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

All You Need To Know Going Into Trade On August 31

Asian stocks declined on the final trading day of the month as President Donald Trump was said to be moving ahead with a plan to impose new tariffs on China as soon as next week.

Stocks slipped in Japan and South Korea, while futures pointed to a lower start for China and Hong Kong, after the S&P 500 declined. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded 0.2 percent lower at 11,707.50 as of 7:10 a.m.

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

U.S. Market Check

  • U.S. equities slumped as President Donald Trump was said to move ahead with a plan to impose new tariffs on China as soon as next week.
  • The yield on 10-year Treasuries was at 2.86 percent.

Also read: Trump Threatens to Pull U.S. Out of WTO If It Doesn’t ‘Shape Up’

Europe Market Check

  • European shares fell as political risks from Brexit to China returned.
All You Need To Know Going Into Trade On August 31

Also read: Emerging Markets Tumble as Argentina Struggles to Stop Bleeding

Asian Cues

  • Japan’s Topix index fell 0.5 percent.
  • South Korea’s Kospi index slid 0.3 percent.
  • Australia’s S&P/ASX 2000 dropped 0.1 percent.
  • Futures on the FTSE China A50 Index dropped 0.9 percent.
  • Futures on Hong Kong’s Hang Seng Index slipped 0.8 percent.
  • Futures on the S&P 500 Index were down 0.1 percent.

Also read: Trump to Back $200 Billion China Tariffs as Early as Next Week, Sources Say

Commodity Cues

  • West Texas Intermediate crude stayed above $70 a barrel after rising 2 percent this week.
  • Brent crude traded 0.3 percent lower at $77.55 a barrel.
  • Gold held at $1,200.47 an ounce.

Shanghai Exchange

  • Steel traded lower for second day; down 0.3 percent.
  • Aluminium snapped two-day winning streak; down 0.5 percent.
  • Zinc traded lower; down 0.5 percent.
  • Copper traded higher; up 0.1 percent.
  • Rubber traded lower; down 0.2 percent.

Also read: EU Offer for No Auto Tariffs Is ‘Not Good Enough,’ Trump Says

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

  • China’s official factory PMI are due Friday.
  • The Bank of Korea sets policy on Friday. Weak jobs growth has cooled speculation of an interest-rate increase.

Stories That You Might’ve Missed

  • Auto sales may hit a bump in August.
  • General insurers brace for Rs 1,300-crore claim payout.
  • How India’s debt recovery is spurring record M&A.
  • Power sector ‘pariwartan’ gets another shot, but can it work?
  • What the faulty hip implant saga tells us.
  • Indians most vulnerable to nutrient deficiency as carbon dioxide levels rise.
  • Indian retail isn’t a pot of gold.
  • Bezos, Buffett eye $250-billion opportunity.
  • BlackRock’s Decade: How the crash forged a $6.3 trillion giant.
  • Google, Facebook, Amazon may be ‘antitrust situation’, Trump says.
  • Trump says Iranian regime may collapse because of his policies.
  • Uber is building its own scooter to compete in Frenzy.
  • Inside glossier’s plans to shake up your makeup routine.

Also read: Buffett Buys More Apple, Says iPhone Is ‘Enormously Underpriced’

Indian ADRs

All You Need To Know Going Into Trade On August 31

Stocks To Watch

  • Mohnish Pabrai of Pabrai Investment Fund hiked stake in CARE Ratings by 2.4 percent through open market. He owns now 7.5 percent in the company.
  • Soril Infra Resources’ board approved to infuse funds via preferential offer worth Rs 210.21 crore. The company will issue shares to Steadview Capital Mauritius and ABG Capital.
  • CRISIL upgraded Indian Terrain Fashions’ long and short term rating of the company to CRISIL BBB+/Stable and CRISIL A2 respectively.
  • GTL Infrastructure to allot abut 86 lakh shares on conversion of convertible bonds. Post this conversion, bonds worth $ 66.701 million will be outstanding.
  • Yes Bank has received RBI approval for Rana Kapoor to continue as MD CEO till further notice from RBI
  • ICICI Bank voted in favor of appointing Chanda Kochhar on board of ICICI Securities. The lender holds 80 percent stake in ICICI Securities.
  • Hindustan Construction Company owned Lavasa Corporation received NCLT nod to start its insolvency proceedings. The company owns 68.7 percent stake in Lavasa Corporation. The project was severely impacted by a Ministry of Environment notification to stop work for jurisdictional reasons and not for environmental infractions, the company says.
  • LKP Finance received RBI nod for 62 percent stake sale to Essel group company-Dakshin Mercantile Private Limited. After this approval, Dakshin Mercantile will now be able to make open offer to acquire a minimum 26 percent equity shares from public shareholders. The public offer is for 32.7 lakh shares at Rs 198 per share. The company which is under the umbrella of Essel group’s finance division is headed by ex-head of Dhanlaxmi Bank, Amitabh Chaturvedi. The group is contemplating to make the new company as a Core Investment Company post the acquisition and open offer.
  • Dilip Buildcon received Letter of Acceptance for a new EPC project values at Rs 1,698 crore by Maharashtra State Road Development Corporation.
  • PNC Infratech has been declared the lowest bidder for Maharashtra Samruddhi Mahamarg’s EPC project for Rs 1,999.52 crore. The letter of award has been given from Maharashtra State Road Development Corporation.
  • Oriental Bank of Commerce board approved raising Rs 1,000 crore via qualified institutional placement.
  • Wipro announces that it has joined the Blockchain in Transport Alliance (BiTA) to drive blockchain adoption in the transportation industry. The company intends to use this platform to help ideate platform-agnostic blockchain standards for the logistics and transportation industry.
  • Mindtree and global professional services company GHD have established a partnership on a digital platform for property and infrastructure industries. The partnership combines GHD Digital’s knowledge of building design and operation, with Mindtree’s extensive track record in cloud based, internet of things platforms and analytics, to deliver efficiencies for clients and communities and create previously untapped revenue opportunities through the collection of data.
  • Muthoot Finance will consider raising Rs 5,000 crore via issue of redeemable non-convertible debentures through private placement on Sept. 04.
  • Panasonic Energy India Company received a penalty order of Rs 73.93 crore in respect of cartelization in the Indian-Zinc Carbon dry cell batteries market from the Competition Commission of India. The company had colluded with Geep Industries (India) Private Limited. In a case in 2016, there was a case in which it had a proven cartel of the company with Eveready Industries India Limited and Indo National Limited.
  • NCLT approved Idea-Vodafone merger, reports CNBC TV18. Idea and Vodafone signed a merger agreement last year, which could create the country's biggest telecom operator.

Data To Watch

  • 4:30 p.m.: India fiscal deficit in rupees for April-July period
  • 5 p.m. : India eight infrastructure industries index for July, prior 6.7 percent.
  • 5:30 p.m. : India GDP for April-June quarter YoY (estimate - 7.6 percent, prior 7.7 percent).
  • 5:30 p.m. : India GVA for April-June quarter YoY (estimate 7.5 percent, prior 7.6 percent).

Also read: Did India Return To 8% GDP Growth In Q1 FY19?

Who’s Meeting Whom

  • Mahanagar Gas to meet Citigroup and Credit Suisse from Aug. 31-Sept. 6.
  • Kennametal India to meet SBI Mutual Fund on Aug. 31.
  • Voltas to meet Blackrock Advisors on Aug. 31.

Insider Trades

  • DCM Shriram Industries promoter group acquired 53,000 shares from Aug. 28-29.
  • Fairchem Speciality promoter sold 1 lakh shares from Aug. 28-29.
  • Meghmani Organics promoter acquired 15,000 shares on Aug. 28.
  • Wonderla Holidays promoter acquired 13,000 shares from August 29-30.

Trading Tweaks

  • Solara Active Pharma Sciences and Kirloskar Oil Engines placed under ASM framework.

Money Market Update

  • Rupee hit record closing low for second day, fell 15 paise to 70.74 a dollar. The home unit touched a fresh all-time low of 70.86 a dollar.
  • The 10-year bond yields ended at 7.93 percent, its highest level in over two-months.

F&O Cues

  • Nifty September futures closed trading at 11,733.1 premium of 56 points versus 58 points.
  • Rollover: Nifty at 68 percent and Bank Nifty at 66 percent.
  • Across series: Nifty open interest up 2 percent; Bank Nifty open interest up 6 percent.
  • India VIX ended at 12.4, down 0.2 percent.
  • Max open interest for September series at 11,800 Call, (open interest at 22.5 lakh, up 53 percent)
  • Max open interest for September series at 11,400 Put (open interest at 27.3 lakh, open interest up 46 percent)

Put-Call Ratio

  • Nifty PCR at 1.57 versus 1.78
  • Nifty Bank PCR at 1.00 versus 1.17

Fund Flows

All You Need To Know Going Into Trade On August 31

Brokerage Radar

BofAML on Dr Reddy’s Lab

  • Maintained ‘Buy’; raised price target to Rs 2,900 from Rs 2,475, implying a potential upside of 22 percent from the last regular trade.
  • Deep pipeline in the U.S. gives comfort of 8 percent growth in the country; 2019-20 largely inflexion point.
  • Specialty to take a bigger role eventually.
  • Many catalysts in near-term: facility clearances, filing of complex LAI and DFN-15.

UBS on Sun Pharma

  • Maintained ‘Buy’; raised price target to Rs 740 from Rs 640, implying a potential upside of 16 percent from the last regular trade.
  • Early among Indian pharma to push forward with a branded portfolio.
  • Dual levers: Specialty as well as generics ramp up.
  • Raise price target on potential earnings upgrades .

CLSA on Auto

  • New insurance norms to push up prices.
  • Two wheeler prices likely to rise by about 3-8 percent; passenger vehicles by about 1-2 percent.
  • Low-priced two wheelers are likely to see highest percentage price impact.
  • Higher upfront insurance likely to impact demand.
  • Stay cautious on two wheelers with SELL on Hero/TVS, Outperform on Bajaj and Buy on Eicher.

JPMorgan on Idea Cellular

  • Maintained ‘Underweight’ with a price target of Rs 50.
  • Idea has received NCLT approval for the merger with Vodafone.
  • Post-merger math does not look good unless we see revenue recovery.
  • Post-merger opex/capex reduction assumptions can get undermined if RJio maintains its current aggressive pricing and market-share posture beyond the current financial year.

CLSA on Bharti Airtel

  • Maintained ‘Buy’ with a price target of Rs 500, implying a potential upside of 31 percent from the last regular trade.
  • Content is key beyond tariffs to defend market share.
  • Adoption of data/bundled plans is key to ARPU recovery.
  • Since Jio’s launch, Bharti Airtel has defended its market share well.

Deutsche Bank on Telecom

  • Bharti Airtel: Downgraded to ‘Hold’ from ‘Buy’; cut price target to Rs 425 from Rs 475, implying a potential upside of 11 percent from the last regular trade.
  • Bharti Infratel: Upgraded to ‘Buy’ from ‘Hold’; cut price target to Rs 345 from Rs 370, implying a potential upside of 21 percent from the last regular trade.
  • Idea Cellular: Maintained ‘Buy’; cut price target to Rs 100 from Rs 105, implying a potential upside of 101 percent from the last regular trade.
  • Idea-Vodafone mergeco set to commence; India becomes a three-player market.
  • Fight is for next billion eyeballs and content is the new battle ground.

Citi on HCL Technologies

  • Maintained ‘Neutral’ with a price target of Rs 1,115, implying a potential upside of 10 percent from the last regular trade.
  • Deals ramp up likely to aid second and third quarter.
  • Remains Neutral rated but near-term upsides possible.
  • With the rupee depreciation and reasonable valuation, believe there could still be upsides ahead.

Credit Suisse on Avenue Supermarts

  • Maintained ‘Underperform’ with a price target of Rs 1,150, implying a potential downside of 28 percent from the last regular trade.
  • Return ratios much lower than peers which trade at similar PEG ratio.
  • DMart has seen earnings downgrade, unlike other most expensive stocks in coverage.
  • Expect earnings growth to slow for the next three years.

Goldman Sachs on Avenue Supermarts

  • Maintained ‘Buy’ with a price target of Rs 1,965, implying a potential upside of 24 percent from the last regular trade.
  • DMart better than German peers on operating cost to sales and RoIC metrics.
  • DMart has higher working capital than the German discounters.
  • German discounters are often seen as benchmarks for discount retailing.

Goldman Sachs on Tata Motors

  • Maintained ‘Neutral’ with a price target of Rs 283, implying a potential upside of 9 percent from the last regular trade.
  • Management remains comfortable with EBIT guidance of 4 percent for the current financial year.
  • Cost reduction initiatives, better volumes and moderation in incentives to support margin.
  • In India business, management aims to enhance profitability.

UBS on Indian Hotels

  • Maintained ‘Buy’ with a price target of Rs 170, implying a potential upside of 26 percent from the last regular trade.
  • Consolidated RoCE below cost of capital, but standalone is quite impressive.
  • Balance sheet is burdened by non-operating assets and other illiquid investments.
  • Focus on an asset-light model and frugal renovation capex to result in better RoCE.
  • Hotel sector is in upcycle model; stay invested.