Pedestrians walk past the Bombay Stock Exchange (BSE) in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

All You Need To Know Going Into Trade On Sept. 18

Asian stocks had a mixed open even as U.S. stock futures declined after the Trump administration’s latest barrage of tariffs against China.

Equity benchmarks in Japan were flat-to-higher, while stocks in Australia and South Korea edged lower. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded 0.3 percent lower at 11,351 as of 7:15 a.m.

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BQ Live

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

U.S. Market Check

  • U.S. stocks tumbled the most in a month as investors grappled with the latest American threats to expand tariffs on Chinese goods.
  • The yield on 10-year Treasuries fell one basis point to 2.98 percent.

Also read: Trump Tariffs to Hit $200 Billion of China Goods on Sept. 24

Europe Market Check

  • European equities rose as H&M led gains among retailers, surging the most in seventeen years on surprisingly strong third-quarter revenue.
All You Need To Know Going Into Trade On Sept. 18

Also read: May Will Fight Off Rivals to Deliver Brexit, Academics Predict

Asian Cues

  • Japan’s Topix index was up 0.2 percent.
  • Australia’s S&P/ASX 200 Index fell 0.3 percent.
  • South Korea’s Kospi index lost 0.4 percent.
  • Futures on Hong Kong’s Hang Seng Index rose 0.2 percent.
  • S&P 500 futures dropped 0.4 percent.

Also read: There's a Mystery Threatening China's $128 Billion Pork Industry

Commodity Cues

  • West Texas Intermediate crude fell 0.5 percent to $68.56 a barrel.
  • Brent crude traded 0.4 percent lower at $77.77 a barrel.
  • Gold fell 0.2 percent to $1,199.10 an ounce.

Shanghai Exchange

  • Steel traded higher for third day; up 0.8 percent.
  • Aluminium traded lower for second day; down 0.4 percent.
  • Zinc traded higher; up 0.2 percent.
  • Copper traded higher; up 0.7 percent.
  • Rubber traded lower for third session; down 1 percent.

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

  • South Korean President Moon Jae-in visits Pyongyang for a summit with Kim Jong Un Tuesday.
  • Japanese trade-flow numbers are due on Wednesday.
  • The Bank of Japan holds its policy meeting on Wednesday.
  • Britain releases inflation data on Wednesday
  • European PMIs are due on Thursday
  • The Organization of Petroleum Exporting Countries and its allies meet in Algiers this weekend.

Also read: Why Is This Supersafe Bank Scaring the Fed?

Indian ADRs

All You Need To Know Going Into Trade On Sept. 18

Stocks To Watch

  • Tata Motors-owned Jaguar Land Rover confirmed a cut in its production schedule at the Castle Bromwich plant in the West Midlands region of England due to “continuing headwinds” impacting the British automobile industry.
  • Government announced the merger of Bank of Baroda, Dena Bank and Vijaya Bank. The proposal will now need to be passed by the boards of the individual banks. The combined bank will be the third largest in India.
  • Bank of Maharashtra request, to set-off accumulated losses worth Rs 2,543.7 crore from its share premium account, gets rejected by RBI.
  • Mcleod Russel to dispose its Assam’s Bargang tea estate to Amgoorie India for Rs 59.65 crore and Harchurah estate to Goodricke group for Rs 31.64 crore.
  • Aurionpro Solutions to provide its cash management platform to Sudan based Bank of Khartoum’s UAE and Bahrain’s branches.

Offering

Ircon International IPO gets 29 percent demand for shares offered for first day sale, offer close on Sept. 19.

Also read: Ircon International IPO: Here’s All You Need To Know

Bulk Deals

Cigniti Technologies

  • Promoter Sapna Pennam sold 2.56 lakh shares or 0.93 percent equity at Rs 390.01 each.
  • Infina Finance Private Limited acquired 2.55 lakh shares or 0.93 percent equity at Rs 390 each.

Who’s Meeting Whom

  • Shriram City Union Finance to meet JM Financial Services on Sept. 18.
  • Tata Steel to meet Abu Dhabi Investment Authority, Pureheart Asset Management and other investors from Sept. 18-20.
  • DCM Shriram to meet DSP Mutual Fund, HDFC Life and other investors from Sept. 18-19.
  • Narayan Hrudayalaya to meet Armor Capital, Toro Capital and other investors from Sept. 18-21.

Insider Trades

  • Waterbase promoter acquired 37,800 shares on Sept. 12.
  • Panama Petrochem Industries promoter group acquired 11,200 shares from Sept. 5-12.
  • Confidence Petroleum promoters acquired 21,000 shares on Sept. 14.
  • Ashoka Buildcon promoter Ashok Motilal Katariya acquired 69,600 shares on Sept. 14.

Trading Tweaks

  • HCL Tech buyback from Sept. 18 to Oct. 3. (More details here)

Money Market Update

  • Rupee weakens against dollar as govt measures disappoint. The home unit snaps two-day winning streak; ends 0.9 percent lower at 72.51 against the U.S. dollar.
  • Sovereign bond gains, as yield dropped three basis points to 8.1 percent.

F&O Cues

  • Nifty September futures closed trading at 11,408, premium of 30 points.
  • Nifty September open interest down 0.9 percent; Nifty Bank September open interest up 4.5 percent.
  • Max open interest for September series at 11,800 Call (open interest at 41 lakh shares).
  • Max open interest for September series at 11,400 Put (open interest at 36.8 lakh shares).

F&O Ban

  • In ban: Adani Enterprise
  • Out of ban: Balrampur Chini

Put-Call Ratio

  • Nifty PCR at 1.28 versus 1.38
  • Nifty Bank PCR 0.84 versus 1.02
All You Need To Know Going Into Trade On Sept. 18

Brokerage Radar

Kotak on Bajaj Auto

  • Maintained ‘Sell’; raised price target to Rs 2,700 from Rs 2,500, implying a potential downside of 5.5 percent from the last regular trade.
  • Rupee depreciation to aid margins but medium-term concerns stay.
  • Rupee depreciation to improve operating margin as well as competitiveness in export markets.
  • Retain ‘Sell’ due to deterioration in profitability and absence of scooters in portfolio.

HSBC on Titan

  • Maintained ‘Buy’; cut price target to Rs 1,050 from Rs 1,100, implying a potential upside of 27 percent from the last regular trade.
  • Correction due to wavering revenue growth guidance and fear of regulations amid growing CAD.
  • Positives: good studded jewellery promotion, low base in the third quarter and own scheme to spur growth.
  • Valuation remains compelling post current sell-off.

PhillipCapital on Jubilant Foodworks

  • Maintained ‘Buy’ with a price target of Rs 1780, implying a potential upside of 31.5 percent from the last regular trade.
  • Believe Jubilant is poised to deliver strong second quarter.
  • Channel checks suggest more than 18 percent SSSG in July-August 2018.
  • Expect 44 percent and 59 percent in operating income and net profit respectively in the second quarter.

UBS on Indian Pharma

  • Pharma stock valuations towards the high end of 10-year average.
  • Rupee weakening likely to translate to earnings upgrades.
  • Emerging Market exposure is a negative.
  • Cipla remains top pick; Also like Sun Pharma.

Macquarie on YES Bank

  • Maintained ‘Outperform’ with a price target of Rs 425, implying a potential upside of 33 percent from the last regular trade.
  • Management expects divergence to be benign.
  • Not alarmed about pace of growth; Lending done to quality customers.
  • The growth of 25 percent is sustainable without equity capital raising.

Brokerages On Hindustan Unilever

CLSA

  • Maintained ‘Outperform’ with a price target of Rs 1,950, implying a potential upside of 22 percent from the last regular trade.
  • Management commentary pre-quarter close remains positive.
  • Increase in crude and rupee depreciation to be offset by lower palm oil prices and price hikes.
  • Outlook for demand remains fairly positive; May get further fillip from pre-election spending.

Macquarie

  • Maintained ‘Outperform’ with a price target of Rs 1,870, implying a potential upside of 17 percent from the last regular trade.
  • Price increases to offset margin pressure due to rupee depreciation.
  • No incremental competitive intensity in Laundry care.
  • GST-related rationalization and cost savings continue to boost margin.

BofAML

  • Maintained ‘Buy’ with a price target of Rs 1,900, implying a potential upside of 18.5 percent from the last regular trade.
  • Healthy volumes and better profitability to mark stable second quarter.
  • Steady compounder with strong execution capability.
  • Expect healthy earnings per share with a compounded annual growth rate of 18 percent to back premium valuations.
  • Recent correction offers attractive buying opportunity.

Brokerages On PSU Banks Merger

IDFC Securities on Bank of Baroda

  • Downgraded to ‘Neutral’ from ‘Outperform’; cut price target to Rs 130 from Rs 180, implying a potential downside of 4 percent from the last regular trade.
  • Believe BoB is in for a de-rating with merger announcement.
  • Integration issues and higher NPLs post-merger are key concerns.
  • Proforma numbers of merged entity indicate no material change in financial parameters.
  • Based on current market price, post-merger shares will be 19 percent higher than BoB’s current shares.

JP Morgan

  • Merger of Bank of Baroda, Dena and Vijaya Bank an incremental positive for the sector.
  • Immediate share price action should be negative for BoB, given further integration risks.
  • Additional provisioning requirements is likely negative for BoB’s incremental earnings outlook.

CLSA

  • Bank of Baroda to acquire to smaller PSUs; Not a material dilution of the franchise.
  • Deal valuation may be at a tad discount to BoB.
  • Risk from clean-up post-merger announcement; Synergy could take 1-2 years.
  • PSU consolidation is a long-term positive but a near-term overhang.

UBS

  • Big overhang is behind; See no major impact over medium term.
  • Believe this merger would be different from a SBI merger.
  • Tier-1 of merged entity similar to BOB, while Provision Coverage Ratio bit lower.
  • Believe merger would offer operating cost and cross sell synergies over medium term.

Citi

  • Merger neutral for Bank of Baroda.
  • Strong financials of Vijaya Bank could offset weak financials of Dena.
  • Cultural issues significant, technology not as much.