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All You Need To Know Going Into Trade On August 31

Stocks in the news, big brokerage calls of the day, complete trade setup and much more!  

A tourist rides on a quad-bike at a ski resort in the Tonale Pass, Italy. (Photographer: Francesca Volpi/Bloomberg)
A tourist rides on a quad-bike at a ski resort in the Tonale Pass, Italy. (Photographer: Francesca Volpi/Bloomberg)

Asian markets have mostly opened higher at the start of a new trading week, suggesting that the rally which took global equities to new highs after recovering from the lows in March, has more legs to it.

The Yen has pared some of Friday's gains as Japan looks for a new Prime Minister post Shinzo Abe's resignation. The U.S. Dollar has steadied near a two-year low while treasuries rose on Friday.

The Singapore-traded SGX Nifty, an early indicator of the Nifty 50 Index’s performance in India, rose 0.4% to 11,732 as of 6:50 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.

Let’s take a look at the factors that may influence equities in today’s session:

  • Benchmark indices in Japan and South Korea have opened higher while those in Australia are little changed.
  • Futures on the Dow Jones are trading higher by 170 points. The index ended with gains of 0.6% on Friday. The S&P 500 ended at an all-time high for the sixth straight day on Friday.
  • Covid-19 cases in the U.S. are rising again while India recorded the largest daily spike in new cases across the world on Sunday.
  • Tensions between U.S. and China persist. In another development, ByteDance Ltd. will be required to seek Chinese government approval to sell the U.S. operations of its short-video TikTok app.
  • Yield on the 10-year treasuries fell three basis points to 0.72%.
  • West Texas Intermediate crude was little changed at $43 per barrel while Gold rose 0.3% to $1,970.1/Oz.

Get your daily fix of the global markets here.

All You Need To Know Going Into Trade On August 31

Reliance Retail - Future Group Deal

  • Future Group to sell its retail, wholesale, logistics and warehousing assets to Reliance Industries' retail arm Reliance Retail Ventures at a value of Rs 27,513 crore.
  • All key Future group companies - Future Retail, Future Lifestyle Fashions, Future Consumer, Future Supply Chain Solutions and Future Market Networks will be merged into Future Enterprises.
  • Reliance Retail will take over certain borrowings and current liabilities as part of the business and pay the rest in cash.
  • Future Enterprises will also transfer assets of the logistics and warehousing business on a slump sale basis to Reliance Retail for Rs 25.22 crore.
  • Reliance Retail to invest Rs 1,200 crore in a preferential issue of Future Enterprises for a 6.09% stake.
  • Shares of the preferential issue and warrants will be issued at Rs 17.65 per share.
  • The Future Group, according to data compiled by BloombergQuint, had debt of more than Rs 15,000 crore in the year ended March 2020.
  • Biyani’s promoter stake in most the group’s listed companies is pledged - as high as 70% in some of its subsidiaries.

Future Enterprises:

  • To issue nine shares to Future Consumer shareholders for every 10 shares held.
  • To issue 116 shares to Future Lifestyle Fashions shareholders for every 10 shares held.
  • To issue 18 shares to Future Market Networks shareholders for every 10 shares held.
  • To issue 101 shares to Future Retail shareholders for every 10 shares held.
  • To issue 131 shares to Future Supply Chain shareholders for every 10 shares held.
Opinion
Market's View On Future Group-Reliance Retail Deal
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What Future Group Minority Shareholders Get From Reliance Deal
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Kishore Biyani’s Future Retail Seals Deal With Reliance Retail

Stocks To Watch

  • NMDC: The company said in a conference call that the demerger process of its steel plant to take at least 8-9 months. Capex incurred on the steel plant stards at Rs 17,000 crore and pending capex of Rs 4,000 crore. Balance funding will be through leveraging the steel plant, which is expected to be commissioned by 2021.
  • ITC: To consider proposal for amalgamation of its three wholly-owned arms - Sunrise Foods, Hobbits International Foods and Sunrise Sheetgrah with itself on September 4.
  • Indiabulls Ventures: Board approves preferential issue of 3.36 crore equity shares at Rs 175 per share worth Rs 588 crore. Investors like Think India Opportunities Fund, TIMF Holdings, Ribbit Cayman Holdings, Inteligo Bank, NWI Emerging Market Fixed Income Master Fund and First Royalty Ventures have been allotted shares. The board has appointed Sameer Gehlaut as the company's Chairman and CEO.
  • RBL Bank: MD & CEO, Vishwavir Ahuja sold 18.93 lakh shares between August 27-28 worth Rs 38.52 crore to meet personal debt obligations. The amount of shares sold is approximately 18% of his or his family's aggregate holdings of the bank as on date.
  • Inox Wind: Board approves raising Rs 200 crore via issue of securities.
  • J&K Bank: Board approved raising Rs 3,500 crore via equity and Rs 1,000 crore via NCDs.
  • South Indian Bank: To consider raising funds via equity and debt and September 4.
  • Ramkrishna Forgings: Board to consider raising Rs 150 crore via NCDs from International Financial Corporation on September 2.
  • IIFL Finance: Moody's Investors Service has extended its review for downgrade of the company's corporate family rating, B1 senior secured MTN program rating and B1 senior secured debt rating. The extension of the review for downgrade takes into account the still considerable uncertainty regarding the impact of the pandemic-driven economic disruption on the company’s loan collections and asset quality. As of June 30, 31% of the company's loans were under moratorium.
  • Balkrishna Industries: BK Bansal resigns as CFO from August 28. He will be replaced by MS Bajaj, who was the Assistant Vice President at Hindustan Vidyut Products.
  • JSW Energy: To consider appointment of key managerial personnel on September 1.
  • CG Power: Lenders of the company have approved Tube Investments' offer as the successful offer, subject to compliances with all the conditions stated in the Letter of Intent, to the satisfaction of the lenders.
  • Non-Nifty Earnings Today: Arvind, Bharat Dynamics, GNFC, JK Cement, Morepen Laboratories, NHPC, Sadbhav Infra, Spandana Sphoorty

Earnings Reported After Market Hours

Apex Frozen Foods Q1FY21

  • Revenue down 1.6% from Rs 218.3 crore
  • Net profit up 2.4% to Rs 8.5 crore
  • Ebitda up 52% to Rs 18.7 crore
  • Ebitda margin at 8.6% from 5.5%
  • Lower raw material costs aid margins
  • All numbers are standalone and compared on a year-on-year basis

Wockhardt Q1FY21

  • Revenue down 18% to Rs 598 crore
  • Net profit of Rs 760 crore from net loss of Rs 55 crore
  • Ebitda loss of Rs 72 crore from Ebitda gain of Rs 1 crore
  • Exceptional gain of Rs 1,470 crore from sale of branded generics business to Dr Reddy's
  • Emerging Markets business revenue flat at Rs 139 crore. EM business contributed 21% of global revenue.
  • U.S. business revenue down 39% to Rs 114 crore and contributed 17% of global revenue.
  • U.K. business revenue down 3% to Rs 218 crore and contributed 33% to global revenue.
  • India business revenue down 48% to Rs 116 crore and contributed 18% of global revenue.
  • Net debt-equity as on June 30, stood at 0.31.

Brokerage Radar

Macquarie On State Bank of India

  • Outperform rating maintained
  • Price target raised to Rs 270 from Rs 242
  • Very cheap valuations and a deep value play
  • Factoring in higher valuation of subsidiaries
  • Top pick in the PSU Banking space
  • Expect core operating profit growth over next three years to be around 16% driven by cost efficiencies
  • Not building in any capital raising as of now
  • RoA target of 1% will remain elusive

Investec On Motherson Sumi

  • Buy rating maintained
  • Price target raised to Rs 125 from Rs 120
  • Management commentary upbeat on volume recovery
  • Volumes from Tuscaloosa are in high single digit year-on-year in July
  • Measures taken to resolve issues in greenfield plant should boost overall profitability
  • Valuations are supportive
  • Raise FY21/21E earnings by 2-10% to factor in slightly better volumes

CLSA On Reliance Industries

  • Outperform rating maintained
  • Price target of Rs 2,250
  • Value accretive acquisition with big market share gains
  • Deal takes up RIL's footprint and warehousing space by over 80%
  • Grocery segment likely to be the biggest gainer with its store count more than doubling
  • Market share gains will only make it a much stronger force
  • Market share gains to drive RIL's new commerce push in the long-term

HSBC On Crompton Greaves Consumer Electricals

  • Initiate coverage with buy rating
  • Price target of Rs 320
  • Valuations underappreciate cash-backed profitable growth track record and outlook
  • High return ratios and winning strategy
  • Solidifying an already strong position
  • Expect 16% revenue CAGR over FY21-23E and 25% net profit CAGR over the same period
  • Trading at a significant discount to its closest peer Havells
  • Potential Catalysts: Margin recovery in the lighting segment and revenue growth returning to positive territory
  • Key Risks: Slower and protracted demand recovery and weaker-than-expected expansion of the appliance business

Antique Stock Broking On Nestle India

  • Upgrade to buy from hold
  • Price target raised to Rs 17,935 from Rs 17,120
  • Improvement in supply chain, drop in input prices to aid earnings
  • Decline in milk prices to aid gross margin expansion
  • Pressure on nutrition business remains
  • Benign raw material prices to aid margin expansion
  • Recent correction provides an entry opportunity
  • Will be one of the outperformers over the next two years

Emkay On NMDC

  • Upgrade to buy from sell
  • Price target raised to Rs 140 from Rs 72
  • De-merger to drive re-rating
  • Raise FY21/22 volume estimates by 22%/16% respectively
  • Volume growth without Donimalai mines
  • Key risk is a decline in iron ore prices

Pledged Share Details

  • JSW Steel: Promoters created pledge of 80 lakh shares on August 25.
  • JSPL: Promoter Danta Enterprises revoked pledge of 59.5 lakh shares between August 25-26.
  • Max Healthcare: Promoter Max Ventures released pledge of 15.54 lakh shares between August 25-27.

(As reported on August 28.)

Who’s Meeting Whom

  • Mahindra & Mahindra: To meet MFS Investment Management on September 3.
  • Cipla: To meet Vontobel AMC on August 31.
  • Tata Motors: To meet Ashmore Investment Advisors, CLSA and other investors between September 2-4.
  • CRISIL: To meet JP Morgan AMC, Goldman Sachs and other investors between August 31 - September 9.
  • Mahindra Logistics: To meet Birla Sunlife Insurance and Philip Capital on September 2.

Bulk Deals

  • India Energy Exchange: PPFAS Mutual Fund acquired 24.38 lakh shares (0.81%) at Rs 190 per share and Rural Electrification Corporation sold 26.01 lakh share (0.87%) at Rs 190.12 per share.
  • Sheela Foam: Promoter Tushaar Gautam sold 10 lakh shares (2.05%) at Rs 1,365 per share and DSP Mutual Fund acquired 5.9 lakh shares (1.21%) at Rs 1,365 per share.

Trading Tweaks

  • AGM Date: CARE Ratings, Ashoka Buildcon.
  • Fund Raising: Welspun Corp, SRF, Sadbhav Infaprojects, Kellton Tech Solutions.
  • Ex-Date For Share Split: Morganite Crucible (From FV of Rs 10 to Rs 5 per share)
  • Move Into ASM Framework: V2 Retail, Nahar Spinning Mills, Ganesh Housing Corporation, DCM, Arshiya, Technofab Engineering, MSP Steel & Power.
  • Move Out Of ASM Framework: Aarti Drugs, Shriram EPC, Birla Cable, Jayant Agro Organics, Saregama India, ADF Foods, Skipper, Sical Logistics, Infibeam Avenues, Eros International Media, Nandan Denim, HT Media, RSWM, Precot Meridian.
  • Move Into Short Term ASM Framework: Dish TV, Sanco Industries.
  • Move Out Of Short Term ASM Framework: Hi-Tech Pipes, Cimmco, Capacit'e Infraprojects, Industrial Investment Trust, Pricol.

Insider Trades

  • JSW Steel: Promoter JTPL Metal Traders acquired 22 lakh shares between August 25-26.
  • Shilpa Medicare: Promoter Omprakash Inani sold 1.39 lakh shares between August 26-27.
  • Dr Lal Pathlabs: Promoter Dr Arvind Lal sold 1.15 lakh shares on August 26.
  • Dollar Industries: Promoter Simplex Impex acquired 80,000 shares between August 26-27.

Money Market Update

  • The rupee ended at 73.40 against the U.S. Dollar as compared to Thursday's close of 73.81.
  • This was the third straight day of gains for the currency. The rupee was the best performing currency in Asia for the second straight day.
  • On a weekly basis - the 2% gain in the currency was the best week since December 2018. It was also the best performing currency in Asia for the week.
  • The rupee now trades at the highest level in six months.

F&O Cues

  • Nifty September futures ended at 11,682; premium of 34 points from 21 points
  • Nifty September futures add 4% and 5 lakh shares in Open Interest
  • Nifty Bank September futures ended at 24,622; premium of 98 points from 2 points
  • Nifty Bank September futures add 17% and 2.1 lakh shares in Open Interest
  • Nifty Put-Call Ratio at 1.41
  • Stocks In F&O Ban: Bank of Baroda, Vodafone Idea

Nifty: September 3 Expiry

  • Maximum Open Interest on Call side at 12,000 strike (24.3 lakh shares)
  • Maximum Open Interest on Put side at 11,500 strike (28.3 lakh shares)
  • Active Options: 11,600 Put (13 lakh shares) and 12,000 Call (9.4 lakh shares)

Nifty: September 24 Expiry

  • Maximum Open Interest on Call side at 12,000 strike (22 lakh shares)
  • Maximum Open Interest on Put side at 11,000 strike (27.2 lakh shares)

F&O Buzzers & Fund Flows