RBI fights inflation, ups REPO rate by 25 BPS.

ITC Limited – Another stellar quarter, cigarette volumes up 15% (Buy, TP: Rs470).

Metal, IT drag as Nifty ends 90 pts lower; Adani Ports gains 8%.

Adani stocks to remain in focus along with RBI MPC meeting. Share Market Close: Indian stock closed in red on Monday with Sensex down 330 pts and Nifty 90 pts. Divi’s Lab and JSW Steel dragged the market. Adani Ports, IndusInd Bank and Hero MotoCorp gained. Metal, IT shed, while FMCG, Media indices ended higher.

RBI MPC meeting, which began today and will go on until Feb 8, will be the focus for the next few days. It is expected that the RBI will increase the interest rates by 25 bps. Meanwhile, Adani Enterprises shares dragged in the morning session but settled in the flat territory. Adani Ports on the other hand gained 8%.

Indices remained in red as Sensex closed around 60,500, Nifty below 17,800.

Indian benchmark indices tracked their peers as they dragged in today’s session and closed 0.5% lower. Most Adani stocks remained stable for the second session in a row. Indices tracked other Asian hares after the latest US jobs report renewed concerns about more rate hikes from the Federal Reserve.

Sensex lost 335 points to close just above 60500, at 60506. Meanwhile, Nifty also fell 90 points to close the day at 17,763.

Adani Ports gained more than 8% in today’s session followed by IndusInd Bank and BPCL which climbed 2% each. Divi’s Lab shed 3.5%, JSW Steel around 3%. Hindalco, Tata Steel and Infosys dropped more than 2% each. Adani Enterprises fell 10% intraday but ended the day flat.

Among sectoral indices, Metal continues to remain under pressure as the sector closed 2% down. Energy and IT also had a rough day. Bank indices remained volatile but the PSU Bank index closed in green along with Media and FMCG.

Asian indices mostly dropped on Monday after strong US jobs data caused a rethink of expectations that the Federal Reserve will soon suspend its rate hikes.

Tokyo remained an exception as stocks ended higher on Monday after a report about the Bank of Japan’s next governor fuelled speculation that the institution would stick to its ultra-loose monetary policies. The benchmark Nikkei 225 index climbed 0.67%, while the broader Topix index added 0.45%.

Hong Kong stocks closed at a one-month low and China shares fell on Monday, as elevated Sino-U.S. geopolitical tensions over a suspected spy balloon dented investor sentiment.

China’s CSI 300 Index closed down 1.3%, while Hong Kong’s Hang Seng benchmark ended 2% lower. A U.S. military fighter jet shot down a suspected Chinese spy balloon on Saturday, a week after it first entered U.S. airspace and triggered a dramatic spying saga that has clouded already strained Sino-U.S. relations.

The Stoxx Europe 600 index retreated after closing Friday in a bull market, as investors showed their concern about a hawkish Fed. Markets retreated on profit-taking after London had raced to a record high ahead of the weekend break.

London’s benchmark FTSE 100 index fell in the morning session points as traders feared further US interest rate hikes for a while longer following strong American jobs data. The FTSE on Friday struck an all-time peak above 7,906 points, in the wake of record profits from British energy giant Shell.

ITC Limited – Another stellar quarter, cigarette volumes up 15% (Buy, TP: Rs470)

ITC’s Q3FY23 delivered stable performance (though impacted by lower agri exports); revenue/ EBITDA/ PAT grew 2.5%/23.3%/21.0%. Cigarette saw strong volume/EBIT growth of 15.0%/ 16.9%. More importantly, the volume recovery from illicit trade on the back of stable taxation and product innovation to continue. FMCG revenue/EBIT grew 18.4%/43.9%, led by staples and convenience foods with rapid growth in MT/E-com. Hotels/Paper segment revenue/EBIT grew 50.5%/29.0% & 12.7%/26.3%. Agri business cut by 37.1%. Gross margin improved to 58.5% (+773bp). FMCG EBITDA margin surged at 10.0% led by price increases and ~7% volume growth. We expect FMCG to deliver strong EBITDA with better operating leverage and improved product-mix. Further, increase in NCCD tax by 16.0% would have limited impact on cigarette margins. With higher FMCG/Cigarette revenues, we tweak earnings and maintain strong BUY, with a revised DCF-based TP of Rs470 (implying 28.5x avg. FY24/FY25E EPS).All segments firing well excluding Agri; Strong execution delivered 184% growth in FMCG.

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