All You Need To Know Going Into Trade On August 28
Asian stocks extended Monday’s advance after U.S. equities climbed to fresh all-time highs, as the Trump administration sealed a bilateral trade deal with Mexico.
Stocks in Japan, South Korea and Australia all followed their U.S. counterparts higher after President Donald Trump unveiled details of the agreement that he says will replace Nafta.
The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded 0.24 percent higher at 11,751.50 as of 7:05 a.m.
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Here’s a quick look at all that could influence equities today.
U.S. Market Check
- U.S. stocks rose to fresh all-time highs and Mexico’s peso rallied versus the dollar as the Trump administration closed a bilateral trade deal with America’s southern neighbour.
- The yield on 10-year Treasuries was little changed at 2.85 percent.
Europe Market Check
European shares climbed on Monday, after German business confidence rose for the first time in nine months and remarks by Federal Reserve Chairman Jerome Powell, indicating little need for aggressive policy tightening, buoyed sentiment. The U.K. market remained closed for a public holiday.
- The MSCI Asia Pacific Index rose 0.4 percent.
- Topix Index rose 0.6 percent.
- Kospi Index rose 0.5 percent.
- Australia’s S&P/ASX 200 Index rose 0.3 percent.
- Futures on the S&P 500 Index rose 0.1 percent to 2,902.00.
- West Texas Intermediate crude rose 0.4 percent to $69.12 a barrel.
- Brent crude traded 0.3 percent higher at $76.46 per barrel.
- Gold rose 0.1 percent to $1,212.49 an ounce.
- LME copper rose less than 0.05 percent to $6,107.50 per metric ton.
- Steel traded lower for fifth consecutive session; down 1.1 percent.
- Aluminium snapped two-day winning streak; down 0.4 percent.
- Zinc snapped six-day winning streak; down 0.5 percent.
- Copper halted two-day rally; down 0.1 percent.
- Rubber traded lower; down 0.4 percent.
Here are the key events to watch out for this week:
- Earnings due for companies including Canada’s largest banks, China Construction Bank Corp., ICBC, Pernod Ricard and Dollar General.
- China’s official factory PMI figures are due on Friday.
- The U.S. economy probably grew in the second quarter at a slightly slower pace, economists predict ahead of Wednesday’s report.
- Bank of Korea sets policy on Friday. Weak jobs growth has cooled speculation of an interest-rate increase.
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- Criminal enterprise to blame, says ecologist who foresaw Kerala floods
- Stuck housing projects of $66 billion weighing down India realty
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- India’s growth indicators show animal spirits very much alive
- India, Pakistan plan talks over water disputes.
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Stocks To Watch
- Jet Airways indicated that they are considering strategies for a turnaround. The board also considered various cost cutting measures, debt reduction and funding options, including infusion of capital, monetisation of assets including the company’s stake in its loyalty programme.
- Adani Power will take over about Rs 3,800 crore of loans out of a total of Rs 5,800 crore that its unit GMR Chhattisgarh Energy owes, said people requesting anonymity. The company will also assume non-funded liabilities of about Rs 1,400 crore of its energy arm. A deal is likely to be announced in the next few weeks after lenders give a formal approval, Bloomberg reported.
- JBF Industries’ board approved debt restructuring plan for its subsidiary JBF Petrochemicals. KKR Jupiter Advisors has agreed to buy out a 100 percent stake in the petrochemicals arm. The total debt stands at $464 million in JBF Petrochemicals Ltd. will now no longer be consolidated in the accounts of JBF Industries Ltd.
- Lanco Infratech got liquidation order from NCLT Hyderabad. The tribunal rejected Thriveni Earthmovers’ plea to consider its bid. The resolution professional has filed a plea for liquidation. The total outstanding debt stands at Rs 45,000 crore. ICICI Bank, IDBI, PNB are the major lenders to this company, Bloomberg reported.
- SAIL is considering locations in three states of Gujarat, Andhra Pradesh and Maharashtra to set up a Rs 5,000-crore auto grade steel plant in joint venture with ArcelorMittal, Steel Minister Chaudhary Birender Singh said today. The auto-grade steel plant project with a capacity of 1.5 million tonne per annum will be scaled to 2.5 MTPA, he added. According to official sources, negotiations were still underway with regard to detailed technical agreements of the joint venture, PTI reported.
- C&C Constructions’ joint venture has been awarded construction project by BSCPL Infrastructure Ltd. under the Bagmati flood management scheme in Bihar for Rs 266.22 crore.
- Oriental Bank of Commerce is mulling to raise Rs 1,000 crore via qualified institutional placement on Aug. 30.
- Colgate Palmolive (India) board has appointed Mukul Deoras as the chairman of the company, with effect from Sept. 1. He will also serve as the President, Asia Pacific Division of Colgate Palmolive.
- Debt-ridden power companies suffer a setback. Lenders will be allowed to initiate insolvency proceedings against power producers, which didn’t get an interim relief from the Allahabad High Court against the Reserve Bank of India’s stricter debt resolution framework.
- Government readies ONGC OFS; to sell off 5 percent stake (Financial Express).
- Fertiliser subsidy to be given every week (CNBC Awaaz).
- Zee Entertainment to convert free channels to paid (Economic Times).
Earnings Reaction To Watch
Jet Airways (Q1, YoY)
- Net loss of Rs 1,323 crore versus profit of Rs 53.5 crore.
- Revenue up 6.4 percent to Rs 6,010 crore.
- Ebitdar loss of Rs 382 crore versus Ebitdar of Rs 659 crore.
- Ebitdar margin at -6.3 percent versus 11.7 percent.
Read more, here
- Welspun Enterprises: Promoter Welspun Group Master Trust acquired 11.5 lakh shares, or 0.78 percent equity at Rs 165.77 each.
- Promoter Dutch US Holding BV sold 37.6 lakh shares, or 3.13 percent equity at Rs 224.01 each.
- HDFC Small Cap Fund acquired 13.4 lakh shares, or 1.12 percent equity at Rs 224 each.
- L&T Mutual Fund acquired 23.3 lakh shares, or 1.93 percent equity at Rs 224 each.
- Nordea India Fund sold 8.3 lakh shares, or 0.54 percent equity at Rs 600.04 each.
- Reliance Mutual Fund acquired 8.3 lakh shares, or 0.54 percent equity at Rs 600 each.
- Studds Accessories Limited, the largest manufacturer of two-wheeler helmets in the world in terms of sales volume in fiscal 2018 filed its Draft Red Herring Prospectus with SEBI. The offer will be for 39.39 lakh shares for Rs 98 crore.
- Auto component maker Craftsman Automation received SEBI nod for its Initial Public Offering of 43.8 lakh shares aggregating to Rs 400 crore.
Who’s Meeting Whom
- TVS Motor Company to meet HDFC Life Insurance, IIFL AMC and other investors on Aug. 28.
- Eicher Motors to meet TVS Capital Fund on Aug. 28.
- Supreme Industries to meet JP Morgan Asset Management and other investors on Aug. 28.
- Allcargo Logistics to meet Premji Investments and other investors on Aug. 28.
- Future Consumer to meet UTI MF, Sundaram Asset Management Co. and other investors on Aug. 28.
- JSW Steel promoter group acquired 5 lakh shares on Aug. 23.
- Liberty Shoes promoter sold 84,000 shares from Aug. 23-24.
- Mangalore Chemicals & Fertilizers promoter sold 3.75 lakh shares on Aug. 24.
- Wonderla Holidays promoter acquired 20,000 shares from Aug. 23-24.
Money Market Update
- Rupee closed at an all-time low of 70.16 a dollar; down 0.4 percent.
- Sovereign bond also fall, as yield rises two basis points to 7.89 percent.
- Nifty August futures closed trading at 11,705.3 premium of 13.4 points versus 14 points.
- Nifty September futures closed trading at 11,741.9 premium of 50 points.
- Rollover: Nifty 23 percent; Bank Nifty 19 percent.
- Across series: Nifty open interest up 2.2 percent & Bank Nifty open interest down 3.6 percent.
- India VIX ended at 12.2, down 1.3 percent.
- Max open interest for August series at 11,700 Call (open interest at 28 lakh, open interest down 2 percent).
- Max open interest for August series at 11,000 Put (open interest at 40.7 lakh, open interest down 2 percent).
- In Ban: Hexaware, Jet Airways, Jain Irrigation
- Out Of Ban: Raymond
Stocks Seeing High Open Interest Change
Put Call Ratio
- Nifty PCR at 1.84 versus 1.62
- Nifty Bank PCR at 1.44 versus 0.91
Citi on J.Kumar Infra
- Initiated ‘Buy’ with a price target of Rs 416, implying a potential upside of 85 percent from the last regular trade.
- Play on India’s urban infra opportunity; Top India E&C pick.
- Backward integration to lead to sector-high margins.
- See healthy growth prospects.
- Expect revenue, operating income and net profit to grow at a compounded annual growth rate of 15 percent, 19 percent and 23 percent respectively over FY18-21.
Elara Capital on Dixon Technologies
- Initiated ‘Buy’ with a price target of Rs 3,475, implying a potential upside of 30 percent from the last regular trade.
- Large addressable market size with market leadership position.
- Asset-light model: Superior business and healthy profitability.
- Positives: higher operating leverage, better revenue mix and backward integration.
- Expect revenue, operating income and net profit to grow at a compounded annual growth rate of 19 percent, 31 percent and 36 percent over FY18-21.
Elara Capital on Amber Enterprise
- Initiated ‘Buy’ with a price target of Rs 1,225, implying a potential upside of 27 percent from the last regular trade.
- Positives: deep backward integration, strong R&D capability, customer stickiness, strong execution capability and significant entry barriers.
- Expect revenue to grow at a compounded annual growth rate of 25 percent over FY18-21 led by products, clients and geographic cluster additions.
- Expect EPS to grow at a compounded annual growth rate of 39 percent due to operating leverage and savings in interest cost.
- RoE improvement largely driven by asset efficiency and margin improvement.
SBICAP on Jet Airways
- Maintained ‘Hold’ with a price target of Rs 335, implying a potential upside of 19 percent from the last regular trade.
- Recapitalisation imperative for continuity of business operations.
- Pressure on yields and PLFs resulted into lower unit revenue.
- Adjusting for forex loss Jet reported break-even at Ebitdar, but suffered cash losses.
UBS on Jubilant Foodworks
- Upgraded to ‘Neutral’ from ‘Sell’; raised price target to Rs 1750 from Rs 950, implying a potential upside of 13 percent from the last regular trade.
- Revenue and SSSG momentum can be maintained.
- Jubilant unlikely to lose the battle against its competitors in the long run.
- Limited upside till RoIC improvements begin to show.
Macquarie on KEC International
- Maintained ‘Outperform’ with a price target of Rs 443, implying a potential upside of 43 percent from the last regular trade.
- Margin concern due to commodity inflation overdone.
- Power Grid capex slowdown imminent, but impact on KEC limited.
- Multiple levers in place to cushion commodity price inflation risk.
JPMorgan on Hindalco
- Maintained ‘Overweight’; raised price target to Rs 370 from Rs 355, implying a potential upside of 60.5 percent from the last regular trade.
- Aluminum outlook is improving slowly but surely.
- India demand pick up should aid local premiums.
- Positives: strong FCF generation, strong positioning across upstream and downstream.
Macquarie on Dish TV
- Maintained ‘Outperform’ with a price target of Rs 94, implying a potential upside of 31 percent from the last regular trade.
- Dish TV confident to tackle uncertainties like Jio GigaFiber, OTT threat and tariff order.
- Company on track for 35 percent exit operating margin led by merger synergies.
- Given attractive valuations primarily due to macro concerns, Dish TV is a good contra play.
JPMorgan on Westlife Development
- Improving consumer sentiment, menu innovations, value platforms and McCafe/McDelivery to help deliver double digit SSSG in the current financial year.
- Confident of delivering 13-15 percent operating margin by March 2023.
- Judicious pricing, better mix, cost optimization measures and operating leverage to aid margins.
- Capital allocation and cost discipline remains fairly high.
Edelweiss on Power
- Allahabad High Court’s decision paves way for sector consolidation.
- One-third of stressed assets potential candidates for resolution.
- JSW has the strongest balance sheet with appetite to absorb stressed projects.
- Tata Power and Adani Power too could exploit this M&A opportunity.
- NTPC could be the joker in the pack garnering a lion’s share of distressed assets.
UBS on India Small Finance Banks
- Loan growth strong in Q1; expect more than 30 percent loan growth through the financial years till March 2021.
- Liability scale-up strong; Rise in rates to drive marginal cut in NIM.
- Opex pressure has peaked for Equitas; Ujjivan lagging in branch roll-out.
- Equitas: Maintained ‘Buy’; cut price target to Rs 240 from Rs 250, implying a potential upside of 66 percent from the last regular trade.
- Ujjivan: Maintained ‘Buy’; cut price target to Rs 480 from Rs 575, implying a potential upside of 34 percent from the last regular trade.
- AU Small: Maintained ‘Neutral’; cut price target to Rs 775 from Rs 800, implying a potential upside of 8 percent from the last regular trade.
UBS on Indian IT Services
- Adoption of digital services to not lead to further revenue deceleration.
- Expect organic revenue growth to stabilise near current levels.
- Expect operating margins to trend down for offshore services companies.
- Valuations are no longer inexpensive for the sector.
Morgan Stanley on Cement Sector
- Overall cement price hikes could be lower if demand driven by institutional sales.
- Modest price hikes is not detrimental to margins.
- Continue to believe that margins track overall utilisation.
- With rising capacity utilisation, margin expansion will follow.
Brokerages On Marico
- Downgraded to ‘Neutral’ from ‘Buy’; cut price target to Rs 410 from Rs 420, implying a potential upaisde of 9 percent from the last regular trade.
- Kerala floods to hinder ongoing softening of copra prices.
- Expect a potential 10-15% increase in bulk copra prices near term.
- Margin revival could be delayed; but medium-term growth levers intact.
- Maintained ‘Buy’ with a price target of Rs 435, implying a potential upside of 15 percent from the last regular trade.
- Copra price correction to help margins by the fourth quarter.
- Company is taking efforts to improve copra crop in the long term.
- Confident on VAHO and Parachute but WIP for Saffola.