Market Update: PSU banks, auto stocks crack with BoB, Tata Motors down 2-3%; Idea plunges 7%

The broader indices including the Nifty and the Sensex�are trading on a negative note this�Monday afternoon with the Nifty�down 23 points at 10,798 and the Sensex�is�trading lower by 83 points at 35,606.

Nifty auto is down 1 percent dragged by Tata Motors and Tata Motors DVR which fell 4-6 percent after�auto tariff threat by US as well as weak JLR trends as well. Multiple brokerages see lack of catalysts in the short term on the back of weak demand and volume growth.

Global research firm CLSA�has a sell�rating�on the stock with target�of�Rs 295.�The global research firm observed that the firm��s benefits from operating leverage will be limited on the back of weak demand. Further, it expects JLR��s cash flow to remain under pressure for FY19-20. Overall, it remains negative on JLR on the back of these multiple headwinds.

Credit Suisse�on the other hand has an�outperform�rating with�target�of�Rs 460.�The financial services firm expects moderate volume growth for JLR across regions. It highlighted how JLR��s capex plan could be flat for three years and that the medium term margin plan is reliant on new architecture.

related news IDBI Bank down 1% on possible stake acquisition by LIC Idea Cellular slips over 7% on possible delay of merger with Vodafone India IndiGo operator, InterGlobe Aviation, falls 2% after Chief Commercial Officer quits

Deutsche Bank�has initiated a�buy�on the stock with�target�of�Rs 380.�The investment bank is now more confident of the firm��s plan to reduce cost base. However, it said that in the short term, the stock is lacking material catalysts. It also said that the consensus was building in lower volume growth for JLR.

However, Morgan Stanley�has an�equalweight�rating on the stock with�target�of Rs�339 per share.�It�observed that free cash flow being negative in FY18 and FY19 was to be noted. Regulations pushing the industry towards high-cost electrified power trains, it said, adding that despite favorable trend JLR's margin is lower than those of peers.

The other top auto losers included names like Ashok Leyland, Bharat Forge, Motherson Sumi Systems, Amara Raja Batteries�and Hero MotoCorp among others.

Bank Nifty is trading weak with stocks like�Axis Bank, ICICI Bank, Bank of Baroda, Punjab National Bank and State Bank of India shedding up to�2�percent each.

Nifty energy is also in the red dragged by Bharat Petroleum Corporation, Hindustan Petroleum Corporation, IOC, ONGC and NTPC among others.

From the�FMCG space, Emami shed over 2 percent while ITC, Proctor & Gamble, United Breweries and United Spirits are the other losers.

Idea Cellular from the telecom space is down over�7�percent after news of Idea-Voda merger may get delayed as DoT readies fresh demand of Rs 4,700 crore. The other losers from the Nifty infra space included BHEL, Adani Power, Interglobe Aviation, IRB Infra and NCC among others.

Metal stocks are also trading weak dragged by Coal India which is down 2 percent followed by Jindal Steel & Power, NALCO and Welspun Corp.

Nifty PSU banks are down over 1 percent as stocks like Allahabad Bank, Andhra Bank, Bank of Baroda, Bank of India, PNB, SBI, Syndicate Bank and Union Bank of India are all down in the afternoon trade.

Nifty pharma is trading in the green led by Cadila Healthcare, Glenmark Pharma, Lupin and Sun Pharma.

The top gainers among Nifty constituents were UltraTech Cement, Bajaj Finance, Infosys,�Eicher Motors and Bharti Infratel.

The most actively traded stocks on the NSE were Sun Pharma, HDFC, Sun Pharma,�Bajaj Finance and Reliance Industries.

The top losers included Tata Motors, BPCL, HPCL,�ICICI Bank and Coal India, each shedding between 2-4 percent.

Some of the top gainers on BSE are PNB Housing Finance which zoomed close to�12�percent followed by KEC International, Vakrangee,�Page Industries and TVS Motor Company.

The top losers included Idea Cellular, Allahabad�Bank, Tata Motors DVR, Tata Motors and�Himachal Futuristic Communications.

Abbott�India, Bajaj Finserv, Bajaj Finance, Jubilant Foodworks and Page Industries are few stocks that hit fresh 52-week high in the�afternoon�trade.

On the other hand, 124 stocks hit new 52-week low including names like�Bank of Baroda, Cummins India, EID Parry, HCC, Jain Irrigation Systems, NHPC, NTPC and UPL among others.

The breadth of the market favoured declines, with�570�stocks advancing, 1111�declining and�393�remaining unchanged. On BSE,�907�stocks advanced, 1557�declined and�136�remained unchanged.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd. First Published on Jun 25, 2018 02:24 pm

Trade tensions will slow the Fed��s rate-hike path, solving a bond-market conundrum

Analysts at Bank of America Merrill Lynch have offered a neat way to make sense of the bond market��s reaction in the event of a trade war, which has confused investors who say tariffs can tug Treasury yields in opposite directions.

A global economy reeling from a trade-driven slowdown could prompt the Federal Reserve to cut the number of interest-rate hikes in its current tightening cycle, stirring a rally in bonds, said the team of strategists at BAML led by Ralph Axel. This scenario would still allow for higher inflationary pressures from tariffs, though longer-term price pressures may flag if the economy eventually falls into a slump.

This helps resolve a conundrum for investors, who point out that while slowing growth from an escalation of tariffs would lead to lower yields and higher prices for Treasurys, higher inflation from import levies would drive bond yields higher as price pressures chip away at the value of a bonds�� interest payments over time.

See: Here��s why bonds might not be a haven in a trade war

��The problem with a trade war is it has many effects, many that work against each other,�� said Lori Heinel, deputy global chief investment officer for State Street Global Advisors.

Bond investors like Heinel have started to contemplate how to position themselves against the specter of protectionism after President Donald Trump doubled down on tariff threats against the U.S.��s major trading partners this week. Pledges by Beijing and Brussels to retaliate against the U.S. import levies have forced market participants to come to terms with the possibility of a tit-for-tat trade war.

On Friday, Trump threatened to impose a 20% tariff on European cars coming into the U.S.

The uncertainty of a trade war��s consequences has been reflected in the bond market. The 10-year Treasury note yield TMUBMUSD10Y, +0.35% �has pinged between 2.90% and 3.00% in June, hemming the 10-year Treasury yield in a tight range.

Read: Here��s why trade-war jitters are putting a lid on U.S. bond yields

To understand how trade tensions would play out in the bond market, the BAML analysts advised investors to break down bond yields into their two basic components, the real yield and the break-even rate. The real yield reflects the path of U.S. monetary policy and demand for risk-free assets, and the break-even rate, derived from Treasury-inflation protected securities, serves as the bond market��s pulse on inflation prospects.

A trade war would ultimately ��contribute to lower levels of nominal and real rates, an initially flatter curve, wider short-dated breakevens, and a stronger dollar,�� they said. In other words, bond yields on a net basis would fall because real yields would fall more sharply than inflation expectations would rise.

Deciding this tiebreaker, as usual, would be the Federal Reserve, which would likely slow its schedule of rate hikes if trade tensions intensify. Higher consumer prices could still put pressure on the central bank to stay the course, but the Fed would see the short-term boost in inflation as a distraction against the deeper toll taken on the U.S. economy from billions of dollars in tariffs.

��Although tariffs will likely place near-term upward pressure on inflation, we expect the Fed will look through this dynamic and instead focus on underlying softening global growth and consumer demand. This would pose risks to the number of hikes the Fed delivers in 2019 or 2020 and result in a lower terminal rate for this cycle,�� the BAML strategist said.

Though a few members of the Fed��s policy-setting committee have insisted trade uncertainty won��t stop the central bank from following through with its gradual rate hikes, other members have begun to notice trepidation from U.S. business leaders.

Fed Chairman Jerome Powell and Atlanta Fed President Raphael Bostic noted this week that though trade uncertainty may not be showing up in economic data, it was figuring in the thoughts of corporate executives, now starting to harbor doubts whether to roll out business investment against a deteriorating global outlook.

PTC Therapeutics Up Most Since 2016 on Rare-Disease Drug Results

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PTC Therapeutics Inc. shares rose to their highest price since August 2015 after the company said its experimental drug for spinal muscular atrophy helped the vast majority of babies who got the treatment.

Over the weekend the company reported that after 182 days of treatment, 91 percent of babies on the drug improved more than four points on a scale that measures motor milestone developments in patients with a form of spinal muscular atrophy, or SMA. The data were presented at the SMA Researcher Meeting in Dallas, along with footage showing the babies rolling, sitting and controlling their head movements.

Shares of the South Plainfield, New Jersey-based company were up 24 percent to $46.58 at 10:31 a.m. in New York, after earlier rising as much as 41 percent -- the biggest intraday gain since Nov. 11, 2016.

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Spinal muscular atrophy is a rare disease that progressively takes away people’s physical strength and their ability to walk, eat and breathe. It affects approximately 1 in 11,000 babies and is the No. 1 genetic cause of death for infants, according to Cure SMA, a nonprofit advocacy group.

Biogen Inc., which sells a treatment for spinal muscular atrophy called Spinraza, saw its shares drop by 5.9 percent to $287.13. Biogen’s business partner on Spinraza, Ionis Pharmaceuticals Inc., slipped 8.2 percent to $42.77.

PTC’s drug is taken orally, while other companies are developing gene therapy treatments that could eventually repair the fundamental genetic causes of the disease.

“While we think gene therapy is the most important competitor, given they could be on the market in 2020 and a one-time infusion, of course an oral would be a major competitor as well if the data is at least similar to” Biogen’s drug Spinraza, said Michael Yee, an analyst with Jefferies Group. Yee has a hold rating on Biogen shares.

Delaware is first state to allow sports betting after Supreme Court ruling

Delaware isn't wasting time welcoming sports betting.

Governor John Carney announced that the state would launch a "full-scale sports gaming operation" on Tuesday at its three casinos.

In May, the Supreme Court overturned a federal law that banned sports gambling everywhere except Nevada. That decision lets states decide whether to allow sports betting. Delaware will be the first state to take that step since the Supreme Court's ruling.

SportsPick, Delaware's sports gaming product, will go live at 1:30 p.m. ET in the state's three casinos: Dover Downs Hotel & Casino, Delaware Park and Harrington Raceway & Casino.

Bettors will be able to wager on single games for pro baseball, football, hockey, basketball, soccer, golf and auto racing.

The Delaware Lottery has published an online guide to help users and Carney said he's hopeful this will bring more visitors to the state.

Lawmakers in New Jersey are attempting to pass a bill by next week that would allow the state to regulate and tax the sports betting industry.

And other states may be close behind.

The Pennsylvania Gaming Control Board announced Wednesday that casinos could start submitting applications for the right to have sports betting.

And four other states, New York, West Virginia, Mississippi and Connecticut, have laws that allowed casinos to take sports bets once the federal law was struck down. Nothing official has been announced in those states yet.