Morning commuters walk through Martin Place in Sydney, Australia. (Photographer: Brendon Thorne/Bloomberg)  

All You Need To Know Going Into Trade On August 24

Asian stocks were mixed on little signs of progress in U.S.-China trade negotiations.

Shares in Japan and Australia rose, while South Korean stocks declined. Futures on Hong Kong equities pointed to declines. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded 0.3 percent lower at 11,564.50 as of 7:05 a.m.

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BQ Live

U.S. Market Check

  • U.S. stocks dropped and the dollar rallied the most in two weeks as the trade dispute with China showed no signs of easing.
  • The yield on 10-year Treasuries was up one basis point to 2.83 percent.

Also read: No Major Progress in U.S.-China Trade Talks as Tariffs Bite

Europe Market Check

  • European shares reversed earlier gains to end lower as concerns over rising trade barriers re-emerged.
All You Need To Know Going Into Trade On August 24

Also read: A No-Deal Brexit Could Mean Higher Prices, More Red Tape and Less Sperm

Asian Cues

  • Japan’s Topix index advanced 0.5 percent.
  • Australia’s S&P/ASX 200 Index added 0.3 percent.
  • South Korea’s Kospi index fell 0.3 percent.
  • Futures on the S&P 500 Index were flat.

Commodity Cues

  • West Texas Intermediate crude was up 0.3 percent to $68.06 a barrel.
  • Brent crude traded 0.4 percent higher at $75 a barrel.
  • Gold was at $1,186.79 an ounce after sliding 0.9 percent.

Shanghai Exchange

  • Steel traded lower for third day; down 0.8 percent.
  • Aluminium traded higher; up 0.6 percent.
  • Zinc traded higher for fifth day; up 1.1 percent.
  • Copper traded higher; up 0.5 percent.
  • Rubber traded lower for second day; down 0.2 percent.

Also read: Crude Sinks as Dollar Rebounds on Trump's Trade War Enthusiasm

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

  • Central bankers gather at the Kansas City Fed’s annual Jackson Hole symposium, where Powell speaks Friday.

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  • These are India’s most expensive large cap stocks.

Stocks To Watch

  • Hexaware Technologies promoters look to raise Rs 1,120 crore via 2.5-crore shares sale at a floor price of Rs 447.5 apiece, according to the offer seen by Bloomberg News. The deal size represents 8.4 percent of the company’s equity. Trade date is Aug. 24 and settlement date is Aug. 28.
  • Britannia Industries’ board approved stock split in the ratio of 1:2. The company said that the rationale behind the split is that there had been a significant rise in the market price of the equity shares of the company over the last one year. In order to improve the liquidity of the company’s equity shares in the stock markets and to make them more affordable for the small retail investors, this move was made. Post the stock split, the authorised capital will be 50 crore shares as compared to 25 crore shares as of now.
  • Reliance Industries to load 80,000 tonne of vacuum gas oil (feedstock for refining units) at Sikka, with estimated arrival date of Aug. 25. The vessel Aframax Desh Prem is also scheduled to discharge 80,000 tonne of crude between Aug. 23-24 with RIL being listed as a receiver. On Aug. 15 , the company had reported shutdown of cracker unit at its Jamnagar refinery near Sikka. This news had been reported by Bloomberg.
  • TVS Motor Company strengthened its commuter motorcycle portfolio with the launch of TVS Radeon. The new 110cc motorcycle boasts of segment leading features including synchronised braking technology and a high ground clearance with spacious and comfortable seating.
  • InterGlobe Aviation’s which has been grappling with Pratt and Whitney engine issues, said that some of its Airbus A320 Neo aircrafts had been grounded “proactively” due to “non-availability” of spare engines from the manufacturer. The airline’s response came to a query on reports that as many as nine of its Airbus A320 neo aircrafts were grounded on Aug. 20 because of engine issues.
  • ICICI Bank Chairman GC Chaturvedi said that the decision on continuance of managing director and CEO Chanda Kochhar would be taken after the Justice BN Srikrishna panel report, probing certain allegations against her is finalised. The probe is likely to be concluded in two-and-a-half months. Kochhar and her family members are facing allegations of quid pro quo and conflict of interest with respect to a loan extended to certain entities, including the Videocon group.
  • Aban Offshore’s board seeks shareholder’s approval to raise $400 million from foreign markets via debt or equity and to raise Rs 2,500 crore via qualified institutional placement. The annual general meeting is scheduled to be held on Sept. 24.
  • SREI Infrastructure Finance’s wholly owned subsidiary, Quippo Oil and Gas Infrastructure proposed to sell 2,600 equity shares constituting 26 percent shareholding in Quippo Drilling Private Limited to an overseas entity. Consequently, QDIPL shall also cease to be a wholly owned step-down subsidiary of the company but shall continue to be a step-down subsidiary of the company.

Earnings To Watch

  • LIC Housing Finance
  • MAS Financial
  • Pratibha Industries
  • Sundaram Finance

Indian ADRs

All You Need To Know Going Into Trade On August 24

Bulk Deals

  • Goa Carbon: Ajo Emerging Markets Small-Cap Master Fund Ltd. acquired 50,000 shares or 0.55 percent equity at Rs 793.51 each.
  • Liberty Shoes: India Nivesh Limited acquired 1.3 lakh shares or 0.76 percent at Rs 217.55 each.
  • Sequent Scientific: Dvi Fund Mauritius Ltd sold 35.8 lakh shares or 1.47 percent equity at Rs 66.02 each.

Mahanagar Gas

  • Blackrock Emerging Frontiers Master Fund Limited acquired 6.5 lakh shares or 0.66 percent equity at Rs 851 each.
  • L&T Emerging Businesses Fund acquired 6.5 lakh shares or 0.66 percent equity at Rs 851 each.
  • Schroder International Selection Fund Emerging Asia acquired 5.17 lakh shares or 0.52 percent equity at Rs 851 each.
  • BG Asia Pacific Holdings Pte Limited sold 1.38 crore shares or 14 percent equity between Rs 851.9-855 per share.

Who’s Meeting Whom

  • Great Eastern Shipping to meet Ambit Capital on Aug. 24.
  • Magma Fincorp to meet investors on Aug. 24.

Insider Trades

  • Confidence Petroleum promoters acquired 28,200 shares on Aug. 13-21.
  • Man Infra promoter and director Parag K Shah acquired 4.82 lakh shares on Aug. 21.

Money Market Update

  • Rupee closed below 70 a dollar on the U.S. rate hike worries.
  • Sovereign bonds fall after yield rises the most in six weeks, ended five basis points higher at 7.88 percent.
  • Dollar index snapped six-day losing streak; ends 0.6 percent higher above 95.5-mark.

F&O Cues

  • Nifty August Futures closed trading at 11,595.4 premium of 12.7 points versus 15.6 points.
  • August series-Nifty Open Interest up 0.3 percent and Bank Nifty Open Interest down 14 percent.
  • India VIX ended at 12.7, down 1.1 percent.
  • Maximum Open Interest for August series at 11,600 Call, Open Interest at 35.3 lakh, Open Interest up 3.5 percent.
  • Maximum Open Interest for August series at 11,500 Put Open Interest at 45.8 lakh, Open Interest up 9 percent.

F&O Ban

  • In Ban: Jain Irrigation, Raymond

Put-Call Ratio

  • Nifty PCR at 1.72 versus 1.70
  • Nifty Bank PCR at 1.18 versus 1.30

Fund Flows

All You Need To Know Going Into Trade On August 24

Brokerage Radar

IIFL on Hexaware

  • Initiated ‘Add’ with a price target of Rs 520.
  • Hexaware uniquely positioned to participate in structural trend of IT spend.
  • Positives: healthy deal wins, steady growth in top accounts and stable margins.
  • Expect dollar revenue and EPS to grow at a compounded annual growth rate of 14 percent and 20 percent respectively over 2017-2020.
  • An attractive long term story; margin expansion key for re-rating.

UBS on ONGC

  • Maintained ‘Buy’ with a price target of Rs 245.
  • Deleveraging through potential listing of OVL and non-core asset sales.
  • Upside risk as stock currently discounting less than $50 a barrel of net realisation.
  • Strong earnings trajectory and potential of stake sales would be positive for ONGC.

Macquarie on Bandhan Bank

  • Maintained ‘Outperform’ with a price target of Rs 560.
  • Bidding for PNB Housing Finance may not be an ideal move.
  • Deal would significantly dilute RoE and introduce several integration risks.
  • RBI mandate of taking down promoter stake would have been a bigger motivator.

Macquarie on ICICI Lombard General Insurance

  • Maintained ‘Underperform’ with a price target of Rs 585.
  • Kerala floods: Impact on P&L to be insignificant.
  • Premiums from Kerala form a very small proportion of overall premiums.
  • Worst case impact could be 3-4 percent of profits.

CLSA on M&M

  • Maintained ‘Buy’ with a price target of Rs 1,120.
  • Success of new MPV and SUV could boost growth and lift valuations.
  • Expectations low from new SUV; Success can boost franchise in a key segment.
  • Expect M&M’s vole and earnings per share to grow at a compounded annual growth rate of 13 percent and 21 percent respectively over the current and the next financial year.

Citi on Sun Pharma

  • Maintained ‘Neutral’ with a price target of Rs 600.
  • Positive CHMP opinion for Tildrakizumab has played out.
  • This to translate into EMA approval soon, which is priced in.
  • Sun has made good progress in transitioning to a specialty play.

Citi on Eris Lifesciences

  • Maintained ‘Buy’ with a price target of Rs 850.
  • ERIS believes that the Indian market has a long growth runway.
  • Company intends to keep its focus on specialty segments.
  • ERIS maintains that it can grow at 30-40 percent higher than industry growth.

CLSA on Colgate

  • Colgate’s acquisition of Bombay Shaving Co. raises concerns on governance due to category overlap.
  • Acquisition by listed Colgate India would have made more sense.
  • Marico and Emami have acquired stake to augment their understanding of evolving business.

Brokerages On L&T

JPMorgan

  • Maintained ‘Overweight’ with a price target of Rs 1,600.
  • If everyone participate in buyback, then ratio would be 4.29:100 for tendering shares.
  • Buyback to reduce FY19 EPS by 2% and increase net debt-to-equity to 2.1 times.
  • RoE would improve to 15.0 percent and 2018-19 yield could be 6 percent.

BofAML

  • Maintained ‘Buy’; raised price target to Rs 1,589 from Rs 1,528.
  • Buyback marginally EPS dilutive; leverage not a concern.
  • Buyback re-affirms company's strategy of returning excess cash.
  • RoEs to expand; Divestments provide upside risk.

CLSA

  • India’s fourth largest buyback ever to boost RoE and support stock.
  • Buyback to lower EPS but improve quality of earnings.
  • Believe L&T is a good proxy for domestic Capex.

Brokerages On Indian Steel Industry

JPMorgan

  • Prices could move higher post October on China and domestic environment.
  • Demand driven by combination of local and global factors.
  • Strong pricing environment creates upside risks for TATA, JSW and SAIL.

Credit Suisse

  • Stabilising raw material costs drive steel price rebound.
  • Indian steel price to rebound with rising China domestic prices and export.
  • Steel spreads may widen further from here.

Brokerages On Indian Non-Life Insurance Industry

HSBC

  • Non-life insurers are keenly awaiting the insurance regulator’s response to Supreme Court ruling.
  • Insurers expect the regulator to allow comprehensive long-term policies.
  • Vehicle OEM’s and banks could benefit whereas agents and online distributors could be negatively affected.