All You Need To Know Going Into Trade On July 1
A pedestrian holding an umbrella walks past an electronic ticker board displaying stock figures at the Bombay Stock Exchange (BSE), which stands partially covered by scaffolding, in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

All You Need To Know Going Into Trade On July 1

A new quarter and mid-week trade has begun on a subdued note for the Asian markets. Investors grapple with mixed global economic data, geopolitical tensions and Covid-19 cases.

U.S. consumer confidence saw the biggest increase since 2011. Treasuries were little changed and the U.S. Dollar edged higher. Gold traded near the $1,800/Oz mark.

The Singapore-traded SGX Nifty, an early indicator of the Nifty 50 Index’s performance in India, fell 0.5% to 10,228 as of 7:00 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 all that can influence equities in today’s session:

  • Markets in Japan are muted after confidence among large manufacturers in the country fell to the lowest in 2009.
  • Markets in Australia gain while those in South Korea are outperforming. Hong Kong is closed on account of a holiday.
  • New Covid-19 cases can rise to 1 lakh per day if behaviours don't change, infectious disease expert Anthony Fauci said.
  • Fed Chair Jerome Powell told the Congress on Tuesday that controlling the virus was necessary as the economy rebounds.
  • Federal Communications Commission designated Huawei Technologies and ZTE Corp. as national security threats.
  • Yield on the 10-year treasury stood at 0.66%.
  • West Texas Intermediate crude rose 0.7% to $39.55 per barrel.

Get your daily fix of the global markets here.

All You Need To Know Going Into Trade On July 1

Earnings Fineprint: ONGC Q4FY20

  • Revenue down 9.5% to Rs 21,456 crore
  • Net loss of Rs 3,098.3 crore from net profit of Rs 4,226.5 crore
  • Ebitda down 30.2% to Rs 8,587.9 crore
  • Ebitda margin at 40% from 51.9%
  • Impairment loss of Rs 4,900 crore this quarter due to Covid-19
  • Deferred tax reversal of Rs 1,641.5 crore this quarter
  • Net realisations at $49.01 per barrel from $58.24 per barrel
  • All numbers are standalone and compared on a year-on-year basis

Stocks To Watch

  • Jindal Steel & Power: The company's Mauritius arm accepts a binding offer from Templar Investments to divest its entire stake in its Oman asset - Jindal Shadeed Iron & Steel. The Enterprise Value of the deal is over $1 billion. The transaction is expected to close in a month. The deal will enable the company's debt reduction plans. Transaction is subject to approval from shareholders of JSPL and lenders of the Oman asset. Templar Investments is part of the promoter group of JSPL.
  • Bharti Airtel: Carlyle Group to acquire approximately 25% stake in the company's data centre business - Nxtra Data Ltd. Enterprise Valuation of the transaction is approximately $1.2 billion. Bharti Airtel to continue holding the remaining 75% stake. Transaction subject to regulatory approvals.
  • Kotak Mahindra Bank: MSCI defers until further notice, potential increase in Foreign Ownership Limits, resulting from the recently implemented relaxation of FPI limit of Indian companies to the sectoral limit.
  • Indian Oil Corporation: Wholly-owned arm - IOC Middle East FZE, Dubai has signed an agreement with Beximco LPG of Bangladesh to form a 50:50 Joint Venture in Bangladesh for the LPG business. As per the plan, the venture will begin functioning by acquiring Beximco's existing LPG assets. It also aims to set up a large LPG terminal at a deep-water port in Bangladesh.
  • Kalpataru Power Transmission: Gets new order for transmission and distribution segment worth Rs 956 crore.
  • NTPC: To develop waste-to-energy facilities at Okhla landfill site along with Indian Oil and SDMC. SDMC to provide land worth one acre on lease at the landfill side while the company along with IOC will invest 50% each towards setting up and operating the facilities.
  • Bank of Baroda: Board approves issuance of Basel-III compliant AT-1 bonds for an issue size not exceeding Rs 2,000 crore in single or multiple tranches.
  • GMM Pfaudler: Enters into binding term sheet with De Dietrich Process Systems India, for itemised sale of their manufacturing facility in Hyderabad. The deal will be done for a total consideration of 6.25 million Euros, subject to completion of the final due diligence and other documentation. The facility is equipped to manufacture Glass Lined Equipment.
  • Lakshmi Vilas Bank: Appoints K Hariharan as CFO.
  • Indian Bank: Cuts MCLR across various tenors from July 3. One-year MCLR now at 7.4% while one-month MCLR at 7.15%. Benchmark rates for all loans linked with external benchmark cut by 40 basis points from July 1.
  • Covid-19 Impact On M&M Financial: 75% of customers opted for moratorium on EMIs. Daily cashflow and liquidity impacted. New business in April & May was substantially lower than previous year's volumes. Business likely to normalise only in the post moratorium period i.e. September 2020. Repayments from HCVs and aggregator taxi segments can be further delayed. Demand and financing for pre-owned vehicles and agri machinery is expected to increase.
  • Cyient: Aditya Birla Sun Life Mutual Fund increased stake from to 5.1% from 3.08% on June 26.
  • Marico: Increases stake in Zed Lifestyle to 100% from 45%.
  • Mahindra Holidays and Resorts: Recommenced operations at 10 of its resorts from mid-June (9 in India and 1 in Dubai). Material subsidiary - Holiday Club Resorts Oy, Finland has recommenced operations in 30 out of the 33 resorts in Finland, Spain and Sweden.
  • Indiabulls Housing Finance: To consider raising funds on July 3.
  • Tata Communications: To meet Baron Capital on July 1.
  • Eveready Industries: To report Q4 earnings today.

Earnings Reported After Market Hours

Vodafone Idea Q4FY20

  • Revenue up 6% to Rs 11,754 crore
  • Ebitda up 28% to Rs 4,380 crore
  • Net loss widens to Rs 11,643 crore from Rs 6,439 crore
  • ARPU up 11% to Rs 121
  • All numbers are consolidated and compared on a quarter-on-quarter basis
Company has breached its debt covenants as at March 31, 2020 for which it is in discussions with various lenders. This has impacted the company’s ability to generate the cash flow that it needs to settle or refinance its liabilities and guarantees as they fall due, resulting in material uncertainty that casts significant doubt on the company’s ability to make the payments mentioned therein and continue as a going concern.
Comments From Vodafone Idea’s Auditors

Godfrey Phillips Q4FY20

  • Revenue down 3.9% to Rs 588.7 crore
  • Net profit up 36.4% to Rs 48.3 crore
  • Ebitda up 80% to Rs 90 crore
  • Ebitda margin at 15.3% from 8.2%
  • Provisions of Rs 15 crore in base quarter on declining value of investments
  • Lower raw material costs, ad expenses and higher depreciation aid margins
  • Higher excise duty impact margins
  • Excise duty tripled to Rs 88.9 crore this quarter
  • Higher depreciation due to change in accounting standards
  • All numbers are consolidated and compared on a year-on-year basis

RITES Q4FY20

  • Revenue down 22.6% to Rs 570.7 crore
  • Net profit down 4.3% to Rs 143.9 crore
  • Ebitda down 10% to Rs 163.6 crore
  • Ebitda margin at 28.7% from 24.7%
  • Domestic consultancy revenue down 13% to Rs 286 crore
  • Domestic construction projects revenue down 35% to Rs 170.1 crore
  • Exports down 43% to Rs 59 crore
  • All numbers are consolidated and compared on a year-on-year basis

MIDHANI Q4FY20

  • Revenue down 39.5% to Rs 203.6 crore
  • Net profit down 49.7% to Rs 40.4 crore
  • Ebitda down 54.7% to Rs 50.1 crore
  • Ebitda margin at 24.6% from 32.9%
  • All numbers are standalone and compared on a year-on-year basis

Brokerage Radar

CLSA On Vodafone Idea

  • Buy rating maintained
  • Price target raised to Rs 14 from Rs 12
  • Enormous debt burden
  • Raise FY21 and FY22 estimates and see further upside to ARPU growth
  • ARPU along with AGR case risk will be a key stock catalyst
  • With return of growth, promoters may also reassess stance on incremental funding

Macquarie On JSPL

  • Outperform rating maintained
  • Price target of Rs 192
  • Rating on improved delivery, volume grwoth and potential deleveraging
  • Deal to reduce consolidated debt by 16% of the currenct net debt as per our calculation
  • Deal to reduce consolidated net debt/Ebitda to 4.3 times from 4.8 times
  • Near-term stock re-rating is capped
  • Key to track will be deal closure and continued delivery on operations

HSBC On Kajaria Ceramics

  • Buy rating maintained
  • Price target cut to Rs 450 from Rs 470
  • Lockdown impacted Q4 resulted in dismal FY20
  • Do not expect FY21 to be any better
  • Market share gains to continue as unorganised players face multiple issues
  • Lower raw material costs support margins
  • Lower estimates offset by rolling valuations forward

HSBC On Bajaj Auto

  • Buy rating maintained
  • Price target of Rs 3,200
  • Margin and cash flow strong in FY20 despite pricing fears
  • Export reliance on Africa has increased
  • Premium domestic two-wheeler portfolio well positioned for the long-term
  • Domestic three-wheeler recovery could be a near-term headwind
  • Long-term attraction is its diversified revenue profile

Jefferies On Bharat Forge

  • Upgrade to buy
  • Price target of Rs 425 from Rs 190
  • Find valuations attractive
  • Faces a severe downturn in FY21
  • FY22-23 should be strong with truck cycle picking up in U.S. and India
  • Oil and Gas outlook weak but multiple other tailwinds
  • Like structural growth story, diversified business mix and distinctive capability to expand
  • Expect sequential pick-up in operations in H2FY21

BofA Securities On Vodafone Idea

  • Underperform rating maintained
  • Price target of Rs 7.5
  • Q4 revenue in-line while Ebitda was a miss
  • Find risk-reward unfavourable
  • Risk of continued market share loss persists
  • Overall subscribers and broadband subscribers declined in Q4

Citi On ONGC

  • Neutral rating maintained
  • Price target of Rs 78
  • FY20 gas production declined 3.5%
  • See bigger drop in realisations in Q1FY21
  • Contribution from ONGC Videsh declines
  • Prefer downstream OMCs among oil companies

Pledged Share Details

  • Adani Transmission: Promoters created pledge of 2.9 crore shares on June 30
  • Zee Media Corporation: Promoter ARM Infra and Utilites invoked pledge of 1.05 crore shares on April 7
  • Apollo Tyres: Promoter Motlay Finance released pledge of 45.7 lakh shares on June 25
  • Jindal Stainless: Promoters created pledge of 20 crore shares between June 24-26

(As Reported On June 30)

Trading Tweaks

  • Record Date for Rights Issue: Aditya Birla Fashion and Retail. Rights issue at 9:77 partly paid.
  • Price Band Revised From 10% To 5%: Aban Offshore, Nitin Spinners, Refex Industries
  • Price Band Revised From 20% To 10%: Omaxe
  • Move Into ASM Framework: Expleo Solutions, ARSS Infrastructure Projects, Tilaknagar Industries
  • Move Into Short-Term ASM Framework: Edelweiss Financial Services, Shree Digvijay Cement, Sharda Cropchem
  • Move Out Of Short-Term ASM Framework: Inox Wind, Usha Martin, Balaji Telefilms , Borosil Renewables.

Insider Trades

  • Apollo Tyres: Promoters acquired 4.14 lakh shares between June 16-25
  • Tourism Finance Corporation: Promoter Koppara Thomas acquired 7.5 lakh shares on June 29
  • Info Edge: Promoters sold 1 lakh shares between June 26-29

(As Reported On June 30)

Money Market Update

  • The rupee gained for the fourth straight day on Tuesday, ending at 75.51 against the U.S. Dollar as compared to Monday's close of 75.58.
  • This is the longest winning streak for the rupee in two months.
  • For the April-June period, the rupee was flat, ending as the third worst performing currency in Asia.

F&O Cues

  • Nifty July futures closed at 10,240; discount of 60 points from 57 points
  • Nifty July futures add 0.8% and 87,900 shares in Open Interest
  • Nifty Bank July futures closed at 21,214; discount widens to 156 points from 124 points
  • Nifty Bank July futures add 8.9% and 1 lakh shares in Open Interest
  • Nifty Put-Call Ratio at 1.2 from 1.33 across all series

Nifty Monthly Expiry: July 2

  • Maximum Open Interest on Call side at 10,500 strike (32.5 lakh shares)
  • Maximum Open Interest on Put side at 10,000 strike (27.9 lakh shares)
  • Active Options: 10,100 Put (+8.5 lakh shares), 10,400 Call (+10.2 lakh shares)

Nifty Monthly Expiry: July 30

  • Maximum Open Interest on Call side at 11,500 strike (20.2 lakh shares)
  • Maximum Open Interest on Put side at 10,000 strike (25.7 lakh shares)
All You Need To Know Going Into Trade On July 1
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