Morning commuters cast shadows on a sidewalk. (Photographer: Takaaki Iwabu/Bloomberg)

All You Need To Know Going Into Trade On July 23

Asian stocks were mixed as the yen pared some of its gains after the Bank of Japan offered to buy bonds at the first fixed-rate operation since February, in a sign the central bank was trying to rein yields.

Equity benchmarks declined in Australia and South Korea. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded a little changed at 11,020.50 as of 7:30 a.m.

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

U.S. Market Check

  • Stocks in the U.S. closed mostly lower Friday after President Donald Trump’s latest verbal salvos fanned investor concern that a global trade war is escalating.
  • The yield on 10-year Treasuries held at 2.89 percent after gaining six basis points on Friday.
All You Need To Know Going Into Trade On July 23

Also read: Emerging Markets at Mercy of Falling Yuan as Currency War Looms

Europe Market Check

  • European stocks fell, led by the auto sector, as President Donald Trump said a new round of U.S. tariffs on Chinese goods was “ready to go” and that China and the European Union were manipulating their currencies.
All You Need To Know Going Into Trade On July 23

Also read: Trade Tensions Threaten Global Economic Growth, G-20 Cautions

Asian Cues

  • Japan’s Topix index fell 0.3 percent.
  • Australia’s S&P/ASX 200 declined 0.5 percent.
  • South Korea’s Kospi index fell 0.3 percent.
  • Futures on Hong Kong’s Hang Seng advanced 0.3 percent.
  • Futures on the S&P 500 Index were little changed.
  • The MSCI Asia Pacific Index rose 0.2 percent.

Also read: China Tower Seeks to Raise Up to $8.7 Billion in Hong Kong IPO

Commodity Cues

  • West Texas Intermediate crude for September delivery was at $68.20 a barrel.
  • Brent crude traded a little changed at 73.09 a barrel.
  • Gold increased 0.3 percent to $1,233.72 an ounce.

Shanghai Exchange

  • Steel traded lower for second day; down 0.1 percent.
  • Aluminium traded higher; up 0.5 percent.
  • Zinc traded higher; up 0.6 percent.
  • Copper traded higher; up 1.5 percent.
  • Rubber traded lower for third day; down 0.2 percent.

Also read: Will the Fed Become President Trump's Next Punching Bag?

Stories You Might Have Missed

  • Modi could have deflected Rahul’s yorker, instead of playing all over it.
  • GST Council meet ends with reduction in rates and simplification of returns.
  • Expanding Congress vote is the base priority for 2019, said Rahul Gandhi at the CWC Meet.
  • Facebook faces delay to WhatsApp payments in India.
  • Robin Williams’s memorabilia, art to be auctioned by Sotheby’s.
  • An Indian firm claims its algorithm can predict your startup’s success.
  • Author of MSP formula says real solutions lie elsewhere.
  • Iran warns Trump not to threaten country’s oil exports.
  • Here’s how mutual funds can help you diversify globally.

Here are some key events to watch out for this week:

  • Earnings season continues with the following tech companies among those reporting: Alphabet, Facebook, AT&T, Amazon.com, Twitter, Advanced Micro Devices, Qualcomm and Intel. They are joined by global financial giants Deutsche Bank, UBS, Nomura and Visa. Others include Halliburton, Michelin, Boeing, Lockheed, Nissan and Shell.
  • Pakistan holds national elections Wednesday.
  • PM Modi will visit Rwanda, Uganda and South Africa July 23-27.
  • European Central Bank’s policy decision Thursday.
  • U.S. gross domestic product probably increased by about 4 percent at an annualized rate in the second quarter, the most since 2014, economists forecast ahead of Friday’s data.

Indian ADRs

All You Need To Know Going Into Trade On July 23

Stocks To Watch

  • UPL Ltd. to acquire Arysta Lifescience in an all cash deal worth $4.2 billion.
  • Wipro guided for IT services revenues to be in range of $2,009 million to $2,049 million in the second quarter. The company will acquire U.S.-based Alight Solutions' India operations for $117 million.
  • Just Dial approved buyback of 27.5 lakh shares, or 24.26 percent equity, at Rs 800 each. The buyback amount to not exceed Rs 220 crore.
  • Havells to merge all India-based subsidiaries with self.
  • Hathway Cable to raise Rs 100 crore via preferential allotment of equity shares to promoter.
  • Muthoot Finance received primary SEBI nod for AMC business.
  • IMP Powers started production of Kinetic Energy Turbine in Silvassa.
  • Sintex Plastics clarified that change in auditors has been effected only post audit and not abruptly.
  • Lyka Labs board accepted in-principle approval received from Dena Bank for compromise settlement of their account.
  • Alok Industries said that their liquidation application has been withdrawn.
  • Cadila Healthcare’s Zydus received final approval from the U.S. FDA for Acetylcysteine Injection.
  • BPCL’s board approved transfer of Gas Business Division to subsidiary Bharat Gas Resources Limited. The transaction to be completed in three-four months.
  • Corporation Bank approved raising Rs 2,555 crore via shares allotment preferentially to government.
  • Jubilant Foodworks says received a report from anti-profiteering body saying Jubilant didn’t pass GST benefit.
  • SpiceJet says Tribunal rejects Maran’s damage claim on warrants.
  • Tata Motors said to restart talks to sell engineering unit stake. (Bloomberg)
  • RCom said to agree to pay bank guarantees by end of July (Economic Times)

Earnings To Watch

  • ACC
  • Delta Corp
  • Granules India
  • Hindustan Zinc
  • ICICI Securities
  • Indiabulls Ventures
  • L&T Infotech
  • L&T Technology Services
  • United Spirits
  • Vijaya Bank

Earnings Reaction To Watch

Wipro (Q1, QoQ)

  • Revenue up 3.4 percent to Rs 14,231 crore.
  • Net Profit up 16.3 percent to Rs 2,094 crore.
  • EBIT up 19.7 percent to Rs 2,254 crore.
  • Margins at 15.8 percent versus 13.7 percent.

HDFC Bank (Q1, YoY)

  • Net profit up 18.2 percent to Rs 4,601 crore.
  • Net interest income up 15.4 percent to Rs 10,813 crore.
  • Net interest margins at 4.2 percent versus 4.3 percent.
  • GNPA at 1.33 percent versus 1.30 percent (QoQ).
  • NNPA at 0.41 percent versus 0.40 percent (QoQ).

L&T Finance Holdings (Q1, YoY)

  • Income from operations up 32 percent to Rs 3,041 crore.
  • Net Profit grew 59 percent to Rs 540 crore.

MCX (Q1, YoY)

  • Revenues up 24 percent to Rs 73 crore.
  • Net profit down 77 percent to Rs 6 crore.
  • Exceptional loss of Rs 24 crore in current quarter.
  • EBITDA doubled to Rs 26 crore.
  • Margins at 35.6 percent versus 22 percent.

Bata India (Q1, YoY)

  • Revenue grew 7.3 percent to Rs 797.3 crore.
  • EBITDA grew 38 percent to Rs 131.8 crore.
  • Margin at 16.5 percent versus 13 percent.
  • Net Profit grew 36.7 percent to Rs 82.5 crore.

Just Dial (Q1, YoY)

  • Revenue up 11.3 percent to Rs 211.4 crore.
  • EBITDA up 76.9 percent to Rs 57.4 crore.
  • Margin at 27.2 percent versus 17.1 percent.
  • Net Profit up 1 percent to Rs 38.5 crore.

South Indian Bank (Q1, YoY)

  • NII grew 7.3 percent to Rs 494.3 crore.
  • Net Profit down 77 percent to Rs 23 crore.
  • Other Income at Rs 146 crore versus Rs 219 crore.
  • GNPA at 4.54 percent versus 3.59 percent.
  • NNPA at 3.27 percent versus 2.60 percent.

VST Industries (Q1, YoY)

  • Revenue up 16 percent at Rs 243 crore.
  • Net profit up 54 percent at Rs 61 crore.
  • Ebitda up 48 percent at Rs 97 crore.
  • Margin at 40 percent versus 31 percent.

Insider Trades

  • Bharat Forge promoter Sundaram Trading & Investment Pvt Ltd acquired 16,000 shares from July 18–19.
  • Sequent Scientific promoter Rajitha Gopalakrishnan acquired 50,000 shares on July 18.
  • GTPL Hathway promoter Gujarat Digi Com Private Limited acquired 53,000 shares on July 19.

Rupee

  • Rupee ended at 68.85/$ on Friday versus 69.05/$ on Thursday.

F&O Cues

  • Nifty July Futures closed trading at 11,024.8, premium of 14.6 points versus 16.4 points.
  • July series-Nifty Open Interest up 1 percent and Bank Nifty Open Interest down 1.4 percent.
  • India VIX ended at 13.5, down 0.4 percent.
  • Maximum Open Interest for July series at 11,100 call, Open Interest at 37.8 lakh, Open Interest unchanged
  • Maximum Open Interest for July series at 10,800 Put, Open Interest at 47.7 lakh, Open Interest up 3 percent.

F&O Ban

In Ban: Adani Enterprises, Adani Power

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

Put Call Ratio

  • Nifty PCR at 1.71 versus 1.63
  • Nifty Bank PCR at 0.88 versus 0.85

Fund Flows

All You Need To Know Going Into Trade On July 23

Brokerage Radar

ICICI Direct on ABB India

  • Initiated ‘Buy’ with a price target of Rs 1,400
  • Capex in power T&D, smart grid solutions, railways gives strong visibility
  • Industry solutions, renewables, E-cars to bring new growth opportunities
  • Positives: strong competencies and technology leadership, proven expertise in execution, healthy b/s and large anticipated capex spends
  • Expect revenue, Ebitda and net profit to compound at 14 percent, 20.5 percent and 21 percent over 2017-2019.
  • ABB trades at premium multiples due to its strong technical capabilities.

Angel Broking on Yes Bank

  • Initiated ‘Buy’ with a price target of Rs 435.
  • CASA growth and rating improvement to support NIM.
  • Expect asset quality to improve and minimal impact of stress resolution.
  • Expect YES Bank’s advances to grow at a CAGR of 32 percent over FY18-20.
  • YES trades attractive valuations considering growth prospects.

UBS on Petronet LNG

  • Upgraded to ‘Buy’ from ‘Sell’; raised price target to Rs 245 from Rs 235.
  • Strong LNG imports driving the short-term outlook.
  • Lower utilisation due to higher regas capacity additions is priced in.
  • Strong utilisation rates and a 5 percent increase in regas tariffs to drive 2018-19 earnings.
  • Triggers: Mundra terminal delay and Kochi-Mangalore pipeline commissioning.

Credit Suisse on Havells

  • Maintained ‘Outperform’; raised price target to Rs 725 from Rs 670.
  • June quarter was very strong on the back of good revenue growth and margin expansion.
  • Main positive was the strong pick-up in switchgears.
  • Lloyd growth positive, especially weak air conditioner season.

JPMorgan on L&T Finance Holding

  • Maintained ‘Neutral’ with a price target of Rs 170.
  • June quarter’s net profit sharply ahead expectations.
  • Rural and housing continue to report strong growth and ROEs.
  • Believe with transition to INDAS, infrastructure book drag is now behind.

CLSA on Kansai Nerolac

  • Maintained ‘Buy’ with a price target of Rs 550.
  • June quarter’s Ebitda was slightly ahead of estimates; Revenue growth momentum continued .
  • Expect higher input prices to keep margins under pressure.
  • Company continues to negotiate product price hikes in auto and industrial segments.

Nomura on Justdial

  • Maintained ‘Buy’ with a price target of Rs 730.
  • June quarter’s revenue and margin came in ahead.
  • Momentum in paid listings alongside improving realisations is positive.
  • Traffic trends continue to be positive despite lower Ad spend in last two quarters.
  • Expect a positive reaction in the stock.

Kotak Securities on Asian Paints

  • Maintained ‘Reduce’; raised price target to Rs 1,275 from Rs 1,100.
  • GST rate cut - definitive kicker to earnings growth for paints companies.
  • Expect higher volume growth as pricing gap versus unorganized segment reduces.
  • Expect likely acceleration in pace of premiumisation.
  • Raise volume, realization and margin assumptions.

Kotak Securities on CDSL

  • Initiated ‘Buy’ with a price target of Rs 320.
  • Repeat business in multiple offerings provides stability to operating income.
  • Strong operating activities and limited capex to keep FCF strong.
  • Positives: stable growth in annual issuer charges, increased market traction, higher number of IPO and inflow in MFs.
  • Expect revenue, Ebitda and earnings per share to compound at 11 percent. 11 percent and 10 percent over FY18-20.

Brokerages On GST Changes

IDFC Securities

  • Expect boost to consumption demand propelled by a fall in prices.
  • Companies will pass on lower GST rate and thereby not see benefit in form of margins.
  • Sectors which saw tax rate cut have big share of unorganised players.
  • Move should help them come under tax net.
  • Expect paint companies, P&G hygiene, footwear manufacturers, Whirlpool, Dixon, Havells, Voltas and select hotels to be key beneficiaries.

Kotak Securities

  • GST rate cuts should be meaningful earnings kicker for paints companies.
  • Indirect benefits market share gains and premiumisation to boost earnings.
  • ITC: No revision would normally be seen as a positive.
  • United Spirits: Could bounce back on non-inclusion of ENA.

Brokerages On UPL

IDFC Securities

  • Maintained ‘Outperformer’ with a price target of Rs 982.
  • Positive on Arysta transaction on the back of potential meaningful upsides.
  • Deal valued at 9.9 times EV/EBITDA, excluding synergies.
  • Expect significant cost/revenue synergies.
  • Significant performa cash flows to take care of leverage ratio.

CLSA

  • Maintained ‘Buy’ with a price target of Rs 940.
  • Arysta acquisition offers scale benefits and discovery capabilities.
  • Complementary portfolio; UPL to get scale benefits.
  • Acquisition valued at 10 times EV/EBITDA and is EPS accretive.

Brokerages On HDFC Bank

IDFC Securities

  • Maintained ‘Outperform’ with a price target of Rs 2,515.
  • Margins and asset quality were soft in June quarter.
  • Pressure on NIMs driven by lower yields and higher cost of funds.
  • Key Reasons For Miss: higher than expected agri-slippage and decline in NIMs.
  • Expect these to improve through the year.

Goldman Sachs

  • Maintained ‘Buy’; raised price target to Rs 2,613 from Rs 2,487.
  • In-line core operating profit growth.
  • Positives: Efficiency gains, strong fee income and robust retail lending growth.
  • Negatives: marginal blip in asset quality and slower growth in NII.
  • Expect NIMs to improve significantly in second half of the current financial year.

Brokerages On Bajaj Auto

Macquarie

  • Maintained ‘Neutral’ with a price target of Rs 2,800.
  • Reported lower-than-expected margins and net profit in June quarter.
  • Cut in prices hurting profitability.
  • Struggling to balance growth and profitability.
  • Exports growth to continue in the near-term.

Deutsche Bank

  • Maintained ‘Hold’ with a price target of Rs 3,000.
  • June quarter’s operating results below estimates despite strong volume performance.
  • Bajaj paying the price for market-share gains.
  • Company is willing to use pricing as a lever to gain market-share.
  • Expect margin pressures due to competitive intensity and elevated commodity prices.

Brokerages On Wipro

Macquarie

  • Maintained ‘Neutral’ with a price target of Rs 300.
  • June quarter missed estimates at margin level; revenue at higher end range.
  • Struggle in verticals extended from healthcare to manufacturing; BFSI remains strong.
  • Expect Wipro to post weakest growth amongst large cap Indian IT names in 2018-19.
  • Wipro is cheap; triggers for re-rating remain amiss.

Nomura

  • Maintained ‘Neutral’ with a price target of Rs 260.
  • June quarter’s margins and guidance miss expectations.
  • Guidance for September quarter suggests flattish growth at midpoint of the range.
  • Except for BFSI, none of the other segments provide comfort.
  • Expect stock to react negative on results.