All You Need To Know Going Into Trade On Dec. 15

Most Asian stocks declined while the dollar headed for headed for its first weekly drop this month after a dovish tone from the Federal Reserve and amid concerns that the Republican tax overhaul package may struggle to pass the Senate.

Uncertainty surrounding the fate of U.S. tax reform is threatening to sour what’s been a stellar run for equities in 2017 as money managers dial back their appetite to take risk amid signs that the eight-year stock rally may not be far from its end.

Back home yesterday, exit polls predicted a victory for the Narendra Modi-led Bharatiya Janata Party in Gujarat, giving it a clear majority in the keenly-contested assembly polls in the state. The polls also showed that the party is set to reclaim Himachal Pradesh.

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.5 percent to 10,335.50 as of 6:55 a.m.

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

Day Break

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

Global Cues

• U.S. equities slid and the greenback erased gains as Republican Senator Marco Rubio’s spokeswoman said he told Senate leaders he’ll oppose tax legislation unless they agree to a larger child tax credit.
• The dollar headed for its first weekly drop this month after a dovish tone from the Federal Reserve and amid concerns that the Republican tax overhaul package may struggle to pass the Senate.

Europe Check

• The euro held onto a retreat after the European Central Bank remained cautious about the prospects of reaching its inflation goals, even as it reiterated a pledge to keep stimulus in place.

Asian Cues

• The Topix index fell 0.9 percent, dragged lower by telecommunication and technology stocks and banks. The Nikkei 225 Stock Average declined 0.8 percent.
• Australia’s S&P/ASX 200 Index fell 0.2 percent and the Kospi index rose 0.8 percent.
• Futures on the S&P 500 Index fell less than 0.1 percent.
• Futures on Hong Kong’s Hang Seng Index lost 0.3 percent.

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

• Russia decides on monetary policy. Policy makers will deliver their second straight quarter-point cut on Friday, bringing the benchmark to 8 percent, according to all 33 analysts surveyed by Bloomberg.

Commodity Cues

• Brent crude ended higher at $63.31/barrel, up 1.4 percent.
• West Texas Intermediate crude added 0.2 percent to $57.13 a barrel.
• Gold traded at $1,254.11 an ounce.
• Sugar ended lower at 13.77 cents per pound; down 0.6 percent.

Shanghai Exchange

• Steel trades lower for third day; down 0.8 percent.
• Aluminium trades higher for second day; up 1 percent.
• Zinc trades higher for fifth day; up 0.6 percent.
• Copper trades higher for sixth day; up 0.5 percent.
• Rubber trades higher for second day; up 0.7 percent.

Indian ADRs

Data Watch

• India Nov. trade balance; est. -$13.25 billion (prior -$14.02 billion)
• Exports; no estimate (prior -1.1 percent)
• Imports; no estimate (prior +7.6 percent)

Earnings To Watch

• Patel Engineering

Earnings Reaction To Watch

Goodluck India (Q2, YoY)

• Revenue up 23 percent at Rs 312.5 crore.
• Net profit up 39 percent at Rs 5 crore.
• Ebitda up 24 percent at Rs 26 crore.
• Margin unchanged at 8.3 percent.

Sree Rayalaseema Hi-Strength Hypo (Q2, YoY)

• Revenue up 21 percent at Rs 126 crore.
• Net profit up 24 percent at Rs 5.2 crore.
• Ebitda up 4 percent at Rs 12 crore.
• Margin at 9.5 percent from 11.1 percent.

Linc Pens and Plastics (Q2, YoY)

• Revenue down 6 percent at Rs 79 crore.
• Net profit down 62 percent at Rs 1.6 crore.
• Ebitda down 10 percent at Rs 7.8 crore.
• Margin at 9.9 percent from 10.4 percent.

Lovable Lingerie (Q2, YoY)

• Revenue down 11 percent at Rs 47 crore.
• Net profit down 24 percent at Rs 3.2 crore.
• Ebitda down 31 percent at Rs 3.1 crore.
• Margin at 6.6 percent from 8.5 percent.

Kopran (Q2, YoY)

• Revenue down 7.6 percent at Rs 73 crore.
• Net profit unchanged at Rs 4.5 crore.
• Ebitda up 8 percent at Rs 7 crore.
• Margin at 9.6 percent from 8.2 percent.

Veto Switchgears and Cables (Q2 YoY)

• Revenue up 9 percent to Rs 64 crore.
• Net profit up 58 percent to Rs 8 crore.
• Ebitda up 76 percent to Rs 12 crore.
• Margins at 19 percent versus versus 12 percent.

Renaissance Jewellery (Q2 YoY)

• Revenue up 2.5 percent to Rs 272 crore.
• Net profit up 23 percent to Rs 9.6 crore.
• Ebitda up 19 percent to Rs 16.5 crore.
• Margins at 6.1 percent versus 5.2 percent.

Rollatainer (Q2 YoY)

• Revenue up 10 percent to Rs 35.2 crore.
• Net profit of Rs 18.4 crore versus net loss of Rs 4.4 crore.
• Ebitda loss of Rs 0.33 crore versus Ebitda loss of Rs 0.93 crore.
• Margins at -0.9 percent versus -2.4 percent.
• Exceptional gain of Rs 33.5 crore in Q2FY18.

Stocks To Watch

• HDFC Bank to consider fund raising proposal on Dec. 20.
• HDFC to consider fund raising on Dec. 19; to subscribe securities of HDFC Bank on preferential basis.
• Unichem Laboratories completes sale and transfer of its domestic formulations business to Torrent Pharmaceuticals.
• L&T commissions 225 MW Sikalbaha combined cycle power plant in Bangladesh.
• NLC India raises Rs 201.8 crore via QIP.
• Gulf Oil starts commercial production at Chennai plant
• AstraZeneca to launch XIGDUO XE tablets in India in Q4FY18. The drug is used for the treatment of Type 2 diabetes in adults
• Mahindra and Mahindra Ltd. to hike prices by up to 3 percent from Jan. 2018.
• McDowell Holdings qualifies as NBFC-CIC, says RBI. Its existing NBFC-ND certificate gets cancelled.
• Fitch places IDBI Bank under ratings watch saying that an upward viability rating is more likely than a downgrade.
• Union Bank to raise Rs 2,000 crore via QIP by allotting 12.93 crore shares at Rs 514.65.
• Godrej Industries approves merger of promoter group company Vora Soaps with itself.
• Quess Corp acquires 45 percent stake in Simpliance Technologies.
• GE, Tata in a strategic tie up to make aircraft engine components in India
• Tata Motors to supply 250 Tigor EVs to EESL.
• GMR Group-Megawide consortium emerges as preffered bidder for Clark Airport project in Philippines.

Bulk Deals

Religare Enterprises

• IDBI Trusteeship sold 1.1crore shares or 6.3 percent equity at Rs 58.5 each.
• India Horizon Fund bought 71.50 lakh shares or 4 percent equity at Rs 58.5 each.
• Bay Capital Advisors bought 21.25 lakh shares or 1.2 percent equity at Rs 58.5 each.

Trading Tweak

• Sumeet Industries goes ex-rights basis from today.
• Waterbase circuit filter revised to 10 percent.

IPO Watch

• Astron Paper & Board Mill IPO at Rs 45-50 a share opens, closes on Dec. 20
• Shalby Ltd. to start trading on BSE/NSE after selling shares at Rs 248 each in IPO that got 2.82 times demand

Who’s Meeting Whom?

• Intrasoft Tech to meet Ambit Capital on Dec. 15
• Cipla to meet Ask Investment Managers private Ltd on Dec. 15 and JP Morgan on Dec. 18
• Endurance Tech to meet Comgest Singapore ltd on Dec. 16

Rupee

• Rupee closed at 64.34/$ on Tuesday from 64.44/$ on Wednesday.

Top Gainers And Losers

Index Trends

F&O Cues

• Nifty December Futures closed trade at 10,276, premium of 24 points versus 22 points.
• December Futures: Nifty open interest down 2 percent; Bank Nifty open interest down 9 percent.
• India VIX closed up 2.9 percent at 16.4.
• Max open interest for Dec. series at 10,500 Call (open interest at 69.5 lakh, up 10 percent).
• Max open interest for Dec. series at 10,000 Put (open interest at 96 lakh, up 12 percent).

F&O Ban

• In ban: Fortis, HDIL, Jain Irrigation, JP Associates, JSW Energy and TV18 Broadcast.
• New in ban: TV18 Broadcast.
• Out of ban: IRB Infrastructure and Jet Airways.

Alert: Only intraday positions can be taken in stocks which are in F&O ban. In case of rollover of these intraday positions, there is a penalty.

Put-Call Ratio

• Nifty PCR at 1.27 from 1.25.
• Nifty Bank PCR at 1.05 from 0.87.

Stocks Seeing High Open Interest Change

Fund Flows

Brokerage Radar

Axis Capital on JSW Energy

• Initiated ‘Buy’ with price target of Rs 100.
• Lowest capital as well as current replacement cost.
• Strategically located assets result in high plant load factor.
• Declining share of merchant volumes and higher share of PPA to increase earnings visibility.
• To substitute 50 percent of imported coal with cheaper domestic coal.
• Under leveraged balance sheet to aid inorganic growth.
• Balance sheet has capacity to acquire up to 3 GW capacity.
• Electric Vehicle foray – too early to evaluate.

Axis Capital on Mahindra Logistics

• Initiated ‘Buy’ with price target of Rs 525.
• Focus on non-automotive and reducing dependence on M&M group to aid margin.
• M&M group contribution to reduce to 38 percent by March 2020, compared to 54 percent clocked in the previous financial year.
• Better client mining and new client additions to drive growth.
• Gross margin to remain largely stable across SCM and PTS business.
• GST to drive clients’ focus on improving supply chain efficiency.
• Expect 28 percent earnings CAGR and firm return ratios given limited capex.
• Expect premium valuations to sustain on MLL’s strong positioning.

Jefferies on Voltas

• Maintained ‘Buy’ with price target of Rs 660.
• Current quarter likely to see 10-15 percent year-on-year sales growth given demonetisation impact last year.
• Dealers indicated trends should normalize after January.
• Products with new energy rating changes could normalize trend.
• Expect 25 percent year-on-year profit growth for Voltas in the current quarter.
• Any near-term stock price weakness should be a buying opportunity.

Motilal Oswal on Zee Entertainment

• Maintained ‘Buy’; raised price target to Rs 690 from Rs 630.
• Expect higher-than-industry ad revenue growth.
• Subscription revenue growth to remain in healthy mid-teens.
• Strong viewership to steer ad revenue growth.
• Positives: recovery in ad market and improved BARC rating.
• New ventures to begin adding to overall growth by three years.
• Expect compounded annual growth rate of 32-34 percent operating margin and 16 percent in earnings per share by March 2020.
• Zee remains the best play in the media industry.

HDFC Securities on Dr. Reddy’s

• Upgraded to ‘Neutral’ from ‘Sell’; raised price target to Rs 2,400 from Rs 2,220.
• EIR for Bachupally is positive, recovery hinges on clearance of Duvvada.
• Bachupally crucial for existing business, Duvvada key to the future.
• Degree of dependence on Duvvada prompts us to maintain a Neutral stance.
• Good product opportunities in the near to medium term - Nuvaring, Suboxone and Copaxone.
• Expect revenue and net profit to grow at a compounded rate of 10 percent and 30 percent respectively on annual basis by March 2020 on these opportunities and Duvvada clearance.

Credit Suisse on Vedanta

• Initiated ‘Outperform’ with price target of Rs 345.
• Aluminium business is most important for incremental profits.
• Global supply-demand and surging raw material prices bodes well for Aluminium.
• Zinc prices have peaked and despite planned volume growth, Hindustan Zinc is fully valued.
• Much of the ex-HZL upside is purely execution-dependent.
• Vedanta not expensive even after adjusting for Hindustan Zinc.
• Volume projections are below company guidance, and remains risk to rating.

Credit Suisse on Hindustan Zinc

• Initiated ‘Neutral’ with price target of Rs 325.
• Hindustan Zinc to expand volume to 1.2mt mined metal production by March 2020.
• Expect cost moderation as it shifts to 100 percent underground mining.
• Ebitda/tonne likely to stay healthy; Expect decent free cash flow generation.
• Silver prices have and output is expected to grow.
• Zinc prices have peaked and despite planned volume growth, Hindustan Zinc is fully valued.
• Even after recent decline in stock price, Hindustan Zinc trades significantly higher.
• Bull case price target of Rs 380 assuming higher commodity prices.

Motilal Oswal India Strategy

• Sensex reconstitution to marginally up Sensex earnings per share for the current and next financial year.
• Sensex earnings per share upgrade by 0.2 percent and 0.4 percent for the current and next financial year respectively.
• Now estimate Sensex earnings per share at Rs 1,498 and Rs 1,891 for the current and next financial year respectively.
• Weightage of financials at all-time high; capital goods and telecom at new lows.
• 58 percent of Sensex constituents unchanged over 10 years.

Nomura on Indian Rupee

• Exit polls to improve sentiment towards India and Indian Rupee.
• Exit polls to be viewed as positive for BJP ahead of the 2019 Lok Sabha elections.
• Oil prices pose a risk to Indian Rupee, and should be closely monitored.

Macquarie on Walt Disney - Fox Deal

• Star to provide Disney a significant India market opportunity.
• Zee, Viacom 18 and Sony will benefit if there is slip in India focus by Disney.
• Star's key strengths in India is its senior management team.
• Management churn in the near to medium term should be monitored.
• Need to see impact on Hotstar and minority stake in Tata Sky.