People look at a screen displaying the Sensex on the facade of the Bombay Stock Exchange (BSE) building on 1 February 2017 in Mumbai, India. (Photo Courtesy: Reuters)

All You Need To Know Going Into Trade On December 5

Stocks in Asia dropped as technology shares tracked a selloff in U.S. tech companies and after gains in U.S. equities spurred by the tax bill passage petered.

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.5 percent at 10,113 as of 6:55 a.m.

Short on time? Well, then listen to this podcast for a quick summary of the article!

DayBreak

Here’s a quick look at all that could influence equities on Tuesday.

Global Cues

  • Financial markets turned defensive, with U.S. stocks sliding and Treasuries advancing with gold after Michael Flynn pleaded guilty to lying to federal agents.
  • Equities rebounded from the worst of the losses as Senate Republicans edged closer to passing tax cuts.

Europe Check

EU failed to produce an agreement on Brexit negotiations with the Irish border remaining a sticking point.

  • The Russell 2000 Index of small caps fell 0.6 percent Friday.
  • The Stoxx Europe 600 Index sank 0.7 percent.
  • The MSCI Emerging Market Index fell 0.4 percent, falling for the fourth day in five.

Asian Cues

Focus is back on China on Tuesday with a private report due on the services sector. It’s the latest data point for a world economy that’s chugging along enough for some central banks to be raising rates and winding down stimulus programs.

  • The Topix index fell 0.3 percent and the Nikkei 225 Stock Average lost 0.5 percent.
  • Australia’s S&P/ASX 200 Index dropped less than 0.1 percent and the Kospi index in Seoul was down 0.4 percent.
  • The S&P 500 Index futures were little changed. The main gauge fell 0.1 percent on Monday and the Nasdaq Composite Index lost 1.1 percent.
  • Hong Kong’s Hang Seng Index futures contracts fell 0.4 percent.
  • The MSCI Asia Pacific Index fell 0.1 percent.

Here are some key events scheduled for the remainder of the week:

  • China’s economy is set to end the year with steady but unspectacular growth. Caixin’s composite and services PMI data are due after coming in at 51 and 51.2, respectively, in October. Officials have yet to face a hard trade-off between growth and deleveraging that’s coming in 2018, Bloomberg Economics said.India PMI is also due, a key piece of data before the central bank’s rate decision.
  • The European Commission College of Commissioners discusses Brexit on Wednesday and will likely make its recommendation on whether sufficient progress has been made to move negotiations onto the future relationship.
  • The U.S. faces a partial government shutdown after money runs out on Dec. 8 if Congress can’t agree on a spending bill by then.
  • U.S. employers probably hired at a robust pace in November as the unemployment rate held at an almost 17-year low. The Labor Department’s jobs report Friday may also show a bump up in average hourly earnings.
  • Other countries setting monetary policy this week include Brazil, Canada, and Poland.

Commodity Cues

  • West Texas Intermediate crude was little changed at $57.51 a barrel after slumping 1.5 percent.
  • Gold traded at $1,276.13 an ounce.

Indian ADRs

Earnings To Watch

  • Dish TV
  • Harrisons Malayalam
  • Lux Industries
  • Manali Petro
  • Orient Bell
  • Plastiblends
  • Rane Holdings
  • Byke Hospitality

Earnings Reaction To Watch

Alphageo India (Q2 YoY)

  • Revenue up 249 percent at Rs 21.3 crore.
  • Net loss of Rs 3.4 crore versus net loss of Rs 3.6 crore.
  • Ebitda at Rs 4.7 crore versus Ebitda loss of Rs 0.1 crore.
  • Margin at 22.1 percent versus -1.6 percent.
  • Depreciation up 115 percent at Rs 8.6 crore.

GOCL Corp (Q2 YoY)

  • Revenue up 1 percent at Rs 102 crore.
  • Net profit down 42 percent at Rs 6 crore.
  • Ebitda down 28.6 percent at Rs 5 crore.
  • Margin at 4.9 percent versus vs 6.9 percent.

FIEM Industries (Q2 YoY)

  • Revenue up 12 percent at Rs 326.5 crore.
  • Net profit up 1.4 percent at Rs 14.3 crore.
  • Ebitda up 4 percent at Rs 37.5 crore.
  • Margin at 11.5 percent versus 12.4 percent.

GPT Infraprojects (Q2 YoY)

  • Revenue down 19 percent at Rs 98 crore.
  • Net profit up 23 percent at Rs 3.8 crore.
  • Ebitda down 3 percent at Rs 17.5 crore.
  • Margin at 17.9 percent versus 15 percent.

Shree Pushkar Chemicals & Fertilisrs (Q2 YoY)

  • Revenue up 21.5 percent at Rs 96 crore.
  • Net profit up 16 percent at Rs 10.4 crore.
  • Ebitda up 14 percent at Rs 17.1 crore.
  • Margin at 17.8 percent versus 19 percent.

Lumax Auto Technologies (Q2 YoY)

  • Revenue up 4 percent at Rs 268 crore.
  • Net profit up 14 percent at Rs 13.3 crore.
  • Ebitda up 16 percent at Rs 25.6 crore.
  • Margin at 9.6 percent versus 8.5 percent.

Sandur Manganese and Iron Ores (Q2 YoY)

  • Revenue up 88 percent at Rs 144 crore.
  • Net profit up 211 percent at Rs 28 crore.
  • Ebitda up 258 percent at Rs 43 crore.
  • Margin at 29.9 percent versus 15.7 percent.

Stocks To Watch

  • Bharat Forge and Ramkrishna Forgings in focus after North America Class 8 trucks sales in November rose 68 percent year-on-year at 32,387 units. (down 9 percent on a monthly basis).
  • Eris Lifesciences completed acquisition of Strides Shasun’s India brand business.
  • Bank of Maharashtra QIP issue opens at a floor price of Rs 26.89 per share.
  • Eros International Media’s parent Eros International Plc Announces $100 Million equity-linked financing.
  • Indiabulls Real Estate says IPIT became a wholly owned unit. IPIT to get delisted from Singapore exchange.
  • Balaji Amines’ expansion project at Solapur conferred ‘Mega Project’ status.
  • Colgate India to consider second interim dividend on Dec. 11.

Bulk Deals

Just Dial

  • HDFC MF bought 9 lakh shares 1.3 percent equity Rs 500 each.
  • SCI Growth Investments II sold 5.74 lakh shares or 0.9 percent equity at Rs 501.54 each.
  • Sequoia capital sold 4.54 lakh shares or 0.7 percent equity at Rs 500.05 each.

Corporate Action

  • IL&FS Investment Managers circuit filter revised to 10 percent.
  • 5paisa Capital circuit filter revised to 5 percent.
  • Lakshmi Vilas Bank Ex date for rights issue.
  • Sri Krishna Constructions last trading day before 1:10 ex bonus.

Who’s Meeting Whom

  • Majesco to meet SBI life Insurance, IDFC Mutual Fund, LIC, DSP Blackrock, Sundaram Mutual Fund and 20 other fund houses on Dec. 5.
  • Emmbi Industries to meet Kedia Securities, Aviva India, Param Capital, Envision Capital and 20 other Fund houses on Dec. 5.
  • Bata to meet Kotak Mutual Fund, Kotak Life Insurance and Elara Capital on Dec. 5
  • Muthoot Capital to meet investors on Dec. 5.

Rupee

  • Rupee closed at 64.37/$ on Monday from 64.46/$ on Friday.

IPO

  • Shalby Limited IPO opens with a price band of Rs 245-248 per share.

Top Gainers And Losers

Index Trends

F&O Cues

  • Nifty December Futures trading at 10,159, premium of 31.5 points from 32 points.
  • December Futures: Nifty open interest up 4 percent; Bank Nifty open interest up 12 percent.
  • India VIX closed 0.4 percent higher at 14.8.
  • Max open interest for Dec. series at 10,500 Call (open interest at 61.7 lakh, up 7 percent).
  • Max open interest for Dec. series at 10,000 Put (open interest at 80 lakh, up 1 percent).

F&O Ban

  • No securities in the ban list.

Put-Call Ratio

  • Nifty PCR at 1.18 from 1.20.
  • Nifty Bank PCR at 0.93 from 0.96.

Stocks Seeing High Open Interest Change

Fund Flows

Brokerage Radar

HSBC on Indian Aviation Sector

  • Airline industry on the cusp of a strong recovery.
  • Future looks highly profitable, particularly for the low-cost carriers.
  • Positives: Favourable government policies, FX rates, and modern fleets to offset the impact of rise in fuel prices.
  • International market fragmented; Privatisation of Air India to create structural benefits.
  • Market to consolidated further, led by Air India.

HSBC on Indigo

  • Initiated ‘Buy’ with price target of Rs 1,500.
  • Positives: best balance of market positioning, comparatively high FCF and dividend yield, and the strongest balance sheet.
  • Expect market share to increase by another 5ppts by March 2021.
  • Costs are 15-30 percent below peers; Fleet modernisation to reduce this further.
  • Strong free cash flow generation to continue.
  • Expect net profit to grow at a compound annual growth rate of 37 percent by March 2020.

HSBC on SpiceJet

  • Initiated ‘Buy’ with price target of Rs 180.
  • Traffic to grow at a compound annual growth rate of 18.5 percent by March 2020.
  • Bulk order for 200 aircraft to help regain market share.
  • Expect the company to be debt free by March 2019.
  • SpiceJet set to grow much faster led by new aircraft addition and as regional operations mature
  • Expect net profit to grow at compound annual growth rate of 45 percent by March 2020.

HSBC on Jet Airways

  • Initiated ‘Hold’ with price target of Rs 600.
  • Highly leveraged and faces a tough debt repayment schedule.
  • Weaker Gulf demand is hurting profitability; Expansion on other international routes to help.
  • Fall in domestic market share to continue.
  • Margin to increase as it shifts focus away from the Gulf.
  • Hold due to the growth potential at its international operations.
  • Expect net profit to grow at a compound annual growth rate of 9 percent by March 2019.

Citi on Hindustan Petroleum

  • Maintained ‘Buy’ with price target of 564; implying a potential upside of 37 percent form yesterday’s close.
  • Remain upbeat on third quarter.,
  • ONGC-HPCL deal to gather pace as we approach fourth quarter.
  • Risk-reward for Hindustan Petroleum minorities remains meaningfully skewed to upside.
  • Any correction in crude could trigger a relief rally.
  • Post-election marketing margins have recovered.
  • Positive: Sing. GRMs holding up well, a likely increase in inventory gains, and a boost from expansion of Bhatinda refinery.

Edelweiss on Parag Milk Foods

  • Initiated ‘Buy’ with price target of Rs 340.
  • Value added products revenue share to increase to 70 percent by March 2020.
  • Parag is fortifying its profitable value‐added share by investing and expanding capacity
  • Aggressive ad spends to strengthen brand equity.
  • Expect revenue, operating income and net profit to grow at a compound annual growth rate of 14 percent, 32 percent and 49 percent by March 2020
  • Expect margins to expand by 335 basis points to 9.6 percent by March 2020, led by improving utilisations
  • RoCE to expand by 1064 basis points to 19 percent by March 2020.
  • Improving cash flow to lower debt/equity to 0.1 times by March 2020.

Edelweiss on Heritage Foods

  • Initiated ‘Buy’ with price target of Rs 976.
  • Expect milk procurement with compound annual growth rate of 21 percent by March 2020 led by investments in procurement network.
  • Acquisition of Reliance Dairy to boost geographical reach; Further inorganic expansion on cards
  • Expect return on capital equity to expand 230 basis points to 42 percent by March 2020.
  • Focus on right product mix to help maintain high return on capital equity.
  • Expect acceleration in fresh dairy and value-added products which are high growth and margin.
  • Expect value added products revenue share to grow to 28 percent by March 2020.
  • Expect revenue, EBIT and net profit to grow at a compound annual growth rate of 23 percent, 21 percent and 18 percent by March 2020.

IIFL on SIS (India)

  • Initiated ‘Buy’ with price target of Rs 1,300.
  • Strong growth outlook for India security services.
  • Rapid growth in facility management services off a low base.
  • SIS is poised for strong earnings growth in coming years.
  • Expect revenue and earnings per share to grow at a compound annual growth of 21 percent and 44 percent respectively by March 2020.
  • Margin expansion of 160 basis points to 6.6 percent by March 2020.
  • Expect improvement in operating efficiencies and shift in revenue mix towards high-margin India business.
  • Tax benefits under Sec 80JJAA are an added boost.

Goldman Sachs on Fortis

  • Maintained ‘Buy’ with price target of Rs 186; implying a potential upside of 25 percent from yesterday’s close.
  • Fortis to continue pursuit of clinical excellence, publish clinical outcomes and managing cost with quality
  • Fortis said they have mitigated 70 percent of the headwinds emanating from medical implants price caps and higher costs due to GST implementation.
  • Fortis working with equipment manufacturers to produce lower cost in-house cheaper alternatives.
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