A cup of Skybury coffee is displayed for a photograph at the Skybury Coffee Pty coffee plantation in the Atherton Tablelands, Queensland, Australia. (Photographer: Carla Gottgens/Bloomberg)

All You Need To Know Going Into Trade On August 1

Asian equities climbed at the open as investors sifted through the latest news on the U.S.-China trade front and positive results from Apple Inc.

Stocks rose in Japan and South Korea, and Hang Seng Index futures in Hong Kong climbed. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded 0.2 percent higher at 11,399 as of 7:35.

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 advanced as trade optimism lifted industrial shares and tech companies staged a recovery. Oil sank and the dollar gained.
  • The yield on 10-year Treasuries fell about one basis point to 2.95 percent.

Also read: U.S. Considers Higher Tariffs on $200 Billion in Chinese Imports

Europe Market Check

  • European stocks advanced on optimism that talks between the U.S. and China will avert a full-blown trade war.
All You Need To Know Going Into Trade On August 1

Also read: The End of the Global Housing Boom

Asian Cues

  • Topix index rose 0.6 percent.
  • Australia’s S&P/ASX 200 Index was flat.
  • South Korea’s Kospi index added 0.5 percent.
  • Futures on Hong Kong’s Hang Seng rose 1.3 percent.
  • Futures on the S&P 500 Index were flat.
  • Futures on the Nasdaq 100 advanced 0.3 percent.

Also read: A Global Guide To State-Sponsored Trolling

Commodity Cues

  • West Texas Intermediate crude decreased 0.6 percent to $68.32 a barrel.
  • Brent crude traded 0.5 percent lower at $73.88 a barrel.
  • Gold was flat at $1,224.21 an ounce.
  • Copper rose 0.3 percent to $6,281 a ton Tuesday.

Shanghai Exchange

  • Steel trades higher for fourth day; up 0.8 percent.
  • Aluminium extend gains for fourth consecutive session; up 0.1 percent.
  • Zinc trades snaps two-day losing streak; up 2.3 percent.
  • Copper trades higher after declining for two sessions; up 0.6 percent.
  • Rubber trades lower for second day; down 0.2 percent.

RBI Decision-Day Guide

The Reserve Bank of India is expected to hike interest rate as the central bank tries to rein in inflation and shore up Asia’s weakest major currency.

RBI will probably increase the repurchase rate by 25 basis points to a two-year high of 6.5 percent on Wednesday, according to 39 of the 52 economists in a Bloomberg survey, with the rest expecting no change.

Read these to get up to speed:

  • In charts: Will the MPC raise rates for a second time?
  • If the MPC waits for food prices to go up before deciding on policy, it may be left to play catch-up, writes JPMorgan's Sajjid Chinoy. (Read his opinion piece here)
  • The arguments for a 25 basis point rate hike now still outweigh those for a pause, writes StanChart's Anubhuti Sahay. (Click here to read more)

Data To Watch

  • Automobile manufacturers to report sales data for July.
  • Nikkei Manufacturing PMI data for July to be announced by 10:30 a.m.

Here are other 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., U.K., Brazil and India are still to meet this week. 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 at its meeting Wednesday.
  • The U.S. jobs report is on Friday, and is predicted to show a healthy labor market, with 193,000 new jobs, and an unemployment rate slipping back to 3.9 percent.

Earnings To Watch

  • Aditya Birla Fashion
  • Apollo Tyres
  • Emami
  • Exide Industries
  • FDC India
  • Gateway Distriparks Group
  • HEG
  • Himachal Futuristic Communications
  • Jindal Saw
  • Navneet Education
  • Orient Cement
  • Pidilite Industries
  • Reliance Infrastructure
  • Tata Global Beverages
  • Torrent Power

Earnings Reaction To Watch

Castrol India (Q1, YoY)

  • Revenue up 17 percent at Rs 1017 crore.
  • Net profit up 19 percent at Rs 164 crore.
  • Ebitda up 19.5 percent at Rs 251 crore.
  • Margin at 24.7 percent versus 24.1 percent.

GSFC (Q1, YoY)

  • Revenue up 56 percent at Rs 1770 crore.
  • Net profit up 75 percent at Rs 71 crore.
  • Ebitda up 40 percent at Rs 113.5 crore.
  • Margin at 6.4 percent versus 7.1 percent.

IIFL Holdings (Q1, YoY)

  • Revenue up 25 percent at Rs 1,768 crore.
  • Net profit up 35 percent at Rs 266 crore.

JK Paper (Q1, YoY)

  • Revenue up 26 percent at Rs 795 crore.
  • Net profit up 58 percent at Rs 95 crore.
  • Ebitda up 30 percent at Rs 199 crore.
  • Margin at 25 percent versus 24.3 percent.

Huhtamaki PPL (Q2, YoY)

  • Revenue up 16.6 percent at Rs 595.5 crore.
  • Net profit up 98.6 percent at Rs 14.3 crore.
  • Ebitda up 24.9 percent at Rs 51.7 crore.
  • Margin at 8.7 percent versus 8.1 percent.

PowerGrid (Q1, YoY)

  • Revenue up 13 percent at Rs 8,127 crore.
  • Net profit up 9 percent at Rs 2,240.5 crore.
  • Ebitda up 12 percent at Rs 6,928 crore.
  • Margin at 85.2 percent versus 86.3 percent.

Astral Poly (Q1, YoY)

  • Revenue up 18 percent at Rs 477 crore.
  • Net profit up 48 percent at Rs 37 crore.
  • Ebitda down 4 percent at Rs 78 crore.
  • Margin at 16.4 percent versus 20.0 percent.

Mahanagar Gas (Q1, YoY)

  • Revenue up 17 percent at Rs 619 crore.
  • Net profit up 3 percent at Rs 128 crore.
  • Ebitda up 4 percent at Rs 210.5 crore.
  • Margin at 34 percent versus 38.2 percent.

Jagran Prakashan (Q1, YoY)

  • Revenue up 2 percent at Rs 603 crore.
  • Net profit down 2 percent at Rs 85 crore.
  • Ebitda up 2 percent at Rs 164 crore.
  • Margin unchanged at 27.2 percent.

Tata Motors (Q1, YoY)

  • Revenue up 15 percent at Rs 67,081 crore.
  • Net loss of Rs 1,902 crore versus net profit of Rs 3,182 crore.
  • Ebitda up 9 percent at Rs 5,430 crore.
  • Margin at 8.1 percent versus 8.5 percent.

Also read: Q1 Results: Tata Motors Posts Worst Quarterly Loss In Nine Years

Vedanta (Q1, YoY)

  • Net sales up 21.4 percent to Rs 22,206 crore.
  • Ebitda up 28.4 percent to Rs 6284 crore.
  • Ebitda margin at 28 percent versus 27 percent.
  • Profit up 2.13 percent to Rs 1,533 crore.

Also read: Q1 Results: Vedanta’s Profit Misses Estimates 

Stocks To Watch

  • Jindal Steel and Power wins tender for rails floated by Indian Railways.
  • Tata Motors unit to stop manufacturing operations in Thailand; to use a distribution model.
  • Bank of Baroda closed three foreign branches in Oman and Bahrain.
  • Orient Refractories approved amalgamation RHI India and RHI Clasil with self.
  • NBCC is said to be the highest bidder for HSCC, EPI. (The Economic Times)
  • IFCI: To avail one-month extension to submit June quarter results.
  • Jet Airways is said to have asked staff to take up 25 percent starting this month. (The Economic Times)

Indian ADRs

All You Need To Know Going Into Trade On August 1

Bulk Deals

  • Sirca Paints India: Elara India Opportunities Fund Limited sold 1 lakh shares at Rs 172.6 each.
  • MMP Industries: Massachusetts Institute of Technology bought 1.27 lakh shares at Rs 205 each.

Inox Leisure

  • HDFC MF bought 45 lakh shares or 4.7 percent equity at Rs 195 each.
  • Goldman Sachs Variable Insurance Trust International Equity Fund sold 24.8 lakh shares or 2.6 percent equity at Rs 195 each.
  • DSP Blackrock Mutual Fund sold 21.13 lakh shares or 2.2 percent equity at Rs 195 each.

Talwalkars Lifestyles

  • Aequitas Investment Consultancy Pvt. Ltd bought 6.74 lakh shares or 2.2 percent equity at Rs 135.35 each.
  • Small Cap World Fund sold 13.33 lakh shares or 4.3 percent equity at Rs 135.52 each.

Insider Trades

  • Bajaj Holdings & Investment promoter acquired 84,339 shares from July 26 – 27.
  • Singer India promoter sold 28,312 shares on July 30.
  • GTPL Hathway promoter acquired 57,000 shares on July 30.

Rupee

  • Rupee closed at 68.55/$ on Tuesday from 68.68/$ on Monday.

F&O Cues

  • Nifty August futures closed trading at 11,371.6 premium of  15 points versus 19 points.
  • August series: -Nifty open interest up 5 percent; Bank Nifty open interest down 11 percent.
  • India VIX ended at 12.48, down 1 percent.
  • Max open interest for August series at 11,500 Call (open interest at 27.8 lakh, down 1 percent)
  • Max open interest for August series at 11,000 Put (open interest at 47.2 lakh, up 14 percent)

Put Call Ratio

  • Nifty PCR at 1.73 versus 1.72.
  • Nifty Bank PCR at 1.56 versus 1.94.

Fund Flows

All You Need To Know Going Into Trade On August 1

Brokerage Radar

Citi on Mahanagar Gas

  • Maintained ‘Buy’ with a price target of Rs 1,000.
  • Strong quarter with operating income and net profits ahead of estimates.
  • Sharp sequential recovery after disappointing March quarter.
  • Await mgmt. outlook on volumes and margins.
  • Given the overhang of further stake sale by promoter, prefer IGL and Petronet LNG.

Credit Suisse on Bank of India

  • Maintained ‘Underperform’; cut price target to Rs 85 from Rs 103.
  • Slippages remained elevated at 2 percent of loans.
  • Loan book continued to contract led by decline in overseas book.
  • Cut EPS by 18-53 percent on higher slippage and treasury losses.

Citi on Oberoi Realty

  • Maintained ‘Sell’ with a price target of Rs 530.
  • Subvention schemes drive sales in June quarter.
  • Investments properties broadly did well.
  • Commerz 2 Phase1 occupancy improved.
  • Valuations demanding, especially in view of slow demand environment.

Brokerages On Tata Motors

BofAML

  • Maintained ‘Buy’; cut price target to Rs 400 from Rs 425.
  • JLR missed margins on destocking impact costs.
  • India strong on commercial vehicle uptick and lower losses from passenger vehicle business.
  • Full year EBIT margin guidance of 4-7 percent maintained.
  • EPS for the current and the next financial year lowered by 15 percent and 12 percent respectively; Risk reward favourable.

CLSA

  • Maintained ‘Sell’; cut price target to Rs 250 from Rs 295.
  • Weak JLR performance drags down to a consolidated June quarter loss.
  • Regaining share in Indian trucks but demand a concern.
  • JLR outlook remains weak.
  • Cut FY19-20 EPS 9-28 percent factoring in lower volumes and margins at JLR.

Brokerages On Vedanta

Morgan Stanley

  • Maintained ‘Equal-weight’ with a price target of Rs 265.
  • June quarter was broadly in-line with estimates.
  • Key positive surprise was better-than-expected performance in aluminum, oil and iron ore.
  • Potential ramp-up delay and higher cost in Zinc is near-term risk.
  • Risk to be partly offset through higher captive alumina and coal linkage supply.

JPMorgan

  • Maintained ‘Overweight’ with a price target of Rs 400.
  • Earnings broadly in line.
  • Net Debt increase driven by acquisition.
  • Expect performance to improve from here on volume growth.

Brokerages On Power Grid Corp

CLSA

  • Maintained ‘Outperform’; cut price target to Rs 213 from Rs 237.
  • Net profit slightly below on weak capitalisation and higher CSR.
  • Expect slowdown ahead; Capitalisation peaked in the previous financial year.
  • Generation capex pick-up – key items to monitor.

Deutsche Bank

  • Maintained ‘Hold’ with a price target of Rs 216.
  • Lower capitalisation, higher O&M expenses and consultancy segment led to miss.
  • Growth trajectory declining earlier than expected.
  • Stock valuation not expensive but earnings cut and higher ROE cut not factored in.

Brokerages On UPL

Citi

  • Maintained ‘Buy’; cut price target to Rs 840 from Rs 850
  • June quarter was operationally robust as all key markets clocked good growth
  • June quarter results address currency related concerns to great extent
  • Marginally cut EPS estimates for the current and the next financial year to factor in higher interest cost

CLSA

  • Maintained ‘Buy’ with a price target of Rs 940.
  • Operationally in-line numbers; Net profit beat on lower tax.
  • LatAm surprises positively while India is a miss.
  • UPL confident of meeting 2018-19 guidance.
  • Monsoon progress and MSP hikes likely to be positive.

Brokerages On Bharat Electronics

Citi

  • Maintained ‘Buy’ with a price target of Rs 140.
  • June quarter’s revenue ahead of expectations on account of solid execution.
  • Expect order inflows to be in a band of Rs 16,000-20,000 crore.
  • Expect net profit CAGR of 12 percent over FY18-21 on the back of orders.

Credit Suisse

  • Maintained ‘Outperform’; cut price target to Rs 155 from Rs 175.
  • Reported strong results with strong execution and margins.
  • Base business order inflows very strong.
  • Cut EPS estimates by 16 percent and 14 percent for the current and the next financial year respectively on likely lower margins.
  • Positives: strong backlog and execution, strong incremental order visibility and reasonable valuation.

Brokerages On Dabur

CLSA

  • Maintained ‘Buy’; raised price target to Rs 500 from Rs 440.
  • Growth all around supported by investments.
  • To focus on growth over margins in outlook.
  • No immediate concerns on margins despite input prices.
  • Remains preferred pick in the space.

Morgan Stanley

  • Maintained ‘Overweight’; raised price target to Rs 500 from Rs 450.
  • June quarter was results in line; Strong volume growth.
  • Key positive: 33 percent rise in ad spending, showing commitment to accelerate volume growth.
  • Expect Dabur to become the most expensive staples stock.
  • Investors likely to pay a premium for its strong product portfolio.