A stock broker talks on a telephone while working on his computer. (Photographer: Chris Ratcliffe/Bloomberg)

All You Need To Know Going Into Trade On Sept. 04

Asian stocks were off to a muted start Tuesday amid continuing concerns about stability in emerging markets and prospects for escalating U.S.-China trade tensions.

Equity benchmarks in Japan and Australia edged lower, while they were little changed in South Korea. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India was little changed at 11,635 as of 6:16 a.m.

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

  • U.S. futures were little changed after American exchanges closed Monday for a holiday.
  • Emerging markets fell, with Argentina slumping the most even as it took further steps to restore investor confidence.
  • U.S. trade negotiators are in difficult talks with their Canadian counterparts over a revision of the North American Free Trade Agreement already agreed to by the U.S. and Mexico.

Also read: Trump Cancels Labor Day Plans as Canada, China Trade Fights Loom

Europe Market Check

  • European shares eked out a slight gain, buoyed by higher oil prices and insurance sector stocks.
All You Need To Know Going Into Trade On Sept. 04

Also read: After $40 Billion Exit, Morgan Stanley Says Give Europe a Chance

Asian Cues

  • Japan’s Topix index fell 0.3 percent as of 9:11 a.m. in London.
  • Australia’s S&P/ASX 200 Index fell 0.2 percent.
  • South Korea’s Kospi index lost 0.2 percent.
  • Hong Kong’s Hang Seng Index futures rose 0.1 percent.
  • Futures on the S&P 500 Index gained 0.1 percent.

Also read: Judgment Day Awaits for Plan to Avert Argentine Economic Crisis

Commodity Cues

  • West Texas Intermediate crude advanced 0.3 percent to $70.02 a barrel.
  • Gold was little changed at $1,201.01 an ounce.
  • LME copper fell 0.4 percent to $5,942.50 a metric ton.

Shanghai Exchange

  • Steel trades lower for fourth-day; down 0.1 percent.
  • Aluminium trades lower for third day; down 0.8 percent.
  • Zinc snaps three-day winning streak; down 0.9 percent.
  • Copper trades lower for fourth day; down 0.5 percent.
  • Rubber trades lower for third day; down 0.5 percent.

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

  • Reserve Bank of Australia meets Tuesday and is expected to leave rates on hold.
  • Bank of England governor Mark Carney on Tuesday testifies on the August inflation report and policy decision.
  • Executives from Facebook, Twitter and Google on Wednesday testify on social media, Russia meddling.
  • U.S. PMI data is due Tuesday, and employment reports for August are set to follow Friday.
  • President Donald Trump may announce implementation of tariffs on as much as $200 billion in additional Chinese products as soon as Thursday.

Also read: World Factory Fears, 30% Pay Rises, Argentina Awaits: Eco Day

All You Need To Know Going Into Trade On Sept. 04

Also read: Petrol, Diesel Prices At All-Time High On Rupee Woes

Stocks To Watch

  • Jet Airways’ long-term rating cut to ‘BB’ from ‘BB+’ at ICRA. The rating agency gives a negative outlook citing significant rise in jet fuel prices and no corresponding increase in air fares, which impacted the financial performance of the company. Even the short-term rating stands revised to ‘A4’ from ‘A4+’. This is the second time in less than four months where the rating agency has downgraded the credit rating on Jet Airways citing the same reasons.
  • State Bank of India to offer loans for repairs and renovation of homes in Kerala at 8.45 percent. The scheme is applicable for loans up to Rs 10 lakh, up to November 3. Even the processing fee for these loans will be waived off.
  • MTNL's plans to seek approval of shareholders for raising authorised share capital from Rs 800 crore to Rs 10,000 crore and borrowing powers by almost 40 percent will aid the state-owned corporation's 4G plans and provide it the firepower to compete in the market, its chairman PK Purwar has said. This is being done with anticipation of 4G spectrum allocations by the government. (PTI)
  • Hotel Leela Ventures clarifies that is evaluating various options to reduce debt. The management says the company is in discussion with three to four investors including Brookfield.
  • VST Tillers August sales data: Power tillers sales up 1.1 percent at 1,646 units versus 1,628 units and tractors sales down 49.7 percent at 517 units versus 1,028 units.
  • Yuken India fixes September 14 as the record date for its bonus issue. The ratio for this issue is set at 3:1.
  • Persistent Systems’ U.S. arm acquires 100 percent stake in Herald Technologies for $5.2 million. The acquired business will strengthen the company’s intellectual property led offerings in the healthcare domain and create cross-selling opportunities.
  • GTL Infrastructure’s certain distressed loans have been bought by Bank of America Merrill Lynch and Edelweiss Asset Reconstruction Co. for about Rs 1,400 crore ($197 million). Banks led by Union Bank are said to take more than 40 percent haircut in getting their loans back, according to Bloomberg.
  • Muthoot Finance to consider raising Rs 5,000 crore via non-convertible debentures.
  • Maruti Suzuki: Parent Suzuki aims to treble sales volume by 2030 in India, retain 50 percent of Indian car market (Business Standard).

Also read: Steel Major Jindal Studies Breakup as $6 Billion Debt Weighs

Earnings To Watch

  • Muthoot Finance
  • Easun Reyrolle

Bulk Deals

Hikal Limited

  • Ashish Kacholia acquired 20 lakh shares (1.62 percent) at Rs 166.5 each
  • The International Finance Corporation sold 39.8 lakh shares (3.23 percent) at Rs 166.51 each.

IG Petrochemicals

  • Birla Mutual Fund acquired 5 lakh shares (1.62 percent) at Rs 480 each.
  • Birla Sun Life Long Term Advantage Fund acquired 5 lakh shares (1.62 percent) at Rs 480 each.

Mahindra Lifespace Developers

  • First State Investment acquired 3.05 lakh shares (0.59 percent) at Rs 440.25 each.
  • American Fund Insurance sold 7.1 lakh shares (1.39 percent) at Rs 440.42 each.

Also read: Fund Managers Fear Foreign Outflows After SEBI’s New Rules

Who's Meeting Whom

  • PI Industries to meet New Mark Advisors and Franklin Templeton India from Sept. 4-6.
  • Eicher Motors to meet Enam Asset Management on Sept. 4.
  • Greaves Cotton to meet Birla Sunlife Asset Management Company on Sept. 4.
  • IIFL Holdings to meet Elara Capital, JP Morgan Asset Management and other investors from Sept. 4-7.

Insider Trades

  • Kirloskar Brothers promoters acquired 3.08 lakh shares from Aug. 30-31.
  • Ceat promoter group acquired 56,300 shares from Aug. 29-30.
  • UPL promoter acquired 2.23 lakh shares from Aug. 29-30.
  • Nava Bharat Ventures promoter acquired 26,000 shares from Aug. 28-30.
  • Skipper promoter Rashmi Bansal acquired 88,000 shares on Aug. 31.

(As reported on September 3)

Trading Tweaks

Infosys' ex date date for 1:1 bonus. F&O lot size revised to 1,200 shares.

Rupee

  • Rupee closed at 71.21/$ on Monday from 70.99/$ on Friday

Also read: Rupee Tumbles To Record Low, Bond Yield Rises To Multi-Year High

F&O Cues

  • Nifty September Futures ended at 11,641.7, with a premium of 59.4 points versus 54.8 points.
  • September series-Nifty open interest up 0.5 percent; Bank Nifty open interest up 4.4 percent.
  • India VIX ended at 13.9, up 6.3 percent.
  • Max open interest for the September series call at 11,800 strike price call option, (open interest at 34.7 lakh share, up 26 percent).
  • Max open interest for September series put at 11,600 strike price put option (open interest at 34.4 lakh shares, up 6 percent)

Put-Call Ratio

  • Nifty PCR at 1.47 versus 1.55.
  • Nifty Bank PCR at 0.74 versus 0.98 .
All You Need To Know Going Into Trade On Sept. 04

Also read: Lehman Brothers Former Global Chief Economist On The 2008 Financial Crisis: Lessons Learned, Lessons Missed

Brokerage Radar

IDBI Capital on Mold-Tek Packaging

  • Initiated ‘Buy’ with target price of Rs 377; Potential upside of 18 percent.
  • In-Mold labelling and in-house backward operation integration key catalysts for future growth.
  • Timely capacity addition to cater to growing demand.
  • Strong foothold in paints and lube segment, entry in food and FMCG to be revenue accretive.
  • Expect sales/EBITDA/net profit to grow at a CAGR of 21 percent/27 percent/31 percent respectively over FY18-20.

Kotak on City Union Bank

  • Downgraded to ‘Reduce’ From ‘Add’; Raised target price to Rs 200 from Rs 190; Potential upside of 2 percent.
  • Rise in stock price could be due to receding concerns.
  • Rising interest rates and inability to pass on the costs to lead to weaker NII growth.
  • RoE contraction and valuation expansion do not bode well.

Brokerages on Mahindra & Mahindra

UBS

  • Maintained Buy; Raised target price to Rs 1,200 from Rs 1,000; Potential upside of 27 percent.
  • New SUV launch could drive re-rating.
  • Expect tractor growth to remain robust.
  • S201 a key potential trigger; Ford alliance a long-term positive.

Deutsche Bank

  • Maintained ‘Buy’; Raised target price to Rs 1,050 from Rs 1,005; Potential upside of 11 percent.
  • Marazzo pricing is right in middle of two largest selling models in the segment.
  • Expect Marazzo to achieve monthly run-rate of 2,500-3,000/month in H2FY19.
  • Mahindra planning a capacity of 8,000-9,000/month between Marazzo and S201.

Citi

  • Maintained ‘Buy’ with target price of Rs 1,060; Potential upside of 12 percent.
  • Utility vehicle growth continues to be modest; Market share softens.
  • Tractors report a steady month.
  • New SUV models critical; All eyes on Marazzo.

Brokerages on Mindtree

Credit Suisse

  • Maintained ‘Neutral’ with target price of Rs 925; Potential downside of 16 percent.
  • Management reiterated target of better-than-industry growth and continued margin expansion.
  • Continued focus on larger deals; Near-term business momentum remains solid.
  • Fundamentals look attractive for the medium term, but valuations leave no upside.

Macquarie

  • Maintained ‘Underperform’ with target price of Rs 820; Potential downside of 25 percent.
  • High emphasis on platform-led delivery; Investments in digital to continue.
  • EPS growth to be faster than revenue due to margin benefits.
  • To improve payout ratio by a mix of dividends and buy-backs.

Credit Suisse on CG Consumer

  • Maintained ‘Outperform’; Cut target price to Rs 320 from Rs 330; Potential upside of 28 percent.
  • Near-term pain point is price-led competition in LED market.
  • Go-to market changes are progressing; Overall process to take 18 months.
  • Cut FY19-21 EPS estimates to factor in margin pressure in lighting business.

Citi on Tata Motors

  • Maintained ‘Buy’ with target price of Rs 410; Potential upside of 54 percent.
  • Another strong month for commercial vehicle sales.
  • UV sales reflects a better showing.
  • Expect October growth to taper off to 5 percent.

HSBC on Quess Corp

  • Maintained ‘Buy’ with target price of Rs 1,400; Potential upside of 43 percent.
  • Company confident of growing at 20 percent organically and meeting 8 percent margin target in medium term.
  • Company to continue to make acquisitions in all segments except its people and services business.
  • Company assumes flat pricing, driven by mix, which is too conservative.

Kotak on BHEL

  • Maintained ‘Reduce’; Raised target price to Rs 89 from Rs 78; Potential upside of 9 percent.
  • Expect EPS to grow meaningfully over FY18-21.
  • Weak cash flow performance limits ability to ascribe value to incremental profits.
  • Industry scenario to remain unrelenting.

BofAML on Telecom

  • Vodafone-Idea may take 1-2 months for network integration to start.
  • Believe communication from new management on company strategy is key.
  • Consider next 6-9 months as an opportunity for Airtel and Jio to grab market share.
  • Expect Infratel to quantify tenancy cancellation number in upcoming quarter.

Brokerages on Cement Sector

Citi

  • If construction ban stays for a prolonged period, then it would hurt cement volumes and pricing.
  • Ultratech’s 20-25 percent volumes are from regions that are banned.
  • ACC/Ambuja have 20/40 percent of their capacity in these regions.
  • Shree Cement and Dalmia Bharat have negligible volumes from banned regions.

Morgan Stanley

  • Earnings are at an inflection point.
  • Saw price hikes in June ended quarter, which should sustain in second half of current financial year.
  • Costs should see a modest near-term rise.
  • Top Pick: ACC.

Deutsche Bank Research on Indian Banks

  • Banks getting aggressive on rate hikes.
  • See loan growth improving with non-retail picking up.
  • Expect improvement in net interest margins.