All You Need To Know Going Into Trade On Aug. 1
A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

All You Need To Know Going Into Trade On Aug. 1

A sell-off in U.S. stocks extended to Asia as markets opened after Chairman Jerome Powell dented hopes the Federal Reserve is poised to continue easing after delivering the first interest-rate cut in over a decade.

Shares in Japan, Australian and South Korea saw moderate declines after the U.S. equities fell the most in two months. U.S. futures slid. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.45 percent to 11,071 as of 7 a.m.

Short on time? Well, then listen to this podcast for a quick summary of All You Need To Know before the opening bell.

BQ Live

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

  • Markets turned volatile as Powell signalled the Fed is in no rush to continue with easing, unless warranted by data.
  • Policy makers voted, with two officials dissenting, to lower the target range for the benchmark rate by a quarter-percentage point to 2-2.25 percent, delivering the first cut in over a decade. The shift was predicted by most investors and economists.
  • President Donald Trump said in a tweet “Powell let us down” with the size of the rate cut.
  • Spot gold fell after traders viewed comments from Federal Reserve Chairman Jerome Powell.
  • With the Fed out of the way, investors will continue to keep an eye on the ongoing earnings season as well as Friday’s U.S. jobs data and trade developments.

Also read: Emerging-Market Rally Tempered by Not-So-Dovish Fed Rate Cut

Earnings Reaction To Watch

Eicher Motors (Q1, YoY)

  • Revenue down 6.5 percent to Rs 2,381.9 crore.
  • Net profit down 21.6 percent to Rs 451.8 crore.
  • Ebitda down 24.1 percent to Rs 614.5 crore.
  • Margin at 25.8 percent versus 31.8 percent.
  • Other Income up twice to Rs 120.4 crore.
  • Employee expenses up 24 percent to Rs 211.6 crore.

Also read: Q1 Results: Eicher Motors’ Profit Misses Estimates; Margin Contracts

UPL (Q1, YoY)

  • Revenue up 91 percent to Rs 7,906 crore.
  • Net profit down 65 percent to Rs 178 crore.
  • Ebitda up 47 percent to Rs 1,246 crore.
  • Margin at 15.8 percent versus 20.5 percent.
  • One-time expense of Rs 72 crore in current quarter attributable to Arysta.
  • Base quarter has other income of Rs 123 crore.

Also read: Q1 Results: UPL Profit Misses Estimates On Exceptional Loss, Higher Costs

Ashok Leyland (Q1, YoY)

  • Revenue down 9.2 percent to Rs 5,683.9 crore
  • Net profit down 45.4 percent to Rs 230.2 crore.
  • Ebitda down 20 percent to Rs 537 crore.
  • Margin at 9.4 percent versus 10.7 percent.

Trent (Q1, YoY)

  • Revenue up 29.9 percent to Rs 767.2 crore.
  • Net profit up 50.8 percent to Rs 57.9 crore.
  • Ebitda up 2.3 times to Rs 163.9 crore.
  • Margin at 21.4 percent versus 12 percent.
  • Depreciation up eight times to Rs 59.7 crore.
  • Finance cost up five times to Rs 53.6 crore

Ajanta Pharma (Q1, YoY)

  • Revenue up 19.7 percent to Rs 611.9 crore.
  • Net profit up 8.3 percent to Rs 114.6 crore.
  • Ebitda up 6.9 percent to Rs 168.4 crore.
  • Margin at 27.5 percent versus 30.8 percent.
  • Raw material as percent of sales at 23.3 percent versus 16.5 percent.

Container Corporation of India (Q1, YoY)

  • Revenue up 4.5 percent to Rs 1,638.9 crore.
  • Net profit down 9.7 percent to Rs 227.8 crore.
  • Ebitda up 3.3 percent to Rs 403.2 crore.
  • Margin at 24.6 percent versus 24.9 percent.
  • Depreciation up 23 percent to Rs 125.3 crore.
  • Other operating expenses up 12 percent to Rs 208.2 crore.

CreditAccess Grameen (Q1, YoY)

  • Net interest income up 27.1 percent to Rs 232.4 crore.
  • Net profit up 32.7 percent to Rs 95.8 crore.
  • Disbursements up 42.9 percent to Rs 2,310 crore.
  • GNPA at 0.55 percent versus 0.66 percent (QoQ)

Jagran Prakashan (Q1, YoY)

  • Revenue down 3 percent to Rs 584.3 crore.
  • Net profit down 24.6 percent to Rs 64.4 crore.
  • Ebitda down 13.8 percent to Rs 141.1 crore.
  • Margin at 24.1 percent versus 27.1 percent.

Tata Global Beverages (Q1, YoY)

  • Revenue up 5.2 percent to Rs 1897.1 crore.
  • Net profit up 7.8 percent to Rs 125.3 crore.
  • Ebitda up 6.2 percent to Rs 264.3 crore.
  • Margin at 13.9 percent versus 13.8 percent

IndiaMART InterMESH (Q1, YoY)

  • Revenue up 30 percent to Rs 147.3 crore.
  • Net profit at Rs 31.4 crore versus net loss of Rs 56.7 crore.
  • Ebitda gain of Rs 36.7 crore versus Ebidta loss of Rs 53.2 crore.
  • Other Income of Rs 14.3 crore.
  • Subscription suppliers up 17 percent at 13.25 lakh.
  • Business Enquiries up 15 percent at 113 million.

Indiabulls Ventures (Q1, YoY)

  • Revenue up twice to Rs 710.3 crore versus Rs 349.2 crore.
  • Net profit up 25.2 percent to Rs 109.8 crore versus Rs 87.7 crore

Mas Financial Services (Q1, YoY)

  • Net interest income up 20.9 percent to Rs 74.6 crore.
  • Net profit up 33.2 percent to Rs 41.3 crore.
  • Disbursements up 20.6 percent to Rs 1,200.7 crore.
  • Asset under management up 29.2 percent to Rs 5578.2 crore.

Munjal Showa (Q1, YoY)

  • Revenues down 12.3 percent at Rs 388 crore.
  • Net profit down 9.8 percent at Rs 15.7 crore.
  • Ebitda down 2.8 percent at Rs 24.2 crore.
  • Margins at 6.2 percent versus 5.6 percent.

Hester Biosciences (Q1, YoY)

  • Revenue up 12.6 percent to Rs 44.8 crore.
  • Net profit down 2.3 percent to Rs 8.4 crore.
  • Ebitda up 18.9 percent to Rs 17.6 crore.
  • Margin at 39.3 percent versus 37.2 percent

CARE Ratings (Q1, YoY)

  • Revenues down 16.8 percent to Rs 499.2 crore.
  • Net profit down 46.4 percent to Rs 134.9 crore.
  • Ebitda down 64 percent to Rs 105.3 crore.
  • Margins at 21.1 percent versus 48.6 percent.

Nifty Earnings To Watch

  • Bharti Airtel

Other Earnings To Watch

  • JK Tyre & Industries
  • Raymond
  • Tata Power
  • Varun Beverages
  • Prestige  Estates Projects
  • Marico
  • Aavas Financiers
  • Adlabs Entertainment
  • Axiscades Engineering Technologies
  • CEAT
  • Cera Sanitaryware
  • Cholamandalam Financial Holdings
  • Dalmia Bharat
  • GlaxoSmithKline Consumer Healthcare
  • Godrej Consumer Products
  • Hikal
  • Hindustan Construction Company
  • ICRA
  • International Paper APPM
  • JSW Holdings
  • KRBL
  • LGB Forge
  • Magma Fincorp
  • Mahindra Logistics
  • OnMobile Global
  • Orient Paper & Industries
  • PTC India Financial Services
  • Welspun Enterprises.

Brokerage Radar

Nomura on Ashok Leyland

  • Maintained ‘Neutral’ with a price target of Rs 91.
  • Ebitda was above consensus estimates.
  • Decent margin show in challenging environment was positive.
  • Medium and heavy commercial vehicles’ demand outlook continues to worsen further.

On UPL

CLSA

  • Maintained ‘Buy’; cut price target to Rs 720 from Rs 813.
  • Higher depreciation and inventory charges from Arysta acquisition impacted profits.
  • Weak EU and India growth offset by strong Latin America performance.
  • On track to achieve synergy guidance from Arysta.

Citi

  • Maintained ‘Buy’ with a price target at Rs 800.
  • Operationally inline; good start on synergies.
  • Holding well in tough environment; margins inline despite adverse mix.
  • Higher amortisation pulled down net income.

on Eicher Motors

CLSA

  • Maintained ‘Outperform’; cut price target to Rs 19,000 from Rs 21,000.
  • Another weak quarter; near-term outlook remains weak.
  • Premium two wheelers are better placed than mass market.
  • Cut EPS estimates by 6-7 percent on lower margins for Royal Enfield and VE Commercial Vehicles.

UBS

  • Maintained ‘Sell’; cut price target to Rs 15,200 from Rs 15,800.
  • June quarter’s margin missed estimates; VE Commercial Vehicles was weak.
  • Expect 10 percent domestic volume decline in 2019-20 for Royal Enfield.
  • Channel inventory for Royal Enfield remains at manageable levels with financial health of majority dealers remaining healthy.

Morgan Stanley

  • Maintained ‘Equal-weight’; cut price target to Rs 17,052 from Rs 21,331.
  • Demand slowdown worsened in June quarter; don't expect recovery in 2019-20.
  • Regulation-driven price hikes have led to sharp slowdown in volumes, and this lowers visibility on margins.
  • Cut EPS estimates for the current and the next financial year by 17 percent and 15 percent respectively to build in lower volumes and margins.

On Indian Oil Corp

Citi

  • Maintained ‘Neutral’ with a price target at Rs 165.
  • Big beat supported by inventory gains and resilient core marketing performance.
  • Refining aided by inventory gains.
  • Prefer BPCL and HPCL to IOCL.

JPMorgan

  • Maintained ‘Overweight’ with a price target at Rs 200.
  • Another strong quarter for the marketing and refining.
  • Decline in debt would be seen as positive.

UBS

  • Maintained ‘Buy’ with a price target of Rs 200.
  • Surprise inventory gains help earnings beat.
  • Stable retail fuel margins to help earnings stability and valuation rerating.

On Zee Entertainment

Axis Capital

  • Maintained ‘Buy’ with a price target of Rs 415.
  • Stake sale healthy but overhang remains.
  • Will have to complete sale of other assets within the stiff deadline.
  • May have to sell additional stake in to address the possible shortfall.
  • Expect the stock to remain sideways over next few months.

Nomura

  • Maintained ‘Buy’ with a price target at Rs 522.
  • Promoter stake sale alleviates pledging concerns to some extent.
  • Sale of remaining assets remains critical for investor confidence.
  • Believe further re-rating will also depend on improvement in the working capital.

Credit Suisse

  • Maintained ‘Neutral’ with a price target at Rs 400.
  • Promoter stake sale - not the best deal possible.
  • Deal addresses only part of the promoter debt problems.
  • For debt outstanding, stake in Zee and Dish TV will provide collateral of Rs 12,000 crore, thus providing some comfort to lenders.

Indian ADRs

All You Need To Know Going Into Trade On Aug. 1

Stocks To Watch

  • Zee Entertainment: Invesco Oppenheimer Developing Markets Fund to acquire up to 11 percent stake in the company for Rs 4,224 crore from the promoters. That company said that it has initiated the process of divesting key assets, with aim to repay all lenders by September.
  • IDBI Bank clarified that the bank has no exposure in Coffee Day Enterprises. The Group’s trustee arm is not a lender to an entity but acts as security trustee.
  • HDFC reduced retail prime lending rate on housing loans by 10 basis points with effect from Aug. 1.
  • Punjab National Bank: Reduced MCLR by 10 basis points across various tenors with effect from Aug. 1. One-month MCLR at 7.95 percent and one-year MCLR at 8.3 percent.
  • Bosch to suspend all manufacturing operation at company’s Bidadi plant from Aug. 1-3.
  • Reliance Capital said that it has fully repaid its commercial papers on due date and the outstanding amount stands at zero from the peak of Rs 3,500 crore.
  • Wipro stated that it has received final comments from the SEBI. Buyback period from Aug. 14-28.
  • Bharat Electronics: Government sold 7.04 crore shares via off market transactions for CPSE issue, decreasing stake in the company from 58.89 percent to 55.93 percent.
  • Unichem Laboratories received four observations from the U.S. FDA’s inspection at Goa formulation facility.
  • GMR Infra: Board approved raising Rs 2,500 crore vie equity and Rs 57.4 crore via debentures.
  • Indiabulls Venture: Board executed sale of company’s Broking business to group’s arm Indiabulls Securities.
  • Mercator: ONGC has invoked bank guarantees and proceeds of Rs 142.19 crore has been remitted by Axis Bank. The appeal was dismissed NCLT and Mercator has already invoked the arbitration against ONGC. Trial may be completed by September 2020.

Also read: BQ Survey | No End To Slowing Auto Sales In July, Say Dealers

Offerings

  • Affle India IPO gets 86.5 times demand for shares offered
  • Spandana Sphoorty to sell shares at Rs 853-856 each via IPO starting Aug. 5

Also read: Spandana Sphoorty IPO Launch On August 5, Price Band Set At Rs 853-856

Datawatch

  • Automakers to announce July sales data.
  • 10:30 a.m.: Markit India Manufacturing PMI for July, prior 52.1

Bulk Deals

  • Delta Corp: Smaller Cap World Fund sold 15.87 lakh shares (0.59 percent) at Rs 144 each.
  • Lakshmi Vilas Bank: Eriska Investment Fund sold 20 lakh shares (0.63 percent) at Rs 47.8 each.

Trading Tweaks

  • Sical Logistics, Rane Engine Valve, Coffee Day Enterprises price band revised to 10 percent.
  • Vimta Labs to move into short term ASM Framework.

Also read: The Death of India’s Coffee King Should Be a Lesson

Who’s Meeting Whom

  • Mahindra Lifespace Developers to meet ICICI Pru AMC and IDFC AMC on Aug. 1
  • Kalpataru Power Transmission to meet Quest Investment Advisors on Aug. 1
  • Cholamandalam Investment and Finance to meet Axis Capital, Vallum Capital Advisors and other investors from Aug. 1-21

Money Market Update

The sovereign bond traders today will assess the implications of the U.S. Fed rate decision.

Yesterday, the yield on the benchmark 10-year government bond fell two basis points to 6.37 percent, extending last month’s decline to 51 basis points, the biggest drop for the benchmark notes since Nov. 2016.

In the currency market, The rupee is likely to open weaker today in line with regional peers. The implied opening from forwards suggest rupee may start trading at 69.19 to the dollar.

F&O Cues

August Futures

  • Nifty futures closed at 11,132, premium of 14 points versus 9.8 points.
  • Nifty futures open interest up 2 percent, adds 3 lakh shares in open interest.
  • Bank Nifty futures closed at 28,972, premium of 96 points.
  • Bank Nifty futures open interest up 2 percent, adds 33,000 shares in open interest.

Options

  • Nifty PCR at 1.09 versus 0.97 (across all series).

Nifty Weekly Expiry Aug.1

  • Max open interest on call side at 11,300 (29.8 lakh shares).
  • Max open interest on put side at 11,000 (24 lakh shares).
  • Max open interest addition seen in 10,900P (+7.2 lakh shares), 11,000P (+7.2 lakh shares).
  • Open interest shedding seen 11400C (-7.4 lakh shares), 11350C (6.4 lakh shares).

Nifty Monthly Expiry Aug. 29

  • Max open interest on call side at 11,500 (34.3 lakh shares).
  • Max open interest on put side at 11,000 (33.4 lakh shares).
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