All You Need To Know Going Into Trade On July 31

Asian stocks opened lower Tuesday after the biggest technology shares led a retreat in U.S. stocks amid signs of investor fatigue with the sector.

Equity indexes fell in Japan and South Korea, while futures signaled a softer open in Hong Kong. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fluctuated between gains and losses to trade little changed at 11,339 as of 7:15 a.m.

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

BQ Live

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

U.S. Market Check

• U.S. stocks ended lower after the biggest technology shares led a retreat, as investors showed signs of exhaustion with the sector.
• The yield on 10-year Treasuries held around 2.97 percent.

Europe Market Check

• European shares fell as concerns that U.S. technology giants are peaking spread across the Atlantic and investors awaited key monetary policy decisions worldwide.

Asian Cues

• The Topix index fell 0.6 percent.
• The S&P/ASX 200 Index rose 0.3 percent.
• South Korea’s Kospi index lost 0.2 percent.
• Hong Kong’s Hang Seng Index futures declined 0.1 percent.
• S&P 500 Index futures rose less than 0.1 percent.

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

• The U.S. Treasury is set to release its funding program for the next three months on Aug. 1.
• Earnings season continues with Berkshire Hathaway, Barclays, Tesla, Toyota, BMW, and Rio Tinto among companies reporting results.
• Central banks in the U.S., Japan, the U.K., Brazil and India all meet this week. The BOJ may tweak its yield-curve control policy and cut its CPI forecasts, while the Bank of England is expected to hike even amid Brexit gloom. The Fed is seen standing pat, as is Brazil’s central bank. The RBI will probably raise its benchmark.
• U.S. personal spending and income data for June -- coming Tuesday -- may be steady. Then it’s the jobs report on Friday, which is predicted to show a healthy labor market, with 193,000 new jobs, and an unemployment rate slipping back to 3.9 percent.
• China’s PMIs probably edged down in July, analysts say, buffeted by a deleveraging agenda and a trade war.

Commodity Cues

• West Texas Intermediate crude was little changed at $70.11 a barrel after rallying 2.1 percent.
• Brent crude traded a little changed at $74.94 a barrel.
• Gold was little changed at $1,222.75 an ounce.
• The Bloomberg Commodity Index increased 0.6 percent Monday to the highest in three weeks.

Shanghai Exchange

• Steel traded higher for third day; up 0.1 percent.
• Aluminium traded higher; up 0.5 percent.

• Zinc traded lower for second day; down 0.3 percent.
• Copper traded lower for second day; down 0.4 percent.
• Rubber traded lower; down 0.7 percent.

Nifty Earnings To Watch

• Power Grid
• Tata Motors
• UPL
• Vedanta

Other Earnings To Watch

• Ajanta Pharma
• Astral Poly Technik
• Bank Of India
• BASF
• Bharat Electronics
• Blue Dart Express
• Castrol India
• Dabur India
• DCM Shriram
• EIH
• GSFC
• Jagran Prakashan
• IIFL
• Mahanagar Gas
• Raymond
• Redington India
• Triveni Tribune
• Supreme Industries
• V-Guard Industries

Earnings Reaction To Watch

Axis Bank (Q1, YoY)

• Net interest income up 12 percent at Rs 5167 crore.
• Net profit down 46 percent at Rs 701 crore.
• Provisions down 54 percent at Rs 3338 crore.
• GNPA at 6.52 percent versus 6.77 percent (QoQ)
• NPA at 3.09 percent versus 3.40 percent (QoQ)

Avenue Supermarts (Q1, YoY)

• Revenue up 27 percent at Rs 4559 crore.
• Net profit up 43 percent at Rs 251 crore.
• Ebitda up 39 percent at Rs 422 crore.
• Margin at 9.3 percent versus 8.4 percent.

IDFC Bank (Q1, YoY)

• NII grew 26.3 percent to Rs 490 crore.
• Net profit down 58 percent at 181 crore.
• Provisions at Rs 34 crore versus Rs 242 crore (QoQ)
• GNPA at 3.24 percent versus 3.31 percent.
• NNPA at 1.63 percent versus 1.69 percent.

Oberoi Realty (Q1, YoY)

• Revenue at Rs 888 crore versus Rs 261 crore.
• Net profit at Rs 309 crore versus Rs 91 crore.
• Ebitda at Rs 462 crore versus Rs 136 crore.
• Margin at 52.0 percent versus 52.1 percent.

Texmaco Rail and Engineering (Q1, YoY)

• Revenue up 44.4 percent at Rs 322.6 crore.
• Net profit at Rs 6.5 crore versus net loss at Rs 8.7 crore .
• Ebitda at Rs 23.4 crore versus Ebitda loss of Rs 4.8 crore.

Tech Mahindra (Q1, QoQ)

• Dollar revenue down 1.6 percent at $1224 million.
• Income from operations up 2.8 percent at Rs 8277 crore.
• Ebit down 3.3 percent at Rs 1077 crore.
• Ebit margins at 13 percent versus 13.8 percent.
• Profit down 27 percent at Rs 899 crore.

GSPL (Q1, YoY)

• Revenue up 32 percent at Rs 391 crore.
• Net profit down 5 percent at Rs 144.5 crore.
• Ebitda up 25 percent at Rs 344 crore.
• Margin at 87 percent versus 93.2 percent.

Mahindra Lifespace Developers (Q1, YoY)

• Revenue up 13 percent at Rs 154 crore.
• Net profit up 93 percent at Rs 27 crore.
• Other Income up 69 percent at Rs 22 crore.
• Ebitda up 3 percent at Rs 16.5 crore.
• Margin at 10.7 percent versus 11.8 percent.

Sharda Cropchem (Q1, YoY)

• Revenue up 34 percent at Rs 457 crore.
• Net profit down 21 percent at Rs 34 crore.
• Other income down 77 percent at Rs 3.5 crore.
• Ebitda up 15 percent at Rs 71 crore.
• Margin at 15.5 percent versus 18 percent.

Gujarat Gas (Q1, QoQ)

• Revenue up 2 percent at Rs 1765.5 crore.
• Net profit up 83 percent at Rs 121 crore.
• Ebitda up 12 percent at Rs 249.5 crore.
• Margin at 14.1 percent versus 12.9 percent.

InterGlobe Aviation (Q1, YoY)

• Revenue up 13 percent to Rs 6,512 crore.
• Net Profit down 97 percent to Rs 28 crore.
• Ebitdar down 47 percent to Rs 1,031 crore.
• Ebitdar margin at 15.8 percent versus 33.9 percent.

Idea Cellular (Q1, QoQ)

• Revenue down 4 percent to Rs 5,889 crore.
• Ebitda down 54 percent to Rs 659 crore.
• Ebitda margin at 11.2 percent versus 23.6 percent.
• Net Profit of Rs 257 crore versus loss of Rs 962 crore.
• ARPU at Rs 100.

IDFC (Q1, YoY)

• Revenue down 11.6 percent at Rs 14.5 crore.
• Net profit down 18.9 percent at Rs 3 crore.

Jaiprakash Associates (Q1, YoY)

• Revenue down 32.1 percent at Rs 1,690.8 crore.
• Net loss at Rs 285 crore.
• Ebitda down 75.4 percent at Rs 186.4 crore.
• Margin at 11 percent versus 30.5 percent.

Stocks To Watch

• Dr. Reddy's request to sell generic Suboxon rejected.
• HDFC Bank QIP openssigns with a floor price at Rs 2179.13 per share.
• Texmaco Rail and Engineering arm signs MoU for upgrading 150 armor vehicles.
• Hindustan Aeronautics now making 11 light combat planes for Air Force.

Economic Data To Watch

• India to report fiscal deficit data for April-June quarter and eight infrastructure industries data for June.

Indian ADRs

Bulk Deals

• TCNS Clothing: Steinberg India Emerging Opportunities Fund Ltd bought 3.27 lakh shares at Rs 655.06 each.
• Talwa lakhars Lifestyles: Smaller Cap World Fund Inc sold 2.25 lakh shares (0.7 percent) at Rs 138.5 each.

Modi Rubber

• Morgan Stanley Asia (Singapore) Pte bought 2.28 lakh shares (0.9 percent) at Rs 51.45 each.
• Quantum (M) Limited sold 2.28 lakh shares (0.9 percent) at Rs 51.45 each.

Who’s Meeting Whom

• Balarampur Chini Mills to meet Sundaram Asset Management on August 2.
• Tata Steel to meet HDFC Mutual Funds, DSP Black Rock and other investors on July 31.

Insider Trades

• Chambal Fertilizers promoter acquired 1.41 lakh shares on July 27.
• Infibeam promoter acquired 63,725 shares on July 26.

Trading Tweaks

• Andhra Petrochemicals placed under ASM framework.
• Adani Green Energy circuit filter revised to 5 percent.

Rupee

• Rupee closed at 68.68/$ from 68.66/$ on Friday.

F&O Cues

• Nifty August futures closed trading at 11,338.5 premium of 19 points versus 28 points.
• August series: Nifty open interest up 4 percent; Bank Nifty open interest up 7 percent.
• India VIX ended at 12.5, up 2.2 percent.
• Max open interest for August series at 11,500 Call (open interest at 28 lakh, up 2 percent)
• Max open interest for August series at 11,000 Put (open interest at 41.4 lakh, up 8 percent)

Put Call Ratio

• Nifty PCR at 1.72 versus 1.71
• Nifty Bank  PCR at 1.94 versus 1.49

Fund Flows

Brokerage Radar

JP Morgan on Avenue Supermarts

• Maintained ‘Underweight’; raised price target to Rs 1,175 from Rs 1,050.
• Good operating performance was reported in June quarter.
• Lower interest costs further boosted net profit growth.
• Raise earnings estimates on the back of higher revenue growth assumptions.
• Valuations expensive; Already factor in optimism.

Credit Suisse on Escorts

• Maintained ‘Outperform’; raised price target to Rs 1,230 from Rs 1,170.
• June quarter results were operationally better than expected.
• Tractor margins on adverse product mix, higher commodity costs and one-off provisioning.
• Outlook on both CE and railways is encouraging.
• Continue to prefer Escorts as top mid-cap pick.

BoFAML on Titan

• Maintained ‘Buy’ with a price target of Rs 1,080.
• Correction offers particularly attractive entry levels.
• Well-established brands to offer continuous outperformance across segments.
• Operating leverage and asset light growth to aid margins.
• Expect 28 percent EPS CAGR to back premium valuation.

Brokerages On HDFC

JP Morgan

• Maintained ‘Overweight’ with a price target of Rs 2,300.
• Stable performance with 18 percent loan growth.
• Spreads and asset quality remain well controlled.
• Best play to capture property upcycle which could start in 2018.

Credit Suisse

• Maintained ‘Outperform’; raised price target to Rs 2,350 from Rs 2,250.
• NII growth was robust led by strong AUM growth.
• Asset quality remained stable; Credit costs dropped on transition to IND-AS.
• Stock trading at attractive valuations given loan growth and sustained profitability.

Brokerages On Axis Bank

CLSA

• Maintained ‘Buy’; raised price target to Rs 690 from Rs 650.
• Top-line ahead: Retail continues to lead.
• June quarter’s net profit ahead of estimates led by better NII and NPL recoveries.
• Slippages moderates, but stress still rises.
• De-risking underway; Expect RoE of 15 percent from April 2020.

Kotak

• Maintained ‘Add’ with a price target of Rs 600.
• Net Interest Margin was reasonably stronger than expected.
• Decline in NPLs is quite meaningful.
• Higher upgrades, write-off and lower slippages led to decline.
• Need clarification on movement of sub-investment grade portfolio.

Brokerages On Tech Mahindra

CLSA

• Upgraded to ‘Underperform’ from ‘Sell’; raised price target to Rs 650 from Rs 635.
• Revenue beat led by enterprise as telecom stays soft.
• Margin recovery comes to a halt.
• Need to watch for growth recovery.
• See limited earnings growth potential and margin upside.

Macquarie

• Maintained ‘Neutral’; raised price target to Rs 700 from Rs 670
• June quarter results were mixed bag with miss on revenue and small beat at EBIT margin.
• Telecom business continues to be a drag.
• 5G-related spend is still some time away.
• Raise EPS estimates to factor in weaker rupee.

Investec

• Maintained ‘Buy’ with a price target of Rs 786.
• June quarter’s revenue and EBIT were ahead of estimates.
• Decline in revenues in telecom segment has been sharper than expected.
• Expect EBIT Margin performance to improve through 2018-19.
• Expect long awaited improvement in telecom appears to be finally here.

Brokerages On InterGlobe Aviation

JP Morgan

• Downgraded to ‘Neutral’ from ‘Overweight’; cut price target to Rs 900 from Rs 1,150.
• June quarter earnings impacted on all fronts.
• Expect industry to either take up pricing or cut back on capacity addition.
• Lower pricing due to competitive intensity to pressure the stock near term.
• Sufficient levers to improve its cost base over medium to long term.

UBS

• Maintained ‘Sell’; cut price target to Rs 940 from Rs 1,040.
• June quarter’s net profit declines significantly on high fuel and other expenses.
• Continue to expect 2018-19 yield growth to be weak.
• Maintenance spend to remain high going forward in the near term.
• Cut our EPS estimates for the current and the next financial year by 34 percent and 5 percent respectively.

Brokerages On Godrej Consumer

Macquarie

• Maintained ‘Outperform’; raised price target to Rs 1,465 from Rs 1,285.
• Strong turnaround in HI business leading to operational beat in June quarter.
• India volume growth at 14 percent was ahead of estimate.
• Believe growth momentum in HI business will continue.
• Godrej Consumer remains our top pick.

CLSA

• Maintained ‘Outperform’; raised price target to Rs 1,425 from Rs 1,150.
• June quarter’s consolidated Ebitda was ahead of estimates.
• Strong domestic growth with healthy margins.
• Management commentary was fairly positive on growth.
• 2018-19 could be busiest year (new launches) for India business.

Brokerages On Shree Cement

Macquarie

• Maintained ‘Outperform’ with a price target of Rs 21,500.
• Adjusted June quarter’s Ebitda was in line; Margins recovery ahead.
• Strong volumes partially offsets costs.
• Capacity growth to drive market share gain in FY19-20.
• Cost headwinds persists but peaking out.
• Volume growth to remain ahead of industry on timely expansion.

Nomura

• Maintained ‘Buy’ with a price target of Rs 22,900.
• June quarter was a miss driven by higher costs, MTM loss.
• Blended realisation was marginally lower than expected.
• Continue to believe that cement sector is on cusp of an upturn.
• Volume growth will likely get better.

Brokerages On Idea Cellular

CLSA

• Downgraded to ‘Sell’ from ‘Buy’; cut price target to Rs 51 from Rs 70.
• June quarter’s revenue was in-line, but Ebitda came below estimates.
• Operating metrics were also weak.
• Merged Co. funded, but gearing still out of hand.
• Expect net debt to be 6.6 times Ebitda by March 2021, will still remain uncomfortable.

Kotak Securities

• Maintained ‘Reduce’ with a price target of Rs 75.
• June quarter’s earnings were weaker then expected.
• Also much weaker than Bharti’s on most operating metrics.
• Equity infusion, a meaningful one, could be needed sooner than expected.