A financial trader speaks on a fixed line telephone while monitoring data on computer screens on the trading floor inside a stock exchange. (Photographer: Jasper Juinen/Bloomberg)

All You Need To Know Going Into Trade On Feb. 25

Stocks built on recent gains amid positive signals emanating from trade negotiations.

President Donald Trump said he will delay the March 1 deadline for higher U.S. tariffs on $200 billion of Chinese goods. That gave a modest lift to riskier assets, with Japan and South Korean shares opening higher and U.S. equity futures advancing.

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded a little changed at 10,810 as of 7:05 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 rallied on signs that negotiators are making headway in trade talks between America and China.
  • The yield on 10-year Treasuries rose one basis point to 2.66 percent.
All You Need To Know Going Into Trade On Feb. 25

Also read: Warren Buffett’s Letter To Berkshire Hathaway Shareholders: Highlights

Asian Cues

  • Japan’s Topix index gained 0.5 percent.
  • S&P 500 Index futures rose 0.4 percent.
  • Australia’s S&P/ASX 200 Index added 0.3 percent.
  • South Korea’s Kospi index rose 0.4 percent.

Also read: Trump Extends China Tariff Deadline After ‘Substantial’ Progress

Commodity Cues

  • Brent crude traded 0.42 percent higher at $67.40 per barrel.
  • West Texas Intermediate crude gained 0.2 percent to $57.37 a barrel Friday.
  • Gold slipped 0.1 percent to $1,327.73.

Also read: Vitol Expects Oil to Rally as OPEC and Venezuela Cause Shortage

London Metal Exchange

  • Nickel resumed rally after a one-day blip, ended 1.1 percent higher.
  • Copper resumed rally after a one-day blip, ended 1.5 percent higher.
  • Aluminium ended higher for the third day, up 0.42 percent.
  • Lead ended higher for the third day, up 0.44 percent.
  • Tin ended higher for the fourth day, up 0.33 percent.
  • Zinc ended 1.53 percent higher.

Key Events To Watch This Week

  • Fed Chairman Jerome Powell delivers the semi-annual Humphrey-Hawkins hearing on monetary policy and discusses the state of the economy as well as testifying to the Senate Banking Committee.
  • U.K. Prime Minister Theresa May updates the House of Commons on Brexit talks as the March 29 deadline nears for Britain to leave the EU. Lawmakers will vote on Feb. 27.
  • President Donald Trump and North Korea leader Kim Jong Un are expected to meet for a second summit beginning on Tuesday.
  • Thursday brings fourth quarter U.S. GDP.

Indian ADRs

All You Need To Know Going Into Trade On Feb. 25

Stocks To Watch

  • Realty stocks will be in focus after the Goods and Services Tax Council approved lowering the tax rate on under-construction properties to 5 percent without input tax credit, from 12 percent earlier, while the affordable housing projects will attract 1 percent tax as against 8 percent earlier. (More details here)
  • Kotak Mahindra Bank’s Mark Newman resigned from the board with immediate effect, as ING Group sold its remaining stake in the bank.
  • NTPC arm’s 250MW thermal power project in Bihar started its operations with effect from Feb. 20.
  • Spicejet received an IATA operational safety audit certification (Bloomberg News)
  • Infosys Ltd.’s CSR arm stated that the company is in receipt of copies of appeals for funds typed on a fake letterhead of the Infosys Foundation (CSR arm), bearing forged signatures of Sudha Murthy, Chairperson, Infosys Foundation. The company stated that the Foundation neither accepts or request donations for its activities.
  • ZF Steering: petition filed by Robert Bosch Automotive Steering to NCLT for winding up of JV between the German based company and ZF Steering.
  • State Trading Corporation of India: Syndicate Bank filed insolvency pleas against the company for Rs 625.32 crore.
  • Suzlon Energy clarified that it was exploring multiple options for debt reduction along with its lenders and won’t comment on market speculation.
  • Piramal Enterprises’ board decided to withdraw issue of NCDs worth Rs 130 crore.
  • Jet Airways extra-ordinary general meeting saw 98 percent of shareholders vote in favour of conversion of loan into shares, increase in authorized share capital and to alter the Articles of Association. Besides, the company’s additional two aircraft have been grounded due to non-payment of amounts outstanding to lessors under their respective lease agreements.
  • Hindustan Zinc’s Chairman Agarwal resigned from his post, citing that he will pursue other interests.
  • GVK Power and Infra: GVK to acquire 13.5 percent stake of Mumbai International Airport Ltd. (MIAL) from Bidvest for Rs 1,247.4 crore. The company will acquire 16.2 crore equity shares at Rs 77 each. Post acquisition, GVK will hold 64 percent stake in MIAL.
  • IFB Agro Industries: Company’s wholly owned subsidiary to carry the business of distribution of seafoods products in the local markets of UAE.
  • Adani Ports and SEZ to acquire Adani Agri Logistics Ltd. from Adani Enterprises Ltd. for a cash consideration of Rs 946 crore. The deal is expected to complete by March 31, 2019 and is subject to regulatory approvals. The deal will not require approval of minority shareholders as the acquisition is done through a wholly owned subsidiary – Adani Logistics Ltd. Adani Ports’ will also take in net debt of close to Rs 700 crore on its book. The enterprise value of this deal is close to Rs 1,662 crore.

Also read: NSEL Scam: SEBI Declares Commodity Arms Of Motilal Oswal, IIFL ‘Not Fit And Proper’

Reliance Power Investors Meet Takeaways

  • Thermal Portfolio of Reliance Power operated at 81 percent PLF versus national average of 62 percent PLF.
  • Expects to achieve resolution of regulatory issue aggregating to Rs 5000 crore
  • The Company’s risk management is on track:
  1. Tilaiya UMPP closed with release of Bank Guarantees of Rs. 808 crore. and receipt of Rs. 113 crore towards transfer of SPV to procurers.
  2. Samalkot Project Equipment being relocated to Bangladesh - Phase I is under implementation.
  3. Krishnapatnam UMPP - SPV being returned to PFC /procurers for buyback price.
  • No further equity will be required for projects under development.
  • Bangladesh Project’s equity to be funded in kind and the project will done in phased manner, while unlocking investments in Samalkot.
  • No hydro, solar and wind investments at current tariff levels.

Reliance Industries’ Acquisition Plans

  • Company to invest Rs 68 crore to acquire 76 percent stake in Easygov, software service and data solutions company. The company will complete acquisition by March 2021.
  • Company to invest Rs 216 crore to acquire 83 percent stake in SankhyaSutra Labs Pvt. Ltd., high-performance computing software simulation services company. The company will complete acquisition by December 2021.
  • Company to invest Rs 267 crore to acquire 83.3 percent stake in Reverie Language Technologies Pvt. Ltd., a language technologies development company. The company will complete acquisition by March 2021.

Media Reports

  • Three Mideast funds eye Reliance Capital’s $1 billion stake in asset management company. (Times of India)

Bulk Deals

  • Kotak Mahindra Bank: ING Mauritius Investments sold 5.84 crore shares or 3.06 percent equity at Rs 1228.51 each.

IndInfravit Trust (No shareholding details given)

  • Omer Infra Asia Holdings acquired 8.28 crore shares at Rs 104.5 each.
  • ICICI Prudential Mutual Fund sold 1 crore shares at Rs 104.5 each.
  • L & T Transportation Infrastructure sold 26 lakh shares at Rs 104.5 each.
  • Larsen & Toubro sold 6.62 crore shares at Rs 104.5 each.
  • Yes Bank sold 26 lakh shares at Rs 104.5 each.

Stride Pharma

  • Promoter Abusha Investment & Management Services sold 5 lakh shares or 0.56 percent equity at Rs 423 each.
  • Lifecell International acquired 5 lakh shares or 0.56 percent equity at Rs 423 each.

Suprajit Engineering

  • Stewart Investors Asia Pacific Fund acquired 16.51 lakh shares or 1.18 percent equity at Rs 198.9 each.
  • Small Cap World Fund sold 30.63 lakh shares or 2.19 percent equity at Rs 198.9 each.

Trading Tweaks

  • Reliance Home Finance price band revised to 5 percent.

Who’s Meeting Whom

  • UPL to meet Bank of America Merrill Lynch between Feb. 27-28.
  • Tata Motors to meet Quantum Advisors, GIC AMC, BNP Paribas Securities between Feb. 25-28.
  • Dr Lal PathLabs to meet C Worldwide AMC and Bay Capital between Feb. 25-27.
  • IDFC First Bank to meet Daiwa AMC, Sumitomo Mitsui AMC and other investors between Feb.25-27.
  • Mahindra & Mahindra to meet GIC Singapore on Feb..27.
  • Escorts to meet TT International HK on Feb. 25.

Insider Trading

  • Deepak Fertilisers & Petrochemicals promoter group Robust Marketing Services acquired 1 lakh shares on Feb. 20.
  • Apollo Tyres promoter group PTL Enterprises acquired 1 lakh shares on Feb. 21.
  • JB Chemicals and Pharma promoter group Nitin Doshi sold 30,200 shares on Feb. 21.
  • Waterbase promoter KCT Management Services acquired 33,000 shares between Feb. 19-20.

Money Market Update

  • The rupee on Friday closed at 71.14/$ versus Thursday’s closing of 71.25/$.

F&O Cues

  • Nifty February futures closed trading at 10809, premium of 17 points.
  • Max OI for February series at 11,000 Call, OI at 41.1 lakh shares.
  • Max OI for February series at 10,700 Put, OI at 35.8 lakh shares.

Stocks In F&O Ban

  • In Ban: Adani Enterprises, Adani Power, Allahabad Bank, IDBI, Jet Airways, Reliance Power, PC Jeweller
  • Out of Ban: Kaveri Seed, Reliance Capital, Reliance Infra.

Put-Call Ratio

  • Nifty PCR at 1.37 versus 1.38.
  • Bank Nifty PCR at 1.08 versus 1.26.
All You Need To Know Going Into Trade On Feb. 25

Brokerage Radar

UBS On SBI

  • Upgraded to ‘Buy’ from ‘Neutral’; hiked price target to Rs 360 from Rs 330.
  • Lower credit costs and operating leverage to boost RoE to 13 percent.
  • Best positioned with strong retail liability franchise.
  • Expect 370 basis points decline in the cost to income ratio in the next financial year.

Motilal Oswal on Phoenix Mills

  • Maintained ‘Buy’ with a price target of Rs 708.
  • On-track execution; five new malls to drive rental growth.
  • Operational retail portfolio to double in four years.
  • Believe that Phoenix is a unique play in India’s retail growth story.

Morgan Stanley on Indian Metals

  • Steel companies’ earnings will accelerate led by domestic demand and price hikes.
  • Non-ferrous downgrades reflects earnings risk from commodity prices.
  • Coal India positives: firm e-auction prices, costs controls and net cash position.
  • Jindal Steel and Power: Upgraded to ‘Overweight’ from ‘Equal-weight’; hiked price target to Rs 188 from Rs 174.
  • JSW Steel: Upgraded to ‘Equal-weight’ from ‘Underweight’; hiked price target to Rs 296 from Rs 278.
  • SAIL: Upgraded to ‘Equal-weight’ from ‘Underweight’; hiked price target to Rs 54 from Rs 53.
  • Hindalco: Downgraded to ‘Equal-weight’ from ‘Overweight’; cut price target to Rs 211 from Rs 290.
  • Vedanta: Maintained ‘Equal-weight’; cut price target to Rs 176 from Rs 235.
  • Coal India: Maintained ‘Overweight’; cut price target to Rs 268 from Rs 296.

On Adani Ports

CLSA

  • Maintained ‘Buy’ with a price target of Rs 475.
  • Acquires Adani’s agriculture logistics from group at premium valuation.
  • Funding is not a problem as its post-acquisition leverage will be 0.72 times.
  • Will group merge more assets into Adani Ports—a key client concern.

JPMorgan

  • Maintained ‘Overweight’ with a price target of Rs 430.
  • Expensively priced inter-group deal on FY20 basis, synergies kick-off starting FY21.
  • Management does not see any other Adani group asset that overlaps with port/logistics business aside.
  • Expect a negative stock reaction to this instance of inter-group M&A.

Citi

  • Downgraded to ‘Neutral’ from ‘Buy’; cut price target to Rs 385 from Rs 500.
  • Downgrade as acquisition appears expensive and raises questions on capital allocation.
  • Acquisition might lead to resurgence of investor concern around related party transaction.
  • Underlying operations are of high quality and stock valuations are reasonable.