Traders work in S&P 500 stock index options pit. (Photographer: Jim Young/Bloomberg)

All You Need To Know Going Into Trade On Jan. 15

Asian stocks built on the strong start to his year and headed for a fresh record high amid optimism in global growth. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.4 percent at 10,729 as of 7:05 a.m.

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DayBreak

Here’s a quick look at all that could influence equities on Monday.

Global Cues

  • U.S. stocks rose to records as retail sales sparked optimism in the economy and JPMorgan Chase & Co. signaled tax cuts will bolster profits.
  • Treasuries pared losses that sent the two-year yield over 2 percent for the first time since 2008 as investors assessed an unexpected acceleration in core inflation that likely boosts the Federal Reserve’s case for higher rates.
  • The underlying pace of U.S. inflation unexpectedly accelerated in December amid increased housing costs, reinforcing the outlook for the Fed to raise interest rates several times in 2018.

Europe Check

  • Euro hit a three-year high and the pound to its strongest since June 2016, after the dollar weakened the most since March.
  • Reports that German policymakers are set to resolve a months-long political stalemate added to news yesterday that the European Central Bank is open to tweaking its policy guidance soon to align it with a strengthening economy.
  • The Stoxx Europe 600 Index advanced 0.3 percent to cap a gain in the the five days.

Asian Cues

  • Japan’s Topix index rose 0.6 percent.
  • Australia’s S&P/ASX 200 Index added 0.3 percent.
  • Futures on Hong Kong’s Hang Seng Index advanced 0.5 percent.
  • Futures on the S&P 500 climbed 0.2 percent.
  • The MSCI Asia Pacific Index climbed 0.6 percent, extending this year’s surge to 4.7 percent, on course to close at a fresh all-time high.

Here are some of the key events scheduled for this week:

  • Earnings season ramps up: Taiwan Semiconductor Manufacturing Co., ASML Holdings NV, Bank of America Corp. and Goldman Sachs Group Inc. are among some notable releases.
  • Industrial production in the U.S. probably increased in December, a report may show Wednesday, completing a solid year for manufacturing. U.S. housing starts probably slipped in December for the first time in three months as frigid winter weather impeded work, forecasts show ahead of Thursday’s release.
  • The Bank of Canada’s interest-rate decision comes Wednesday. Monetary policy announcements are also due in South Korea, South Africa and Turkey.
  • China releases fourth quarter GDP, December industrial production and retail sales Thursday.

Commodity Cues

  • Gold futures were flat at $1,337.31 an ounce, following five weeks of gains.
  • West Texas Intermediate crude was little changed at $64.25 a barrel.
  • Brent crude ended higher for fifth day at $69.87 per barrel, up 0.9 percent.
  • Sugar ended flat at 14.18 cents per pound.

Shanghai Exchange

  • Steel extends decline for the second day; down 0.5 percent.
  • Aluminium trades 0.4 percent higher.
  • Zinc trades flat.
  • Copper extends decline for the second day; down 0.5 percent.
  • Rubber snaps four-day winning streak; down 0.4 percent.

Indian ADRs

All You Need To Know Going Into Trade On Jan. 15

Earnings To Watch

Federal Bank

  • Net interest income seen 18.5 percent higher at Rs 938 crore
  • Net profit seen up 25.5 percent at Rs 258 crore
  • NIM to remain stable QoQ at around 3.3 percent

Other Factors:

  • Other income growth is likely to moderate due to drop in treasury gains
  • Loan growth will continue to maintain traction (seen at around 22-25 percent growth)
  • GNPA expected at around 2.2-2.3 percent levels.
  • Slippages should be at normalised level
  • Management expects credit cost in second half of FY18 to be better than first
  • Expect limited impact of RBI's second watch list.

Key Things To Watch:

  • Outlook on asset quality, especially in SME segment and movement in the corporate and MSME segment
  • Strategy on balance sheet growth, particularly corporate growth.
  • Update on stake sale in IDBI Federal Life Insurance

Other Earnings To Watch

  • ABC Bearings
  • Delta Corp
  • India Grid Trust
  • Zee Learn

Earnings Reaction To Watch

Infosys Q3 (QoQ)

  • Net Sales up 1.3 percent at Rs 17,794 crore.
  • Net profit up 37.7 percent at Rs 5,129 crore.
  • EBIT up 1.7 percent at Rs 4,319 crore.
  • Margins at 24.3 percent versus 24.2 percent.

TGV Sraac Q3 (YoY)

  • Revenue up 22 percent at Rs 273 crore.
  • Net profit up 221 percent at Rs 10.6 crore.
  • Ebitda up 58 percent at Rs 50.5 crore.
  • Margin at 18.5 percent versus 14.3 percent.

RIIL Q3 (YoY)

  • Revenue down 8 percent at Rs 21.1 crore.
  • Net profit down 1 percent at Rs 2.67 crore.
  • Ebitda down 30.6 percent at Rs 3.4 crore.
  • Margin at 16.1 percent versus 21.3 percent.

Sintex Industries Q3 (YoY)

  • Revenue up 44 percent at Rs 840 crore.
  • Net profit down 50 percent at Rs 21 crore.
  • Ebitda down 32 percent at Rs 57 crore.
  • Margin at 6.8 percent versus 14.3 percent.

Muthoot Capital Services (YoY)

  • Net profit up 143 percent at Rs 15.7 crore
  • Revenue from operations up 50.4 percent at Rs 105.14 crore
  • Provisions at Rs 7 crore versus Rs 6.8 crore QoQ and Rs 5.7 crore YoY

Stocks To Watch

  • HDFC’s board approved to raise Rs 13,000 crore by selling shares to institutional investors and QIP.
  • HDIL board approves allotment of 2 crore warrants to promoter at Rs 70.5 per each.
  • Boards of the IDFC Bank Ltd. and Capital First Ltd. approved a merger between the two entities.
  • RBI Approves to hike FPI limit in Granules India to 49 percent from 24 percent earlier.
  • TRAI cuts international interconnect charges to 30 paise per minute.
  • Southern Petrochemicals to shut down its plants for maintenance.
  • Religare Enterprises revises value of health insurance operations over delayed sale to Rs 1,350 crore.
  • Eclerx to consider details of share buyback on Jan. 23.
  • Lasa Supergenerics to consider conversion of unsecured loans into equity at EGM on Feb. 7.
  • Filatex India’s expansion project at Dahej commences trial production.
  • Trigyn Technologies receives multiyear IT services contract worth $1.5 million from IFAD, Rome, Italy.
  • REC transfers entire stake in wholly owned subsidiary REC Transmission To Power Grid.
  • 3i Infotech’s U.S. subsidiaries merge together.
  • EXIM Bank declares Venus Remedies and its directors as “wilful defaulters”.

Bulk Deals

Butterfly Gandhimathi Appliances

  • IDFC MF bought 1 lakh shares or 0.6 percent equity at Rs 580 each.
  • Ashish Kacholia bought 1.52 lakh shares or 0.9 percent equity at Rs 580 each.
  • Standard Chartered MF bought 3 lakh shares or 1.7 percent equity at Rs 579.99 each.
  • Reliance Alternative Invest Fund sold 8.5 lakh shares or 4.8 percent equity at Rs 580.67 each.

APL Apollo Tubes

  • Emblem FII sold 2 lakh shares or 0.8 percent equity at Rs 2,228.23 each.

Hathway Cable

  • Small cap World Fund Inc sold 44.6 lakh shares or 0.5 percent equity at Rs 40.4 each.

Gayatri Projects

  • Socite Generale bought 25 lakh shares or 1.4 percent equity at Rs 217.35 each.
  • UBS CH Equity Fund-Emerging Markets bought 70 lakh shares or 3.9 percent equity at Rs 208 each.
  • Afrin Dia sold 70 lakh shares or 3.9 percent equity at Rs 208 each.

Greenlam Industries

  • Sundaram Rural India Fund bought 3.57 lakh shares or 1.5 percent equity at Rs 1,315 each.
  • Jwalamukhi Investment Holdings sold 3.56 lakh shares or 1.5 percent equity at Rs 1,315 each.

Menon Bearings

  • Astute Investments sold 7.75 lakh shares or 1.4 percent equity at Rs 110.2 each.

Emami Papers

  • Ganpati Industrial Private Ltd. bought 9.04 lakh shares or 1.5 percent equity at Rs 226.29 each.

Trading Tweaks

  • TeamLease Services and Healthcare Global’s foreign institutional investor limit reached 24 percent, no further buying allowed.
  • Granules India’s foreign institutional investor limit increased to 49 percent from 24 percent.
  • Hindustan Motors revised its circuit filter to 10 percent.

Who’s Meeting Whom?

  • Filatex India to meet Stewart & Mackertich, Mentor Capital and HNI Kirit Gogri on Jan. 15.
  • Virinchi to meet investors on Jan. 15
  • Mahanagar Gas to meet sevel fund houses including Goldman Sachs, Kotak Mahindra, UBS, Morgan Stanley etc between Jan. 15 - 22.
  • Vakrangee to meet investors on Jan. 15-16 in Singapore.

Insider Trades (As Reported On January 12)

  • BNK Capital Markets promoter BNK securities buys 81,000 shares on Jan. 11.
  • Pennar Industries promoter Aditya Rao buys 5,000 shares on Jan. 11.
  • Omax Auto promoters sold 18,712 shares on Jan. 5-9.
  • Chembond chemicals promoters sold 1.48 lakh shares on Jan. 9.
  • Teamlease Services promoter Dhana Mgmt Consultancy LLP sold 1,300 shares on Jan. 1.

IPO

  • Apollo Micro Systems IPO subscribed 248 times on final day.

Rupee

  • Rupee ended at Rs 63.63 per U.S. dollar versus Rs 63.67 per U.S. dollar on Thursday.

Top Gainers And Losers

All You Need To Know Going Into Trade On Jan. 15

Index Trends

All You Need To Know Going Into Trade On Jan. 15

F&O Cues

  • Nifty January futures trading at 10,686, premium of 5 points versus 3 points.
  • January Series: Nifty open interest up 1 percent; Bank Nifty open interest up 12 percent.
  • India VIX ended at 13.7, down 2 percent.
  • Max open interest for January series at 11,000 Call (open interest up 5 percent at 47.3 lakh).
  • Max open interest for January series at 10,500 Put (open interest at 81.5 lakh, down 1 percent).

F&O Ban

  • In ban: Dish TV, Jain Irrigation, Kaveri Seed, Fortis Healthcare, GMR Infrastructure, HDIL, Jet Airways, Jindal Steel, JP Associates, Reliance Communication, Reliance Capital, Reliance Power, Wockhardt.
  • New in ban: Dish TV, Jain Irrigation, Kaveri Seed.
  • Out of ban:NIL

Only intraday positions can be taken in stocks which are in F&O ban. There is a penalty in case of a rollover of these intraday positions.

Put-Call Ratio

  • Nifty PCR unchanged at 1.74.
  • Nifty Bank PCR at 1.06 from 1.04.

Stocks Seeing High Open Interest Change

All You Need To Know Going Into Trade On Jan. 15

Fund Flows

All You Need To Know Going Into Trade On Jan. 15

Brokerage Radar

Geojit ICICI Pru Life

  • Initiated ‘Buy’ with price target of Rs 450.
  • Outlook on Indian life insurance sector remains bright.
  • Indian life insurance industry is at the cusp of enormous growth.
  • ICICI Life is well-positioned to capture the strong growth.
  • Best play on life insurance sector.
  • Expect ICICI Life to deliver 22 percent and 15 percent in return on equity and return on enterprise value in the next financial year.
  • Expect new business premium to grow at a compounded rate of 20 percent over the financial years through March 2019.
  • Strong brand and parentage; Well placed on distribution.
  • Remains outperformer in private life insurance despite challenging business environment.
  • Diversified multi-channel distribution network gives a competitive edge.
  • Under-penetrated market provides significant growth opportunity.

HSBC on Guajarat Pipavav

  • Upgraded to ‘Buy’ from ‘Hold’; raised price target to Rs 174 from Rs 144.
  • Pipavav is set to receive another two weekly services.
  • Rebound in India-China EXIM trade bodes well given exposure to Far East.
  • Earnings momentum to resume an upward trend in the near future.
  • These service wins along with improved trade outlook raised earnings estimate.

Equirus on Whirlpool

  • Initiated ‘Add’ with a price target of Rs 1,717.
  • With favorable industry dynamics Whirlpool is well-poised for growth.
  • Plugging portfolio gaps to drive incremental volumes, improve brand image.
  • Distribution network expansion, new product launches to drive growth.
  • Revenue growth to be powered by refrigerators, WM and ACs.
  • Expect revenue, operating income and net profit to grow at a compounded rate of 19 percent, 21 percent and 20 percent respectively over the financial years through March 2020.
  • Stock trades at reasonable valuations.
  • Refrigerator segment – penetration levels to increase to 43 percent by March 2022.
  • Washing machines – Growth to be driven by fully-automatic machines.
  • Air conditioning segment – Split ACs to lead the way.
  • Focus on profitable growth to shore up operating income and net profit.

ICICI Direct on Himadri Speciality

  • Initiated ‘Buy’ with price target of Rs 245.
  • Growth visibility is healthy with impressive capex and firm financing plans amid robust product demand.
  • Debt at controlled level; debt-to-equity steadily on decline.
  • Expect revenue, operating income and net profit to grow at a compounded rate of 22.7 percent, 29.3 percent and 38 percent respectively over the financial years through March 2020.
  • Expect Himadri to command premium valuations among its peers.
  • Coal tar pitch: Dominance to sustain; cash cow.
  • SNF a construction chemical is big opportunity.
  • Carbon black: Industry in sweet spot, Himadri a key beneficiary.
  • Advance carbon material to fetch high margins and boost earnings from March 2020.
  • Himadri is one of the only few listed players with exposure to Electric Vehicle.

Brokerages On Capital First-IDFC Bank Merger

Edelweiss

  • Capital First: Maintained ‘Buy’, Raised price target to Rs 1,033 from Rs 927.
  • IDFC Bank: Maintained ‘Hold’, raised price target to Rs 74 from Rs 67.
  • Merger is a step in right direction to achieve stated intentions of both entities.
  • Merger will be synergistic, value accretive and provide an opportunity to build a robust banking franchise.
  • Immediate term benefits flow more to Capital First.
  • Value combined entity at Rs 36,400 crore, i.e., 1.75 times next financial year’s book
  • All regulatory approvals (RBI, CCI, SEBI, etc) to take almost 9-12 months.
  • Ramp up of liability franchise will be a key monitorable.

Antique

  • Lower borrowing costs is one of the potential benefit of merger.
  • Increased provisioning costs to offset benefits from lower borrowing costs.
  • Capital First huge SME book to witness higher provisions in banking.
  • Combined entity to trade between 2-2.2x during integration phase, translating to Rs 70-75.
  • Further upside contingent upon successful integration and re-alignment of bank strategy.
  • Expect 10-12 percent price upside to Capital First; No significant upside to IDFC Bank.

Brokerage On Infosys Earnings

Credit Suisse on Infosys

  • Maintained ‘Neutral’; raised price target to Rs 1,100 from Rs 1,000.
  • Previous quarer results were in line; Guidance maintained.
  • U.S. and financial services soft, but management outlook is positive.
  • Decent growth recovery in retail; No significant pick-up in large deals.
  • Update on the new CEO's strategy only in April.
  • Revise estimates to slightly lower tax rate and adjusting for recent buyback.
  • Valuations are reasonable as stock underperformed in 2017.
  • Do not see any near-term trigger.

CLSA on Infosys

  • Maintained ‘Buy’; raised price target to Rs 1,300 from Rs 1,230.
  • Previous quarter remained in line in revenue growth and steady margins.
  • Tax cuts drive up next two financial year’s earnings per share estimates by 2 percent.
  • Client mining stayed strong with solid growth in top client.
  • Impressive margin performance continues despite hikes and variable pay.
  • New CEO is yet to fully sponsor the strategic direction.
  • Limited gap with peers, stability and improving execution deserves a rerating.

Edelweiss on Infosys

  • Upgraded to ‘Buy’ from ‘Hold’; raised price target to Rs 1,265 from Rs 1,010.
  • With new CEO in place expect highest margin levers, high dividend yield and undemanding valuations.
  • Barring BFSI, all other businesses posted modest numbers in a weak quarter.
  • BFSI, retail and digital look strong for 2018.
  • BFSI, retail, digital and Europe all look promising.
  • Downgraded earlier due to management instability.