All You Need To Know Going Into Trade On Dec. 12

Asian equities climbed with U.S. stock futures and the offshore yuan after the senior executive of China’s tech giant Huawei Technologies Co. was granted bail, potentially improving the outlook for U.S.-China trade talks.

Futures on the S&P 500 Index jumped at the open. Equity benchmarks rose in Japan, Korea and Australia. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell fell 0.45 percent to 10,553 as of 7 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 ended little changed after a volatile session as investors weighed the prospects for a trade deal and an agreement to fund the American government.
• The yield on 10-year Treasuries held at 2.88 percent.

Asian Cues

• The MSCI Asia Pacific Index was up 0.7 percent.
• Japan’s Topix index added 1.6 percent.
• Hong Kong’s Hang Seng Index futures rose 0.7 percent overnight.
• FTSE China A50 futures gained 0.8 percent.
• Australia’s S&P/ASX 200 Index advanced 0.5 percent.
• Futures on the S&P 500 rose 0.2 percent.

Commodity Cues

• West Texas Intermediate crude rose 0.1 percent to $52.16 a barrel.
• Brent crude ended 0.38 percent higher at 60.20 per barrel.
• Gold was little changed at $1,243.59 an ounce.

London Metal Exchange

• Aluminium ended 0.05 percent higher.
• Copper ended 1.3 percent higher.
• Zinc halted a three-day decline, up 0.58 percent.
• Nickel ended lower for the second day, down 0.28 percent.
• Lead ended 1.23 percent higher.
• Tin ended 0.9 percent higher.

Indian ADRs

Stocks To Watch

• Dr. Reddy’s Laboratories will have to wait a little longer before it can start selling a generic version of Indivior Plc’s Suboxone Film opioid addiction treatment, a U.S. appeals court ruled Tuesday, according to Bloomberg report.
• Reliance Industries’ telecom unit Reliance Jio Infocomm board approved transferring fibre and tower businesses into two separate companies. The plan is yet to get statutory and regulatory approvals.
• Zydus Wellness: Competition Commission of India approved acquisition of Heinz India jointly with Cadila Healthcare. It will be acquiring business related to the four brands—Glucon-D, Nycil, Sampriti Ghee and Complan.
• Tata Sponge Iron: Competition Commission of India approved acquisition of Usha Martin’s steel division for around Rs 4,300-4,700 crore.
• Unichem Laboratories received tentative approval for ANDA-Tadafil Tablets from U.S. FDA.
• PNC Infratech arm submitted financing documents to NHAI regarding its HAM project in Karnataka worth Rs 1,157 crore. The company now has submitted documents for financial closure for all its 7 HAM projects.
• Sugar stocks in focus as Brazil to consult WTO Dispute Settlement Body to challenge the Indian policy to support the export of sugar. Brazil says that the domestic support and export subsidies granted by the Indian government have caused significant impacts on the world sugar market in a scenario of declining prices and declining production in major centers - Brazil, China and Thailand, Bloomberg reported.
• UFO Moviez India’s non-promoter investors agree to sell their shares in Qube Digital Cinema Pvt. Ltd. to UFO Moviez and ICICI Ventures at Rs 264.88 per share as against an earlier decided price of Rs 302.65.

Data Watch

• 5:30pm: India October industrial production YoY; Bloomberg estimates at 6 percent (prior 4.5 percent).
• 5:30pm: India November consumer price inflation YoY; Bloomberg estimates at 2.53 percent (prior 3.31 percent).
• Dec. 12-15: India November trade balance, Bloomberg estimates at -$15.8 billion, prior -$17.1 billion
  • India November exports YoY, prior 17.86 percent.
  • India November imports YoY, prior 17.62 percent.

Who’s Meeting Whom

• Great Eastern Shipping to meet Aditya Birla Sun Life Insurance on Dec. 20

Insider Trading

• Greaves Cotton promoter group Karun Karpets acquired 2 lakh shares on Dec. 7.
• Axis Bank promoter LIC sold 15.74 lakh shares from Dec. 7-10
• Aster DM Healthcare promoter and director Azad Moopen acquired 40,000 shares on Dec. 12.

Rupee

• The Indian rupee ends at 71.86/$ on Tuesday versus 71.34/$ on Monday

F&O Cues

• Nifty December futures closed trading at 10,581, premium of 32 points.
• Max open interest for December series at 11,000 Call (open interest at 49.8 lakh shares).
• Max open interest for Dec series at 10,000 Put (open interest at 53.1 lakh shares).

Stocks In F&O Ban

• Adani Enterprises
• Adani Power

Put-Call Ratio

• Nifty PCR at 1.33 from 1.30
• Nifty Bank PCR at 1.14 from 1.00

Brokerage Radar

Brokerages on State Elections

CLSA

• NDA should win 245-280 seats in 2019, enough for Modi to retain power.
• SP-BSP combine in the state of Uttar Pradesh could be a big challenge for the BJP.
• Key worry for markets would be if the domestic investors start to reduce new investments.
• State election manifesto shows competitive populism which could aid consumption but impact capex recovery.

Credit Suisse

• No conclusive evidence determining the next ruling party at the center.
• Loss in Chhattisgarh was a big negative surprise.
• Political takeaway could be farm stress must be addressed.
• Results do not drive any visible change in market directions.

UBS

• State assembly elections not positive for BJP; Market focus to shift towards general election 2019.
• BJP coming back in 2019 is being priced in; Market evaluating various outcome possibilities.
• Market risk-reward remains unattractive as it continues to trade expensively.

Morgan Stanley

• First indicators of how things may pan out in May 2019.
• Do not ignore results, but be cognisant of the complexities of politics.
• Investors should watch for pre-poll alliances and the growth/inflation mix.
• Maharashtra and Uttar Pradesh are likely to be crucial to the results in 2019.

More Brokerage Calls

Citi on Aavas Financiers

• Initiated ‘Buy’ with a price target of Rs 930.
• Growth to come from existing locations as well as geographic expansion.
• Niche focus and priority sector lending compliant portfolio supports healthy spreads.
• Premium valuations supported by long growth runway and strong asset quality.
• Expect AUM and profit to grow at a CAGR of 35 percent 33 percent respectively over FY18-21.

Nomura on Sun Pharma

• Upgraded to ‘Buy’ from ‘Neutral’; hiked price target to Rs 516 from Rs 513
• Stock price factoring muted expectations from the U.S. generics and specialty.
• Expect higher sales and cost control to lead to margin expansion.
• Upgrade to Buy on recent correction; risk-reward favourable.
• Catalysts: U.S. approvals, specialty ramp-up, Ebitda margin expansion.

CLSA on Aditya Birla Fashion

• Maintained ‘Buy’; hiked price target to Rs 240 from Rs 232.
• See multiple growth triggers till March 2021.
• Expect margin expansion from Pantaloons ahead as store network matures.
• Focus on improving profitability in Fast Fashion; innerwear losses peak in the current financial year.

Citi on Persistent Systems

• Maintained ‘Neutral’ with a price target of Rs 650.
• To focus on 4 areas in 3 sectors – AI, cloud, security and IoT in healthcare, BFSI and industrial & manufacturing.
• To continue to invest in accelerite portfolio and concentrate on reseller and value-added business.
• Cash kept for acquisition; company will likely take a call on extra cash post Q3 results.