A financial trader monitors data on computer screens on the trading floor. (Photographer: Jasper Juinen/Bloomberg)

All You Need To Know Going Into Trade On Sept. 05

Asian stocks followed U.S. equities lower amid continued pressure in many emerging markets and as trade tensions persisted.

Equities posted modest declines in Japan, Australia and South Korea, while futures on indexes in China and Hong Kong pointed to a weaker open. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded 0.2 percent lower at 11,561 as of 7:25 a.m.

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 fell, Treasuries weakened and the dollar climbed as trade tensions persisted and emerging markets remained under pressure.

Also read: It's Beginning to Look a Lot Like a Crisis

Europe Market Check

European shares declined as concerns about world trade and emerging markets prevailed, with all but one sub-sector falling.

All You Need To Know Going Into Trade On Sept. 05

Also read: Contagion or Not, These Emerging Markets Hold Key to Selloff

Asian Cues

  • Japan’s Topix index fell 0.5 percent.
  • Australia’s S&P/ASX 200 Index lost 0.3 percent.
  • FTSE China A50 Index futures sank 0.4 percent.
  • Futures on Hong Kong’s Hang Seng fell 0.9 percent.
  • The S&P 500 Index futures were down less than 0.1 percent.

Also read: At $1 Trillion, Amazon Is Still Not Its Stock Price

Commodity Cues

  • West Texas Intermediate crude dropped 0.7 percent to $69.38 a barrel.
  • Gold was flat at $1,191.40 an ounce.
  • The Bloomberg Commodity Index declined 0.7 percent.

Shanghai Exchange

  • Steel traded higher for second day; up 0.2 percent.
  • Aluminium traded lower for fourth day; down 1 percent.
  • Zinc traded lower for second day; down 1.6 percent.
  • Copper traded lower for fifth day; down 1.3 percent.
  • Rubber snapped three-day losing streak; up 0.3 percent.

Also read: Western Japan Struggles to Recover After Typhoon Jebi

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

  • Australian GDP data for the second quarter comes out Wednesday.
  • Executives from Facebook, Twitter and Google on Wednesday testify on social media, Russia meddling.
  • The monthly U.S. employment report for August is due Friday.

Also read: SEBI Panel May Suggest Easing Ownership Rules For Foreign Funds

Datawatch

  • 10:30am: Nikkei India Services PMI for August, prior 54.2
  • 10:30am: Nikkei India Composite PMI for August, prior 54.1
  • 09/05-09/28: India 2Q BoP Current Account Balance, est. $17.0b deficit, prior $13.0b deficit

Indian ADRs

All You Need To Know Going Into Trade On Sept. 05

Stocks To Watch

  • Sun Pharma Advanced Research releases deadlines for the U.S. FDA to review its two new drugs ‘Xelpros’ and ‘Elepsia’ as November 2018 and January 2019, respectively. The company also said that it will shift its research facility to Vadodara and file a new drug application for its cancer drug ‘Taclantis’ in the fourth quarter of this financial year.
  • Qatar Airways CEO Akbar Ali Baker says he won’t rule out any future opportunity for investing in Indigo. He also said that if the airline approached them, they gulf-based carrier will show interest. He also added that Qatar Airways is open for partnership with a local partner who is credible and financially sound. (PTI)
  • LT Foods arm Nature Bio Foods secures equity funding of Rs 140 crore from Rabobank’s India Agri Business Fund II. This investment will facilitate further development of a retail consumer portfolio through the ‘EcoLife’ brand which offers rice, rice flour, staples, spices, nuts, etc.
  • Emami Infrastructure mulls modifying its memorandum of association by entering into manufacturing of crude drugs and raw materials, pharmaceutical preparations, aerated and mineral waters and similar other preparation. The annual general meeting of the company is scheduled on September 27.
  • Jet Airways announces its six-day global fare sales. The sale is effective till September 7 and covers 2.5 million seats over its network and will offer savings up to 30 percent on economy class and premiere class fares.
  • NBCC Limited gets direction from National Green Tribunal to provide a report on the revival of the Purana Qila lake in Delhi after a plea alleged that the project was being undertaken in a manner which would damage the environment. The plea said that the method of concretization and laying down of the sheets will cause damage to the lake.
  • Texmo Pipes and Products receives orders of HDPE pipe worth Rs 81.30 crore from Larsen & Toubro Limited. The execution period of the aforesaid order is nine months.
  • McNally Bharat Engineering receives construction order worth Rs 108 crore from NLC India. The project will be undertaken in Odisha.
  • Dr. Reddy’s Lab received tentative approval from USFDA for Esomeprazole Magnesium Tablets.

Earnings To Watch

  • Hudco
  • SREI Infrastructure
  • Varroc Engineering

Earnings Reaction To Watch

Muthoot Finance Q1 (Standalone, YoY)

  • Net profit up 43 percent at Rs 492 crore.
  • Interest income up 18 percent at Rs 1,605.3 crore.
  • Provisions down 79 percent at Rs 2.7 crore.
  • Gross loan assets up 11 percent at Rs 30,997 crore.
  • Gold loan outstanding up 10 percent at Rs 30,562 crore.

Bulk Deals

  • MEP Infrastructure Developers: Promoter Sudha Dattatray Mhaiskar acquired 9.4 lakh shares or 0.51 percent equity at Rs 50.99 each.
  • JM Financial: Saif India Holdings acquired 53 lakh shares or 0.63 percent equity at Rs 121.96 apiece.

Dynamatic Technologies

  • Goldman Sachs India Limited sold 83,000 shares or 1.31 percent equity at Rs 1625.01 apiece.
  • Girish Gulati Huf acquired 83,000 shares or 1.31 percent equity at Rs 1625.04 apiece.

Also read: Lockheed to Make F-16 Wings in Push for India Warplane Contract

Who’s Meeting Whom

  • Prism Johnson to meet ARGA Investment Management on Sept. 5.
  • Voltas to meet Marshall Wace, Blackrock Advisors and other investors from Sept. 5-6.
  • Inox Leisure to meet ICICI Securities on Sept. 5.
  • Shriram City Union Finance to meet Dolat Capital Markets and Reliance MF from Sept. 5-7.
  • Finolex Industries to meet Edelweiss Asset Management and Reliance MF from Sept. 5-12.

Insider Trades

  • Maharashtra Seamless promoter acquired 1 lakh shares on Aug. 30.
  • Kitex Garments promoter Sabu Jacob sold 16,800 shares on Aug. 30.
  • Fairchem Speciality promoter and director Utkarsh Shah sold 45,000 shares on August 31.

Trading Tweaks

  • TCS last trading day before start of buyback.
  • Adani Enterprises last trading day before demerger.

Money Market Update

  • Rupee dropped to record low for fifth straight day, ends 0.5 percent lower at 71.57 per U.S. dollar. The home unit has declined 10.8 percent so far this year and is Asia’s worst performing currency.
  • Sovereign bond extend declines as yields rose to highest level in three and half years.

F&O Cues

  • Nifty September Futures closed trading at 11,573.1 premium of 52.8 points versus 59.4 points.
  • Sept. series: Nifty open interest up 0.3 percent; Bank Nifty open interest up 3.4 percent.
  • India VIX ended at 13.7, up 2.9 percent.
  • Max open interest for the September series call at 11,800 strike price call option (open interest at 41.6 lakh share, open interest up 20 percent).
  • Max open interest for September series put at 11,500 strike price put option (open interest at 36.7 lakh shares, open interest up 17 percent).

F&O Ban

  • New In Ban: Adani Enterprises.

Put-Call Ratio

  • Nifty PCR at 1.45 versus 1.47.
  • Nifty Bank PCR at 0.61 versus 0.74.
All You Need To Know Going Into Trade On Sept. 05

Brokerage Radar

Nomura on Cochin Shipyard

  • Initiated ‘Buy’ with a price target of Rs 534, implying a potential upside of 28 percent from the last regular trade.
  • See strong medium-term visibility from defence orders and ship repair ramp-up.
  • Expect Revenue and operating income to grow at a compounded annual growth rate of 15 percent and 18 percent over FY18-21.
  • See an addressable defence opportunity worth Rs 1.15 lakh crore over next five years.
  • Expect Cochin to bag Rs 24,400 crore of orders extending revenue visibility well until March 2030.

HDFC Securities on HG Infra

  • Initiated ‘Buy’ with a price target of Rs 386, implying a potential upside of 61.5 percent from the last regular trade.
  • Further pickup in NHAI orders in the second half to address longevity concerns on earnings up-cycle.
  • Positives: healthy balance sheet, stable working capital cycle and entry into HAM.
  • Sub-contracting projects to boost margins.
  • Expect Order Book, revenue and net profit to grow at a compounded annual growth rate of 32 percent, 35 percent and 38 percent respectively over FY18-20.

Edelweiss on ITC

  • Upgraded to ‘Buy’ from ‘Hold’; raised price target to Rs 405 from Rs 328, implying a potential upside of 31 percent from the last regular trade.
  • Expect cyclical improvement in volume trajectory.
  • cigarette EBIT growth riding structural levers - limited cess hike & ban of e-cigarettes.
  • Believe ITC’s other businesses too are ripe for re-rating.

Credit Suisse on FMCG

  • Britannia: Downgraded to ‘Neutral’ from ‘Outperform’; raised price target to Rs 6,900 from Rs 6,000, implying a potential upside of 9 percent from the last regular trade.
  • HUL: Downgraded to ‘Neutral’ from ‘Outperform’; cut price target to Rs 1,770 from Rs 1,850, implying a potential upside of 7 percent from the last regular trade.
  • Last stock move has taken valuations to unprecedented territory.
  • Downgrade Britannia and HUL as there is no scope for earnings upgrades and see margin risks in the next financial year.
  • Prefer Dabur, Nestle and Colgate.

Deutsche Bank on Grasim Industries

  • Maintained ‘Buy’ with a price target of Rs 1430, implying a potential upside of 40 percent from the last regular trade.
  • Robust earnings growth outlook not yet discounted.
  • Expect margins to remain strong based on global demand-supply dynamics.
  • Volume growth should also improve substantially as VSF capacity is expanding.

Jefferies on GAIL (India)

  • Maintained ‘Buy’ with a price target of Rs 450, implying a potential upside of 25 percent from the last regular trade.
  • See robust earnings outlook with strong momentum in LPG/Petchem.
  • Winter may bring materially higher trading EBIT.
  • Most of the segments should fare better in coming quarters skewing EPS risks to the upside.

Citi on ICICI Bank

  • Maintained ‘Buy’ with a price target of Rs 390, implying a potential upside of 19 percent from the last regular trade.
  • Focusing on delivering growth in risk-adjusted operating profit.
  • Bank minimising exposure to riskier loans while aiming for 15 percent consolidated RoE by June 2020.
  • Believe that NPA recognition is in last leg and focus will shift to recoveries.

Macquarie on Graphite India

  • Maintained ‘Outperform’ with a price target of Rs 1,410, implying a potential upside of 41 percent from the last regular trade.
  • Needle coke market to remain tight and restrict GE supply.
  • Management confident it can pass on cost pressures.
  • Increasing comfort on longevity of current up-cycle and prudent capital allocation to re-rate stock.

CLSA on Media

  • Expect digital ad revenue to jump four times led by explosive growth of digital video.
  • Print ad share will be hit hard but TV ad revenue will continue to grow.
  • Zee Entertainment is set up for success in both TV and digital.