese revenues. Traction was strong in Digital Services and Solutions. Net addition to headcount was over 10k in Q2, one of the strongest in the last several quarters. Management increased its gross hiring outlook for F16 from 60k to 75k.

Results negatives

Revenue growth in North America decelerated to 3.1% in Q2FY16 (vs. 4.4% in Q1FY16), whereas Infosys showed continued strong growth momentum. According to management, Japan and Diligenta will continue to decline over the coming quarters, hampering overall revenue growth for the company. Ebit margin in 2Q16 was lower than we expected. Margin in 1H was 26.8%, largely flat y-o-y despite ~6-7% y-o-y rupee depreciation vs. USD.

Pickup in vehicle book growth key positive: Commercial vehicle (CV) book growth inched up to ~28% y-o-y, with ~30% growth in disbursements and retail book share is inching up again. This is the key positive, as the loan mix change should be favourable in FY16F as CV growth picks up and aids NIMs (net interest margins).

w Fees and liability momentum in line: (i) IndusInd Bank (IIB) has sustained an increased SA accretion momentum of R10-11 bn run-rate seen in Q1FY16 vs R6-8 bn run rate in FY14/15 (ii) Core fee income growth of 23.5% y-o-y was in line but all granular fee income streams like trade/FX/third party grew +20% y-o-y improving the granularity of core fees.

Asset quality stable but risk taking continues to rise: Asset quality largely stable and the inch up in provisioning was related to higher standard asset provisioning on diamond portfolio. In Q2FY16, RWA (risk-weighted assets) accretion again inched up with R100 bn of q-o-q increase vs R90 bn of balance sheet expansion and H1FY16 corporate growth was largely driven by CRE/ EPC/contractors indicating some inch up in risk taking again.

Maintain Buy: EPS of 23% CAGR over FY15-18F

We increase our FY16/17F PAT (profit after tax) by 1-2% and TP (target price) to Rs 1,050 (up 2.5%). Improving CV cycle should aid growth and profitability for IIB and hence we maintain our Buy rating. We prefer HDFCB (HDFCB IN, Buy)/Kotak (KMB IN, Buy) vs IIB due to better sustainability of all revenue streams.

Retail growth especially CVs inching up again:
* Overall loan growth adjusted for the diamond book migration of R41 bn from RBS was ~24% y-o-y driven by an uptick in the CV portfolio. Overall retail book grew by ~23% y-o-y matching overall loan growth after a long while.
* CV portfolio grew 27% y-o-y from 18% y-o-y in Q2FY16 and 10% y-o-y in FY15. Management indicated that momentum in MHCV book is building up and the trend is likely to continue.

Liability and NIMs performance stable
* IIB’s net interest margins inched up to 3.9% from 3.66% q-o-q largely due to the capital issue adjusted for which NIMs moderated marginally. This was largely a leverage impact. With improvement in loan mix going forward management seemed confident of improving NIMs from current levels.
* SA accretion of R10 bn was similar to the higher momentum of R11 bn SA accretion seen in Q1FY16 vs R6-7 bn of quarterly run-rate seen in FY14/15.

Asset quality stable
* Rs 730m of corporate slippages was from one new NPA account and two smaller restructured loans. Though gross NPAs inched up marginally slippages were broadly under check.
* IIB has an ARC security receipt book of Rs 2.3 bn up from Rs 2.1 bn in 1QFY16; IIB sold Rs 0.4bn of assets to ARCs in this quarter but IIB recovered Rs 0.2 bn as well.

Higher risk taking:

A negative in Q2FY16
* IIB’s RWA accretion of R100 bn was significantly higher than loan book accretion of R60 bn and B/S accretion of Rs 90 bn.
* RWA growth inched up significantly due to substantial increase in non-fund exposure. Management explained the non-fund exposure is largely to PSU enterprises but given that risk weight for PSUs is lower, this could not have contributed to such a large increase in risk-weight indicating some risk build-up.

TCS, country’s largest software services firm, saw its market valuation slump by Rs 30,324.88 crore to Rs 4,87,868.11 crore, taking the steepest hit in the top 10 list.(Photo: PTI)

Led by TCS, three of the top 10 most valued Indian companies together witnessed an erosion of Rs 51,472.27 crore from their market capitalisation last week.

The rest seven companies saw rise in their valuation.

However, their cumulative gain was less than the total loss suffered by the three companies – TCS, Infosys and Sun Pharma.

TCS, country’s largest software services firm, saw its market valuation slump by Rs 30,324.88 crore to Rs 4,87,868.11 crore, taking the steepest hit in the top 10 list.

The company’s September-quarter earnings, released early last week, failed to enthuse investors.

The market capitalisation of Infosys tumbled by Rs 17,020.36 crore to Rs 2,51,228.32 crore and Sun Pharma lost Rs 4,127.03 crore to Rs 2,13,980.32 crore.

Infosys had announced its second quarter earnings on Monday wherein the company cut its dollar revenue guidance for the current fiscal.

Meanwhile, in stark contrast, the combined market valuation of top seven Sensex companies rose by Rs 36,413.3 crore, where SBI emerged as the biggest gainer.

The market valuation of SBI surged by Rs 13,862.78 crore to Rs 1,97,873.19 crore.

RIL’s market capitalisation jumped by Rs 8,371.33 crore to Rs 2,95,409.35 crore while that of ITC went up by Rs 4,494.84 crore to Rs 2,80,004.28 crore.

The valuation of HDFC Bank soared by Rs 3,512.88 crore to Rs 2,76,938.30 crore while mortgage lender HDFC added Rs 3,376.23 crore to Rs 2,07,007.20 crore.

Similarly, the market capitalisation of CIL rose by Rs 1,768.58 crore to Rs 2,13,777.35 crore while that of ONGC gained Rs 1,026.66 crore to Rs 2,26,164.38 crore.

The ranking of top 10 firms in terms of market valuation was led by TCS, followed by RIL, ITC, HDFC Bank, Infosys, ONGC, Sun Pharma, CIL, HDFC and SBI.

In the broader market, the benchmark BSE Sensex, over the last week, gained 135.09 points to end at 27,214.60.