An employee places cups of freshly-brewed coffee on a counter for customers. (Photographer: Simon Dawson/Bloomberg)

All You Need To Know Going Into Trade On July 17

Asian equities opened mixed as investors evaluated whether earnings can deliver on high expectations against a backdrop of trade tensions.

Japan’s Topix index ticked higher, while stocks fell in Australia and South Korea. Hong Kong futures pointed to declines for shares there. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.2 percent to 10,925.50 as of 6:55 a.m.

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Also read: Trump Gives Putin a Win in Finland, Kindling New Outrage at Home

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

U.S. Market Check

  • Slumping tech shares led most U.S. stocks lower as investors continue to weigh earnings against a backdrop of trade tensions.
  • The yield on 10-year Treasuries held at 2.86 percent after gaining three basis points.

Also read: Netflix's Slowdown Sparks Fresh Fears of Video-Streaming Bubble

Europe Check

  • European stocks fell as oil dropped on risks of increased supply, weighing on the energy sector and the U.K. benchmark.
All You Need To Know Going Into Trade On July 17
  • The euro was little changed at $1.1712.
  • The British pound bought $1.3235.

Also read: U.K.'s May in Brexit Turmoil as Furious Pro-EU Tories Rebel

Asian Cues

  • Japan’s Topix index rose 0.4 percent.
  • Australia’s S&P/ASX 200 declined 0.3 percent.
  • South Korea’s Kospi index dropped 0.3 percent.
  • Futures on Hong Kong’s Hang Seng slid 0.3 percent.
  • S&P 500 Index futures rose less than 0.1 percent.
  • The yen lost about 0.1 percent to 112.41 per dollar.
  • The offshore yuan was steady at 6.7022 per dollar.
  • Australia’s 10-year bond yield rose one basis point to 2.65 percent.

Here are some key events coming up this week:

  • Earnings season continues with reports due from companies including: Goldman Sachs, Morgan Stanley, American Express, Microsoft, Taiwan Semiconductor Manufacturing, Unilever, Johnson & Johnson and IBM.
  • Fed’s Powell delivers the semi-annual Monetary Policy Report to the Senate Banking Committee and answers lawmakers’ questions.

Also read: Warnings of Market Complacency Are Growing Louder 

Commodity Cues

  • West Texas Intermediate crude was little changed at $68.10 a barrel after dropping 4.2 percent.
  • Brent crude rose 0.6 percent to $72.30 a barrel. It fell 4.6 percent yesterday.
  • Gold was little changed at $1,240.63 an ounce.

Shanghai Exchange

  • Steel traded lower for second day; down 0.8 percent.
  • Aluminium snapped two-day losing streak; up 0.1 percent.
  • Zinc traded lower for sixth day; down 2.8 percent (lowest level in a decade).
  • Copper snapped three-day winning streak; down 0.6 percent.
  • Rubber snapped two-day losing streak; gains marginally.

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Stocks To Watch

  • UPL is said to seek $3 billion loan to buy Ackman-backed Arysta, Bloomberg reported.
  • IHH made mandatory open offer to shareholders of Fortis Healthcare.
  • HDFC Bank: To decide pricing of share allotment to parent HDFC
  • Bharat Electronics signed MoU with Sweden’s SAAB for 3D air surveillance radar.
  • L&T and BEML signed MoU to explore domestic and export markets for defence projects and services.
  • Ajanta Pharma clarified DGCA has not taken action against the company.
  • Adani Ports arm to form joint venture with Nyk Auto Logistics for transportation of vehicles using freight trains.
  • Apex Frozen Foods, Avanti Feeds and Waterbase in focus as the U.S. Department of Commerce finalises the antidumping duty rate, on certain frozen warmwater shrimp from India, at 1.35 percent.

Earnings To Watch

  • Zee Entertainment
  • 8K Miles
  • Ashok Leyland
  • Federal Bank
  • ICICI Lombard General Insurance
  • Muthoot Capital Services
  • Nucleus Software Exports
  • Rallis India
  • Sintex Industries
  • Tata Sponge Iron

Earnings Reaction To Watch

HUL (Q1, YoY)

  • Revenue up 11.2 percent at Rs 9,487 crore.
  • Net profit up 19.2 percent at Rs 1,529 crore.
  • Ebitda up 20.6 percent at Rs 2,251 crore.
  • Margin at 23.7 percent versus 21.9 percent.

Jay Bharat Maruti (Q1, YoY)

  • Revenue up 34.1 percent at Rs 505.9 crore.
  • Net profit up 32.7 percent at Rs 13.4 crore.
  • Ebitda up 46.2 percent at Rs 42.4 crore.
  • Margin at 8.4 percent versus 7.7 percent.

Sintex Plastics Technology (Q1, YoY)

  • Revenue down 12.2 percent at Rs 1325.2 crore.
  • Net profit down 46.9 percent at Rs 37.5 crore.
  • Ebitda down 29.9 percent at Rs 162.8 crore.
  • Margin at 12.3 percent versus 15.4 percent.

Also read: Q1 Results: HUL Profit Meets Estimates As Sales Volumes Rise In June Quarter

Indian ADRs

All You Need To Know Going Into Trade On July 17

Bulk Deals

  • PVR: MFS International New Discovery Fund acquired 2.96 lakh shares or 0.63 percent equity at Rs 1191.75 each.

JTEKT

  • Promoter Jtket Corporation sold 1.14 crore shares or 5.75 percent equity at Rs 91.16 each.
  • Reliance Capital acquired 60 lakh shares or 3.02 percent equity at Rs 91.1 each.
  • India Acorn Fund Ltd. acquired 12 lakh shares or 0.60 percent equity at Rs 91.1 each.
  • White Oak India Equity Fund acquired 13.5 lakh shares or 0.68 percent equity at Rs 91.1 each.

KDDL

  • RBS acquired 2.5 lakh shares or 2.3 percent equity at Rs 473 each.
  • Maven India Fund sold 71,000 shares or 0.6 percent equity at Rs 475 each.
  • RC Tritec AG sold 60,000 shares or 0.5 percent equity at Rs 470 each.

Who’s Meeting Whom

  • GPT Infraprojects to meet investors on July 17.
  • Indiabulls Housing Finance to meet investors from July 16-20 in U.K. and Singapore.
  • Mirc Electronics to meet ASK investment, Trust Capital and Florintree Advisors on July 17.
  • Rushil Decor to meet SBI Mutual Fund and Fidelity Investments on July 17.

Insider Trades

  • JSW Steel promoter group acquired 6.16 lakh shares from July 12-13.
  • Singer India promoter sold 1.03 lakh shares from July 12-13.
  • Sadbhav Infrastructure Projects promoter acquired 30,000 shares from July 11-12.

Trading Tweaks

  • Den Networks circuit filter revised to 10 percent.
  • D B Corp ex date to determine buyback eligibility.
  • M.M.Forgings last trading day before ex date for 1:1 bonus.

Rupee

  • Rupee closed at 68.57/$ on Monday from 68.53/$ on Friday. Widening trade deficit along with foreign outflows weighed on the currency.

F&O Cues

  • Nifty July futures closed trading at 10,944 premium of 7 points versus 1 point.
  • July series: Nifty open interest down 3 percent and Bank Nifty open interest down 6 percent.
  • India VIX ended at 12.9, up 5.2 percent.
  • Max open interest for July series at 11,000 Call (open interest at 39.6 lakh, up 19 percent)
  • Max open interest for July series at 10,600 Put (open interest at 47.2 lakh, down 6 percent)

F&O Ban

In ban: Jet Airways

Only intraday positions can be taken in stocks which are in F&O ban. There is a penalty incase of a rollover of these intraday positions.

Put Call Ratio

  • Nifty PCR at 1.62 versus 1.79
  • Nifty Bank PCR at 0.73 versus 1

Fund Flows

All You Need To Know Going Into Trade On July 17

Brokerage Radar

HSBC on Finolex Industries

  • Initiated ‘Buy’ with a price target of Rs 750.
  • Policy, capacity and improving margins all flowing through.
  • Expect PVC resin fundamentals to improve.
  • Rise in weightage of more stable pipes business to make margins less volatile.
  • Finolex trades at steep discount, despite similar growth profile and strong balance sheet.

IDFC Securities on GAIL

  • Maintained ‘Outperformer’; hiked price target to Rs 434 from Rs 410.
  • Expect June quarter to see stellar performance.
  • GST inclusion and aggressive bidding in the CGD auction are positive triggers.
  • Petchem expansion to stabilize gradually.
  • Transmission and trading volumes set to grow steadily.
  • Unified tariff approval: every 10 percent hike can boost EPS by 7 percent.
  • Profitability in LPG segment to remain strong over the current and next financial year.

Nomura on proposed Axle Norms

  • Proposed truck axle load relaxation led to sharp correction in Ashok Leyland and Tata Motors.
  • Impact on truck demand depends on execution of proposed norms.
  • If implemented on existing vehicles then demand for new vehicles to be impacted.
  • If implemented on new vehicles then positive for short term demand.

BofA-ML on Proposed Axle Norms

  • Proposed rated load to be increased by 15-25 percent.
  • If implemented on current fleet, then it will impact demand for new trucks.
  • Change in norms to bring down the existing overloading issues.
  • Impact of these norms is difficult to gauge as it depends on state-wise implementation.
  • Uncertainty to remain an overhang for stock prices of Ashok Leyland and Tata Motors.

Edelweiss on Hindustan Unilever

  • Maintained ‘Hold’; raised price target to Rs 1,887 from Rs 1,647.
  • June quarter numbers came inline with estimates.
  • Growth was broad based aided by gradual improvement in demand.
  • Triggers: New launches, performance of Indulekha & Ayush and revival of rural demand.
  • Hold as stock offers limited upside from current levels.

Nomura on Coal India

  • Upgraded to ‘Buy’ from ‘Neutral’; cut price target to Rs 318 from Rs 332.
  • Sanguine earnings outlook and inexpensive valuations turn risk-reward favourable.
  • Higher blended realisation to result in EPS CAGR of 24 percent over the fiscal 2018-2020.
  • Expect 7 percent CAGR in offtake over the financial years till March 2021 with no negative surprises in operating expense.

Credit Suisse On Sun Pharma

  • Maintained ‘Outperform’ with a price target Rs 600.
  • Details of MK-3222 formulary inclusion has started trickling.
  • MK-3222 likely classified as Tier 4 coverage at United.
  • High discount strategy could work for Sun Pharma.
  • Expect Sun to take peak volume share of 4-5 percent in market of $7-8 billion

Motilal Oswal on Hindustan Unilever

  • Maintained ‘Buy’; raised price target to Rs 2,010 from Rs 1,925.
  • Broad-based growth encouraging.
  • Margins impressive despite high ad spend.
  • Offers highest earnings visibility and return ratios in large-cap Indian consumer space.

Macquarie on Indian Metals

  • China remains focused on pollution control.
  • More cities in restricted list means more cuts in steel capacity.
  • No new cuts in aluminium, but cost support may rise.
  • Believe Asian steel margins will remain high on account of high utilisation levels.
  • Favourable terms for EAF capacity addition should keep graphite electrode market tight.
  • Indian metals equities corrected on trade war risks.
  • Remain constructive on steel equities, graphite electrode producers, Hindalco and Coal India.