All You Need To Know Going Into Trade On July 10
Asian markets have begun the final trading day of the week on a negative note, tracking the drop in its U.S. counterparts.
A recent surge in Covid-19 cases is making investors wary of slowing global growth. Treasuries held an overnight advance.
The Singapore-traded SGX Nifty, an early indicator of the Nifty 50 Index’s performance in India, fell 0.4% to 10,796 as of 6:55 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 can influence equities in today’s session:
- Markets in Japan are retreating as are those in South Korea and Australia.
- Futures on the Dow Jones are little changed after the index fell 1.4% on Thursday.
- Nasdaq continued to advance to a fresh record high.
- Jobs data reported on Thursday was better than estimates.
- Yield on the 10-year treasuries stood at 0.62%.
- West Texas Intermediate crude was little changed at $39.65 per barrel.
Get your daily fix of the global markets here.
Earnings Fineprint: TCS Q1FY21
- U.S. Dollar revenue down 7% to $5,060 million
- Revenue down 4.1% to Rs 37,322 crore
- Ebit down 9.7% to Rs 9,048 crore
- Ebit margin at 23.6% from 25.1%
- Net profit down 12.9% at Rs 7,049 crore
- BFSI revenue flat at Rs 15,282 crore
- Manufacturing revenue down 7.9% to Rs 3,884 crore
- Retail & Consumer Business revenue down 11.5% to Rs 5,912 crore
- Communication, Media & Technology revenue down 3.8% to Rs 6,495 crore
- Lower revenue weighs on operating margins
- Total Contract Value at $6.9 billion
- Expects gradual recovery over next two quarters
- Revenue growth to be flat only in Q4 on constant currency basis
- Management says clients are neither cancelling contracts nor renegotiating
- All numbers are consolidated and compared on a quarter-on-quarter basis
Stocks To Watch
- Zee Entertainment: Bombay High Court has directed the company to file an affidavit within a period of one week in the matter pertaining to a letter of comfort given to Yes Bank. The bank had filed an appeal against the single judge bench order of the Bombay High Court which refused its plea to enforce Zee's letter of comfort as a bank guarantee.
- Reliance Industries: Announces start of their JV with BP, named Reliance BP Mobility. The JV has received marketing authorisation for transportation fuels among other necessary regulatory and statutory approvals. The JV will begin seling fuels and Castrol lubricants with immediate effect from existing retal outlets which will be rebranded to Jio-BP in due course. It aims to expand to 5,500 sites over the next five years from the current 1,400. It also aims to increase its presence to 45 airports from the current 30 going ahead.
- Punjab National Bank: Board approved raising Rs 10,000 crore by private placement, QIP issue, FPO, rights issue or any combination thereof and seek shareholders nod to raise Rs 7,000 crore via equity. Board has also approved the appropriation of accumulated losses of Rs 28,707.9 crore from share premium account of the amalgamated Bank. A fraud of Rs 3,688.6 crore is being reported by Bank to RBI in the accounts of the DHFL at a large corporate branch at Mumbai. Bank has already made provisions amounting to Rs 1,246.6 crore, as per prescribed prudential norms.
- Firstsource Solutions: Rakesh Jhunjhunwala increased stake to 2.88% from 2.06% in the June quarter.
- Gujarat Ambuja Exports: Board to consider proposal for share split of 1:2 on July 25.
- VIP Industries: Board approved raising NCDs worth Rs 100 crore via private placement.
- Rallis India: Completed the merger of Zero Waste Organics into the company from July 9.
- Muthoot Capital Services: Completed its first securitization of Rs 100.9 crore in FY21.
- Seamec: One of its vessel charter with Clipper Bulk Shipping, has been extended for a further period of one year. The annualized value of the charter is $2.88 million.
- CG Power and Industrial Solutions: A Hungary court has declared the company's two arms to be insolvent and the liquidation proceedings have commenced.
- Seshasayee Paper and Boards: Operations in its Tirunelveli unit have been temporarily shut from July 7 after some employees tested positive for Covid-19.
- Tourism Finance Corp: To consider raising capital on July 16.
- Som Distilleries and Breweries: There has been a GST dispute in a promoter company where an investigation is going on, which is related to a dispute regarding hand sanitizers which promoter company had started manufacturing at the outbreak of the ongoing pandemic.
- Dai-Ichi Karkaria to sell its Pune land parcel for Rs 153.5 crore to Gera Developments.
- GE Power India: Has been awarded a contract worth approximately Rs 291.9 crore by Megha Engineering & Infrastructures for Kundah pumped storage hydro electric project in Nilgiris district of Tamil Nadu.
- NLC India: Solar project in Andaman islands has been commissioned on June 30.
- Non-Nifty Earnings Today: IRCTC, SAIL, Karnataka Bank, Lakshmi Vilas Bank, Future Consumer, GNFC, IFB Agro.
Quarterly Business Updates
Tata Motors JLR
- Retail sales down 42.4% to 74,067 units
- June retail sales down 24.9% to 35,334 units
- Sales in China, North America were encouraging
- 95% retailers are open and all plants have resumed manufacturing
- Castle Bromwich facility will resume production in August
PNB Housing Finance
- Plan capital raise of up to Rs 1,700 crore
- Disbursements to de-grow on a year-on-year basis this year.
- Focus will be on mass housing and lower risk weighted retail segment.
- Unnati segment will account for 10-15% of total disbursements for FY21.
- Retail loans are expected to further increase beyond 85% of total AUM.
- Will look to maintain spreads anywhere between 210-220 basis points this year.
- Gross margin is expected to be in the range of 300-315 basis points.
- Operating expense is expected to reduce by 5-10% in absolute terms.
- Looking to further sell down corporate assets and make balance sheet further asset light
- Promoter's objective is to maintain minimum stake of 26%.
- Retail loans under moratorium phase 2 account for 29% of retail AUM and 39% of overall AUM is under moratorium
Container Corporation of India
- Total throughput down 21% to 7,32,711 TEUs
- Domestic TEUs down 25.3% to 1,04,806 TEUs
- EXIM TEUs down 20.1% to 6,27,095 TEUs
- TEUs - Twenty Foot Equivalent Units
- All numbers compared on a year-on-year basis
Earnings Reported After Market Hours
Sadbhav Engineering Q4FY20
- Revenue down 57.2% to Rs 629.5 crore
- Net profit of Rs 886.6 crore from net loss of Rs 27 crore
- Ebitda down 24% to Rs 180.2 crore
- Ebitda margin at 28.6% from 16.1%
- Exceptional gain of Rs 1,501 crore due to transfer of assets of Sadbhav Infra Projects to IndInfravit Trust
- All numbers are consolidated and compared on a year-on-year basis
CLSA On Cement
- Demand has likely fallen 30-40% as compared to earlier expectation of 50-70%
- Prices are up nearly 5.5% on a sequential basis
- Remain cautious in the near-term as most of the recovery is pent-up demand
- Continue to expect a double-digit decline in FY21 demand
- Expect profitability to decline 3% in FY21 before recovering 10% in FY22
- Raise FY21-23CL Ebitda by 0-16% across coverage to factor in better profitability
- ACC: Buy rating maintained; price target cut to Rs 1,385 from Rs 1,575
- Dalmia Bharat: Buy rating maintained; price target cut to Rs 720 from Rs 870
- Ambuja Cement: Downgrade to outperform from buy; price target cut to Rs 200 from Rs 220
- Ultratech: Outperform rating maintained; price target cut to Rs 3,925 from Rs 4,160
- Shree Cement: Downgrade to sell from underperform; Price target cut to Rs 19,000 from Rs 20,300
- Ramco Cement: Sell rating maintained; Price target cut to Rs 515 from Rs 600
CLSA On Adani Ports & SEZ
- Downgrade to outperform from buy
- Price target of Rs 386
- Stock has risen 37% in the past three months
- Cut FY21 volume estimates by 3% as traffic fell 27% year-on-year
- Cut EPS estimates by 2%-4%
- Gujarat Government's reversal of its tariff hike order for clients of Adani Ports creates risk for 81% of coal volumes at Mundra Port
- Remains best infrastructure asset but recent rally calls for a pause
Macquarie On TCS
- Downgrade to neutral
- Price target of Rs 1,900
- Growth recovery to be gradual given uncertainty in key verticals
- Margin drag to remain till growth recovers
- Expect Ebit margin to decline 80 basis points in FY21E and improve 160 basis points in FY22E
- Uncertainty on large deal wins persists
- Expect to benefit from vendor consolidation in the medium-term
- Significant investments made in products and platforms provides long-term competitive advantage
- Prefer Infosys, HCL Tech
CLSA On TCS
- Outperform rating maintained
- Price target cut to Rs 2,204 from Rs 2,260
- Stable cashflow and optimistic outlook
- Order booking strong but concentrated
- Incremental upside to be limited
- Superior cash generation should sustain relative outperformance
PhillipCapital On TCS
- Buy rating maintained
- Price target of Rs 2,212
- Deal wins and outlook positive
- FY21 to be a washout year for the entire sector
- Expect a bounce back in FY22
- Valuations may appear expensive
- Continue to command valuation premium to peers
Pledged Share Details
- Rushil Decor: Promoter K Thakkar created a pledge of 19.9 lakh shares on July 8
- JSW Steel: Promoter JSW Techno Projects Management revoked pledge of 9.7 lakh shares on July 6
(As Reported On July 9)
- Tejas Networks: HDFC Mutual Fund sold 12.2 lakh shares (1.32%) at Rs 51.8 per share.
- Arvind Fashions Rights Issue: Schroder Asian Growth Fund sold 3.21 lakh shares at Rs 55.89 per share.
- Record Date Rights Issue: PVR, Shriram Transport Finance
- AGM Date: Ambuja Cement, Aditya Birla Money, Neuland Labs, CSB Bank
- Fund Raising: Shriram EPC, Bank of Maharashtra, Canara Bank
- Move Into ASM Framework: LT Foods
- Move Into Short-Term ASM Framework: Indiabulls Real Estate, IG Petrochemicals, Ujjivan Small Finance Bank.
- Move Out Of Short-Term ASM Framework: Gallantt Ispat, Anant Raj, Den Networks, Bajaj Hindusthan Sugar, Century Extrusions, Zensar Technologies.
Money Market Update
- The rupee snapped a three-day losing streak on Thursday, ending flat but with a positive bias.
- The currency ended at 74.99 against the U.S. Dollar as compared to Wednesday's close of 75.02.
- Seven other EM currencies managed to outperform the rupee on Thursday.
- Nifty July futures closed at 10,823; premium of 10 points from discount of 10 points
- Nifty July futures add 4.2% and 4.7 lakh shares in Open Interest
- Nifty Bank July futures closed at 22,908; premium narrows to 1 point from 26 points
- Nifty Bank July futures shed 0.5% and 7,200 shares in Open Interest
Nifty Monthly Expiry: July 16
- Maximum Open Interest on Call side at 11,000 strike (13.7 lakh shares)
- Maximum Open Interest on Put side at 10,800 strike (13.3 lakh shares)
- Active Options: 10,800 Put (+10.4 lakh shares) and 11,000 Call (+7.4 lakh shares)
Nifty Monthly Expiry: July 30
- Maximum Open Interest on Call side at 11,500 strike (26.3 lakh shares)
- Maximum Open Interest on Put side at 10,000 strike (34 lakh shares)