Asian stocks extended the strong start to the year, heading for fresh all-time highs, as investors turn with optimism toward the earnings season after the U.S. government shutdown moved toward an end.
The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.3 percent to 10,999 as of 7 a.m.
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Here’s a quick look at all that could influence equities on Tuesday.
- U.S. equity gauges closed at records as the government shutdown appeared to be on the brink of ending and investors turned their attention toward earnings.
- Investors are awaiting about 80 earnings reports this week from companies in the benchmark index.
- The dollar traded near lows for the year and 10-year Treasury yields held close to 2.66 percent.
- European stocks rose for a third day as gains in telecom shares offset losses in travel and leisure companies.
- Japan’s Topix index rose 0.6 percent. Australia’s S&P/ASX 200 Index gained 0.7 percent and South Korea’s Kospi index advanced 0.5 percent.
- Futures on Hong Kong’s Hang Seng Index added 0.4 percent.
- Futures on the S&P 500 Index were little changed.
- The MSCI All-Country World Index climbed 0.6 percent to the highest on record Monday. It’s up 5.8 percent in 2018.
- The MSCI Emerging Market Index advanced 0.5 percent, its seventh consecutive advance.
Here are some of the key events scheduled for this week:
- Earnings season is in full swing: Fanuc, Novartis, General Electric, Intel, LVMH Moet Hennessy Louis Vuitton, Starbucks and Hyundai Motor come later in the week.
- Barring any last minute changes in Washington, President Donald Trump will join world leaders and senior executives in Davos, Switzerland, for the annual World Economic Forum.
- Central banks: Bank of Japan monetary policy decision and briefing on Tuesday; European Central Bank rate decision on Jan. 25.
- U.K. Prime Minister Theresa May’s Brexit bill is set to be taken up in the House of Lords.
- Prime Minister Narendra Modi to address at the Davos World Economic Forum, International Business Council and interact with CEOs.
- West Texas Intermediate crude rose 0.4 percent to $63.82 a barrel.
- Brent ended higher at $69.03/barrel, up 0.6 percent.
- Gold was little changed at $1,333.51 an ounce.
- Sugar ended lower at 13.17 cents per pound; down 0.6 percent.
- Steel snaps five-day losing streak; down 0.6 percent.
- Aluminium trades higher; up 0.5 percent.
- Zinc trades lower; down 0.1 percent.
- Copper trades lower for second day; down 0.04 percent.
- Rubber snaps two-day losing streak; up 0.5 percent.
Nifty Earnings To Watch
- Indiabulls Housing Finance
Other Earnings To Watch
- Can Fin Homes
- Crompton Greaves Consumer Electricals
- Edelweiss Financial Services
- Force Motors
- Indiabulls Real Estate
- L&T Technology Services
- PNB Housing Finance
- RBL Bank
- Syngene International
- United Spirits
- Wabco India
Earnings Reaction To Watch
Asian Paints Q3 (YoY)
- Revenue up 10.5 percent at Rs 4,260.5 crore.
- Net profit up 19 percent at Rs 555 crore.
- EBITDA up 18 percent at Rs 891.5 crore.
- Margin at 20.9 percent.
Rallis India Q3 (YoY)
- Revenue up 18.5 percent at Rs 390 crore.
- Net profit down 1 percent at Rs 25.1 crore.
- EBITDA down 14 percent at Rs 37 crore.
- Margins at 9.5 percent versus 13.1 percent.
Sasken Tech Q3 (QoQ)
- Revenue up 5.6 percent at Rs 132 crore.
- Net profit up 8.5 percent at Rs 20.4 crore.
- EBITD down 11.7 percent at Rs 15 crore.
- Margin at 11.4 percent versus 13.6 percent.
Tinplate Q3 (YoY)
- Revenue up 146 percent at Rs 547 crore.
- Net profit up 189 percent at Rs 13 crore.
- EBITDA up 89.5 percent at Rs 36 crore.
- Margins at 6.6 percent versus 8.6 percent.
Just Dial Q3 (QoQ)
- Revenue up 1 percent at Rs 197 crore.
- Net profit down 24 percent at Rs 28.6 crore.
- EBIT up 25 percent at Rs 38 crore.
- Margin at 19.3 percent versus 15.7 percent.
MPS Q3 (YoY)
- Revenue down 15 percent at Rs 68 crore.
- Net profit down 2 percent at Rs 17.6 crore.
- EBITDA down 5 percent at Rs 25.1 crore.
- Margin at 36.4 percent versus 32.8 percent.
Stocks To Watch
- Indian Oil Corporation board to consider bonus issue on Jan. 30.
- Kalpataru Power gets multiple orders worth Rs 871 crore.
- Torrent Pharma to consider fund raising via bonds, share placement on Jan. 25.
- Om Metals reached an agreement with a Jaipur-based developer to withdraw claim on 56,000 square metre land.
- Bajaj Corp. introduced new Coco Jasmine hair oil.
- Swaraj Engines buyback to open on Jan. 31.
- HSIL commissions pipe manufacturing plant in Telangana.
- Lux Industries: Kotak Mahindra AMC bought 1.68 lakh shares or 0.7 percent equity at Rs 1525.2 each.
- Indoco Remedies: Reliance Growth Fund bought 12.11 lakh shares or 1.3 percent equity at Rs 275 each.
- IRB Invit: Prusik Umbrella UCITS Fund PLC - Prusik Asian Equity Income Fund bought 28.25 lakh units at Rs 87.17 each.
- Videocon: Yes Bank sold 17.39 lakh shares or 0.6 percent equity at Rs 21.27 each.
- Religare Enterprises: IDBI Trusteeship services sold 22.55 lakh shares or 1.3 percent equity at Rs 50.26 each.
- DSP Blackrock MF bought 4.26 lakh shares or 1.4 percent equity at Rs 748 each.
- Promoter R S Ramani sold 6.82 lakh shares or 2.2 percent equity at an average of Rs 749.32 each.
- SBI MF bought 8.19 lakh shares or 1.6 percent equity at Rs 840.5 each.
- Baron International Growth Fund sold 11.3 lakh shares or 2.2 percent equity at Rs 840.5 each.
- Excel Realty and Infra ex-date for 2:1 bonus.
Who’s Meeting Whom?
- PC Jewellers to meet investors in road show in Taiwan, Hong Kong and Singapore from Jan. 22-26.
- MEP Infra to meet Kotak AMC, Principal PNB, SBI MF on Jan. 23.
- Weizmann Forex to meet funds in Singapore and Hong Kong on Jan. 23-25.
- Zee Learn to meet Alder Capital on Jan. 23.
- TNPL to meet Pabrai Investment on Jan. 24.
- PTL Enterprises promoter bought 3.75 lakh shares of Apollo Tyres on Jan. 18-19.
- Lakshmi Overseas promoter sold 1.3 lakh shares on Jan. 18.
- Adani Transmission promoter revokes pledge of 9 lakh shares on Jan. 19.
- KCP promoter sold 26k shares on Jan. 17-18.
- Max Financial Services promoter revokes pledge of 27 lakh shares on Jan. 17.
- Rupee closed at 63.87/$ on Monday from 63.85/$ on Friday.
Top Gainers And Losers
- Nifty January futures trading at 10,968, premium of 1.8 points versus discount of 6.2 points.
- January Series: Nifty open interest down 9 percent; Bank Nifty open interest down 3 percent.
- Across series: Nifty open interest up 2 percent; Bank Nifty open interest up 5 percent.
- India VIX ended at 15.3, up 10 percent.
- Rollover: Nifty at 20 percent, Bank Nifty at 23.5 percent.
- Max open interest for January series at 11,000 Call (open interest at 51.1 lakh, down 5 percent).
- Max open interest for January series at 10,500 Put (open interest at 70.6 lakh, down 5 percent).
- In ban: Balrampur Chini, Dewan Housing, DLF, Fortis, HCC, HDIL, IFCI, JP Associates, Just Dial, Kaveri Seed.
- New in ban: Dewan Housing, JP Associates, Just Dial.
- Out of ban: Dish TV, GMR Infra, Jain Irrigation.
Only intraday positions can be taken in stocks which are in F&O ban. There is a penatly in case of rollover of these intraday positions.
- Nifty PCR at 1.79 from 1.30.
- Nifty Bank PCR at 1.30 from 1.10.
Stocks Seeing High Open Interest Change
Elara Capital on L&T Technology Services
- Initiated ‘Accumulate’ with price target of Rs 1,170.
- Broad portfolio, deep expertise driving growth.
- Expect new client relationships to scale up gradually.
- Lower client concentration than domestic peers.
- L&T helping in domain expertise, client access.
- Expect revenue, operating income and net profit compounding at 17.4 percent, 25.2 percent and 22.5 percent respectively over the financial years through March 2020.
- Faster growth to lead to earnings upgrade.
- Bull case price target of Rs 1,560.
Credit Suisse on Havells India
- Maintained Outperform; raised price target to Rs 635 from Rs 600.
- December quarter was a strong broad-based quarter.
- Consumer durables and lighting drove growth.
- Switchgears saw modest pick-up; B2B initiatives seeing traction.
- Margins very strong; Cables have set new normal of profitability.
- Lloyd growth aided by some pre-buying before new energy norms.
Edelweiss on Havells India
- Maintained ‘Buy’ with price target of Rs 640.
- Favorable base leads to in-line quarter; Growth profile intact.
- Impressive growth in lighting/consumer durable on low base.
- Havells well placed to benefit with demonetization and GST mostly behind.
- Positives: shift to organized, rising premiumisation and ramp up in Lloyds’ profitability.
IDFC Securities on Asian Paints
- Maintained ‘Outperform’; cut price target to Rs 1,262.
- Volume miss; lower costs drive earnings growth.
- Volume growth of 6 percent for the quarter is disappointing.
- Cost management initiatives and better mix resulted in strong margin improvement.
- Expect uptick in volumes driven by favourable base and improving demand.
- Expect price hikes to mitigate input cost pressure.
- Market share loss over last three quarters is a concern.
Morgan Stanley on Dr. Reddy’s
- Maintained ‘Overweight’ with price target of Rs 3,133.
- Raised prices by 5 percent for Sernivo spray and Zembrace in January 2018.
- Small brands with gross sales of $20/25 million.
- Price hike to have small impact but shows confidence in the ramp-up ahead.
- March 2018 important month with three upcoming Target Action Dates.
Credit Suisse on Asian Paints
- Maintained ‘Underperform’; raised price target to Rs 1,100 from Rs 1,060.
- Volume growth significantly below expectations.
- Competitors continue to grow volumes faster.
- Management cautiously optimistic as December growth had been good.
- EBITDA growth driven by tightening fixed costs, lowering marketing spends and GST savings.
- Raw material costs firming up; Needs to take a price hike to stem gross margin decline.
Brokerages On Axis Bank
- Maintained ‘Overweight’, raised price target to Rs 700 from Rs 650.
- Guidance of 225-260 basis points with normalised credit costs expected.
- See the next 2-3 quarters as challenging given the uncertainty over timing and quantum of back-book provisioning.
- At about 2 times price-to-book and a FY20 return on equity estimate of 19.5 percent, Axis Bank is our top value pick.
- Maintained ‘Overweight’; price target Rs 770
- Impaired loans at Axis showed good trends after a weak December quarter.
- Expect asset quality and core pre-provision operating profit trends to be volatile over the next four quarters.
- Expect continued improvement in impaired loans over the next four quarters.
- This should drive strong stock performance over the next 12 months.
- Maintained ‘Neutral’, raised price target to Rs 595 from Rs 525.
- Asset quality stabilises, operating profitability yet to improve.
- Expect credit costs to normalise from 2.7 percent in current fiscal to 1.2 percent in Fiscal 2020.
- Maintained ‘Buy’, raised price target to Rs 730 from Rs 650.
- Key positive in the result was improvement in asset quality.
- Expect earnings to normalise from the next fiscal.