All You Need To Know Going Into Trade On Sept. 19

Asian stocks extended a rally in the wake of the latest salvos in the trade war that look likely to be less intense than many had feared.

Equities in Japan and South Korea advanced, while futures signaled China and Hong Kong will also build on gains that began in Asia Tuesday and extended into the U.S. session. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded 0.1 percent lower at 11,304 as of 7:10 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

• Global equity markets climbed Tuesday, shrugging off the latest salvos in the trade war between the U.S. and China.
• The yield on 10-year Treasuries held at about 3.05 percent after jumping six basis points to the highest in almost four months.

Europe Market Check

• European shares managed to eke out a small gain as investors shrugged off a new round of tit-for-tat tariffs between the world’s two largest economies.

Asian Cues

• Japan’s Topix index rose 1.3 percent.
• South Korea’s Kospi added 0.1 percent.
• FTSE China A50 futures advanced 0.7 percent.
• Futures on Hong Kong’s Hang Seng Index gained 0.5 percent.
• Australia’s S&P/ASX 200 Index rose 0.2 percent.
• Futures on the S&P 500 Index ticked lower.

Commodity Cues

• West Texas Intermediate crude slid 0.2 percent to $69.72 a barrel.
• LME copper gained 0.4 percent to $6,109.50 a metric ton.
• Gold was little changed at $1,198.46 an ounce.

Shanghai Exchange

• Steel traded higher for the fourth day; up 1.33 percent.
• Aluminium traded lower for the third day; down 0.07 percent.
• Zinc traded 1.83 pecent higher.
• Copper traded 2.5 percent higher.

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

• The Bank of Thailand decides on policy 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.

Indian ADRs

Stocks To Watch

• AMC companies are in focus as SEBI changed total expense ratio for mutual funds.
• MCX in focus SEBI said that they have taken the first step to open commodities derivatives market to foreign investors
• Sun Pharma announced that it has received the European Commission’s approval for anti-body Ilumetri by Almirall. The roll out of this product will start in Europe in next few weeks and will be used to treat moderate-severe chronic plaque Psoriasis.
• ICICI Prudential Life Insurance signed bancassurance partnership with Saraswat Co-operative Bank. Through this partnership, over 280 branches of the Saraswat Bank in Maharashtra, Goa, Gujarat, Delhi, Madhya Pradesh and Karnataka will offer customer-centric life insurance products of ICICI Prudential Life.
• ICICI Bank clarified that they have not filed any application for settlement but only a response to the show-cause notice has been submitted to SEBI. This clarification came after the SEBI chairman Ajay Tyagi stated that ICICI Bank had filed consent petition with SEBI regarding the Videocon group dealings.
• RITES received additional turnkey contract work worth Rs 436 crore from the Indian Railways. This contract is in addition to existing project for setting up of a wagon workshop at Dalmianagar for which the initial contract cost was worth Rs 89 crore.
• KIOCL board approved buyback of 1.26 crore shares (1.98 percent of paid up capital) at Rs 170 apiece for an aggregate consideration of Rs 214 crore. The record date for the buyback is Oct. 1.
• Som Distilleries & Breweries arm launched lager beer ‘Blackfort’ to tap the mild beer segment in Karnataka.
• NIIT Technologies launched blockchain-based solution ‘Chainm’ for Airlines and its partners. This will help airlines and its partners in the backend process of
• settlements.
• IL&FS Transportation Networks arm Moradabad Bareilly Expressway Ltd. to receive a claim compensation of Rs 425 crore from NHAI for losses suffered on account of cost overruns for the development of the project.
• Himachal Futuristic gets Rs 611 crore order from BSNL, reported Bloomberg.

Offerings

• Ircon IPO subscribed 1.02 times on second day. Offer closes today.

Who’s Meeting Whom

• Cipla to meet MSD Capital, JP Morgan India Private Ltd. and other investors from Sept. 19-27.
• PI Industries to meet Mirae Asset Global Investments on Sept. 20.

Insider Trades

• Apollo Tyres promoter group PTL Enterprises acquired 1 lakh shares on Sept.14.

Money Market Update

• The rupee closed at a record low of 72.97 per dollar versus 72.51 per dollar on Monday.
• Sovereign bond slide, as yield inch higher four basis points to 8.13 percent.

F&O Cues

• Nifty September futures closed trading at 11,310, premium of 32 points.
• Nifty September open interest down 0.5 percent ; Nifty Bank September open interest up 25 percent.
• Max open interest for September series at 11,500 Call, (open interest at 42.9 lakh shares).
• Max open interest for September series at 11,200 Put, (open interest at 37.2 lakh shares).

F&O Ban

• In ban: Adani Enterprises, Balrampur Chini
• New in ban: Balrampur Chini

Put-Call Ratio

• Nifty 1.20 versus 1.28
• Nifty Bank 0.58 versus 0.84

Brokerage Radar

Motilal Oswal on MCX

• Maintained ‘Buy’ with a price target of Rs 1,000, implying a potential upside of 28 percent from the last regular trade.
• SEBI allow foreign entities to participate in commodity derivatives.
• Move to increase liquidity and depth in far-month contracts.
• Move to encourage domestic firms to trade on Indian exchanges instead of overseas hedging.
• Will wait and watch for any contribution from this new segment.

Nomura on JSW Steel

• Initiated ‘Buy’ with a price target of Rs 484, implying a potential upside of 19 percent from the last regular trade.
• Leading play on Indian steel revival.
• Expect Indian steel demand to grow at 5-7 percent over the next decade.
• Combination of cost efficiency and timely capacity expansion to drive profitability growth.
• Balance sheet to remain strong despite capex-intense phase.

IDFC Securities on Dr Lal PathLabs

• Initiated ‘Outperform’ with a price target of Rs 1,184, implying a potential upside of 23 percent from the last regular trade.
• Company is one of the winners, given its proven execution capabilities and profitable business model.
• Positives: focus on volume growth, competitive pricing and steady network expansion.
• Expect a compounded annual growth rate of 16 percent in revenue and steady 26 percent margin over FY18-21.
• Expect economic gains to increase for large players and create multi-year growth stories.

Axis Securities on Sheela Foam

• Initiated ‘Buy’ with a price target of Rs 2,039, implying a potential upside of 22 percent from the last regular trade.
• Strong brand awareness among consumers to give competitive edge over peers.
• Positives: product expansion, introduction of low price products and high margin products.
• New plant setup and investment in existing plants to be supported by strong cash flow position.
• Expected fall in price of major raw material TDI to further increase margin.

Goldman Sachs on Shriram Transport

• Upgraded to ‘Buy’ from ‘Neutral’; cut price target to Rs 1,491 from Rs 1,530, implying a potential upside of 26 percent from the last regular trade.
• Volume growth to sustain momentum
• Asset quality stabilising while loan loss reserve moderating.
• Improving RoA and earnings trajectory not fairly priced.
• Cut FY19-FY21 EPS estimates by 1-3 percent to factor in higher cost of funds.

HSBC on M&M Financials

• Maintained ‘Buy’; cut price target to Rs 569 from Rs 578, implying a potential upside of 28 percent from the last regular trade.
• Tracks well on growth and asset quality led by strong rural demand.
• Rising interest rates could weigh on net interest margins.
• See enough levers in P&L to sustain RoE improvement.

Citi on India Property

• Some signs of a rebound, but still a long way to go.
• Residential new launches appear to be bottoming.
• Survey indicate residential prices have inched up.
• Commercial new launches appear to be increasing from a low base.
• Weak demand conditions and tightening interest-rate to further toll on the sector.

Credit Suisse on India Telecom

• Strong subscriber addition aided by renewed push for JioPhone.
• Incremental market share gains for Jio at expense of incumbent operators.
• All operators other than Jio witnessed decline in active subscriber base.
• Expect ARPU and Ebitda pressures to continue for incumbent operators.

Brokerages On Asset Management Companies

Morgan Stanley on HDFC AMC

• Maintained ‘Overweight’; cut price target to Rs 1,765 from Rs 2,050, implying a potential upside of 15 percent form the last regular trade.
• SEBI has cut TER quite sharply resulting into EPS estimates cut of 13-14 percent.
• Stock has been weak in anticipation of adverse regulation.
• Expect some further near-term weakness; Overhang should subside post this cut.

Nomura on Reliance Nippon

• Downgraded to ‘Neutral’ from ‘Buy’; cut price target to Rs 210 from Rs 315, implying a potential downside of 2 percent from the last regular trade.
• AMCs will also have to absorb some part of lower TER.
• Operating leverage taken away to large extent.
• Ability to absorb such large TER cuts is limited for Reliance Nippon.
• A 35 percent absorption of lower TER would mean 10-15 percent cumulative reduction in profits for Reliance Nippon.

CLSA on AMCs

• Lowering of TER could lead to 15-25 basis point reduction in equity fees.
• Equity AUMs form 40 percent of total funds and could lead to 25 percent earnings impact on sector.
• Companies to pass on majority of this to distributors.
• Banning of upfront commission to reduce investor churn and improve working capital cycle.

Citi on AMCs

• MFs could cushion lower TER impact by passing it to distributors and by lower promotional expenses.
• Banning upfront commissions to improve quality of flows.
• Lower charges to make mutual funds more attractive for investors and aid penetration.