All You Need To Know Going Into Trade On July 15

Asian stocks began the week with a cautious tone as investors turned their attention to upcoming data on Chinese economic growth amid expectations for further policy support.

Australian shares opened lower and South Korea’s main equity index was flat. Futures on the S&P 500 Index edged lower. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, erased gains and fell 0.1 percent to 11,537.50 as of 7:15 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.

BQ Live

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

U.S. Market Update

• U.S. equities closed at a record high for a second straight day, and recorded a second consecutive weekly advance, as investors remained cautiously optimistic about prospects for easier monetary policy, despite a bigger-than-projected rise in a key inflation measure.
• The yield on 10-year Treasuries declined two basis points to 2.12 percent on Friday.

Asian Cues

• Futures on the S&P 500 Index dipped 0.1 percent.
• South Korea’s Kospi index was flat.
• Australia’s S&P/ASX 200 dropped 0.3 percent.

Commodity Cues

• Brent crude resumed gains after a one-day blip, closed 0.3 percent higher at $66.72 a barrel Friday. The Asian crude benchmark fell 0.2 percent today.
• West Texas Intermediate crude fell 0.1 percent to $60.16 a barrel.
• Gold gained less than 0.1 percent to $1,416.26 an ounce.

London Metal Exchange

• Copper ended a two-day gains, closed 0.34 percent lower.
• Lead ended higher for the fifth consecutive trading session, ended 0.18 percent higher.
• Tin resumed declines after a one-day breather, closed 0.79 percent higher.
• Zinc ended higher for the third consecutive trading session, closed 0.4 percent higher.
• Aluminium ended lower for the second day, ended 0.33 percent lower.
• Nickel ended higher for the third consecutive trading session, closed 2.59 percent higher.

Key Events To Watch This Week

• India June Wholesale Prices Inflation data.
• India June trade balance data.
• U.S. June retail sales, due Tuesday, are expected to rise 0.2% from the prior month, which would be the slowest pace since February.
• Monetary policy decisions are due in Indonesia, South Korea and South Africa on Thursday.

Data Recap

• India June CPI rose 3.18 percent versus 3.05 percent in May.
• India May IIP rose 3.1 percent YoY; Estimated 2.9 percent.

Indian ADRs

Stocks To Watch

• Infosys approved follow-on investment of $6 million in Trifacta Inc.
• Syndicate Bank revised MCLR by five basis points across tenors.
• IGE Group deplored misinformation on corporate governance (Bloomberg New).
• Grindwell Norton formed JV with Shinagawa Refractories, Japan for tap hole clay refractory products for steel industry.
• Emami said to pick Arpwood and Credit Suisse for cement unit sale, Bloomberg reported quoting unidentified people.
• InterGlobe Aviation: With promoter spat intensifying at the country's largest airline IndiGo, markets watchdog Securities and Exchange Board of India and the Ministry of Corporate Affairs have started digging deep into allegations of governance lapses and violations that could force the government to override existing arrangements and pacts at the company, PTI reported quoting officials.
• The Directorate of Revenue Intelligence arrested Future Enterprises Chief Financial Officer Dinesh Maheshwari for allegedly being the “main person responsible” for customs duty evasion to the tune of Rs 14.58 crore by the company. Maheshwari is also an executive director on the company’s board, along with Managing Director Vijay Biyani and Vice Chairman Kishore Biyani.
• BHEL: Won an order worth Rs 100 crore for setting up a 25 MW floating solar photovoltaic power plant on EPC basis from NTPC.
• IndusInd Bank: SR Batliboi & Co. has tendered resignation as statutory auditors as RBI has barred the auditor from carrying out audits in commercial banks.

Tata Steel Q1FY20 Updates

• Market spreads for steel producers globally have been affected due to fall in steel prices and rise in iron ore prices.
• In Europe, steel industry is facing significant headwinds in terms of lower economic growth and trade flow uncertainty that is impacting steel consuming products.
• Tata Steel Europe production was impacted by planned shutdowns and unplanned outages during the quarter, while sales were affected due to sluggish demand.
• Resumption of trade talks between U.S. and China and the recent Union Budget announcements in India is expected to translate into a stronger business performance in the second half of the current financial year.

Earnings To Watch

• Automotive Stampings
• Bajaj Consumer Care
• Tata Metaliks
• Tinplate Company of India

Earnings Reaction To Watch

Infosys (Q1 QoQ)

• Revenue up 1.2 percent to Rs 21,803 crore.
• Net profit down 6.7 percent to Rs 3802 crore.
• EBIT down 3.2 percent to Rs 4471 crore.
• Margin at 20.5 percent versus 21.4 percent.
• Increased 2019-20 revenue growth guidance range from 7.5 to 9.5 percent given earlier to 8.5-10 percent in constant currency.
• Maintained 2019-20 operating margin guidance range of 21 percent-23 percent.

Hathway Cable (Q1, YoY)

• Revenue up 17 percent to Rs 450 crore.
• Net loss narrows to Rs 10 crore.
• Other income of Rs 57 crore in current quarter.
• Ebitda up 29 percent to Rs 93 crore.
• Margin 20.7 percent versus 18.7 percent.

Karnataka Bank (Q1 YoY)

• Net interest income rises 5 percent to Rs 494 crore.
• Net profit rises 7 percent to Rs 175 crore.
• Provisions down 8 percent to Rs 201 crore (QoQ).
• GNPA rise to 4.55 percent (QoQ).
• NPA rise to 3.33 percent (QoQ).

TRF Ltd (Q1, YoY)

• Revenues up 1.5 percent to Rs 69 crore.
• Net profit of Rs 12 crore versus net loss of Rs 60 crore.
• Gain from impairment of goodwill of Rs 16.6 crore in current quarter versus loss of Rs 23.2 crore.
• Ebitda gain of Rs 4 crore versus Ebitda loss of Rs 25 crore.
• Margin expands to 5.8 percent.

Avenue Supermarts (Q1, YOY)

• Revenue up 27 percent to Rs 5,815 crore.
• Profit up 32 percent to Rs 323 crore.
• Ebitda up 41 percent to Rs 597 crore.
• Margin at 10.3 percent versus 9.2 percent.
• Added eight stores in June quarter.

DHFL (Q4, YoY)

• NII up 45 percent to Rs 664.52 crore.
• Loss at Rs 2,223 crore versus Rs 134 crore
• Defaults on NCD interest payments worth Rs 48 crore.

Bulk Deals

• REC: Integrated Core Strategies (Asia) PTE Ltd. buys 1.02 crore shares or 0.5 percent equity at Rs 148.16 each.
• DHFL: BNP Paribas Arbitrage sells 18.44 lakh shares or 0.6 percent percent equity at Rs 69.94 each.

PFC

• The Windacre Partnership Master Fund LP buys 6.35 crore shares or 2.4 percent percent equity at Rs 124.85 each.
• UBS Principal Capital Asia Limited sells 6.35 crore shares or 2.4 percent percent equity at Rs 124.85 each.

Who’s Meeting Whom

• TFCI to meet investors and analysts on July 15.
• Tata Steel to meet several fund houses including Emkay Global, Morgan Stanley Investment, Cathay Life Insurance among others on July 15 & 16.

Money Market Update

Indian government bonds are likely to be supported by a benign headline inflation number which will support expectations of a rate cut in August.

A rise in U.S. Treasury yields may, however, temper gains. Consumer prices rose 3.2 percent in June from a year earlier, the Statistics Ministry said in a statement on Friday. That is higher than the 3.13 percent median estimate in a Bloomberg survey of 38 economists, but below RBI’s 4 percent medium-term aim.

A slowing in core inflation due to waning demand is likely to keep price pressures in check, economists said. The yield on the 10-year bond fell one basis point to 6.49 percent Friday.

In the currency market, implied opening from the forwards suggest the rupee may start trading at 68.63 per dollar, having ended at 68.68 on Friday. India will release trade data for June later in the day and the deficit is expected to narrow a bit.

July Futures

• Nifty futures closed at 11,544, discount of 8 points versus 0.8 points.
• Nifty futures open interest down 3.6 percent, sheds 6.3 lakh shares in open interest.

Bank Nifty

• Bank Nifty futures closed at 30,600, discount of 1 point.
• Bank Nifty futures open interest up 2 percent, adds 34,000 shares in open interest.

Options

• Nifty PCR at 1.14 versus 1.24 (across all series).

Nifty Weekly Expiry 18-July

• Max open interest on call side at 11,600 (18.2 lakh shares).
• Max open interest on put side at 11,500 (12 lakh shares).
• Open interest addition seen in 11,600C (+7.7 lakh shares), 11,650C (+5.4 lakh shares).

Nifty Monthly Expiry 25-July

• Max open interest on call side at 12,000 (32 lakh shares).
• Max open interest on put side at 11,300 (19.8 lakh shares).

Stocks in F&O Ban

• DHFL
• IDBI Bank
• Reliance Capital
• Reliance Infra

Brokerage Radar

Morgan Stanley on Avenue Supermarts

• Maintained ‘Underweight’ with a price target of Rs 1,120.
• Revenue slightly below, but operating margins strong.
• Gross margin expansion is key positive for the quarter.
• Sustainability of margin expansion is key for the stock.

UBS on Emami

• Maintained ‘Buy’; cut price target to Rs 400 from Rs 535.
• Negative sentiments had led to de-rating.
• Earnings cut may have bottomed out.
• Positive triggers could be ahead; risk-reward compelling.

Morgan Stanley on Sun Pharma

• Upgraded to ‘Overweight’ from ‘Underweight’; hiked price target to Rs 505 from Rs 470.
• Expect the current financial year to be transitional year followed by cost normalisation and positive operating leverage.
• Positives: specialty ramp-up, manufacturing rationalisation, cost control and Halol contribution.
• Stock is trading at inexpensive valuations; Sun Pharma is top pick.

Morgan Stanley on Hindustan Unilever

• Resumed at ‘Equal-weight’ with a price target of Rs 1,630
• Expect GSK acquisition to drive 23 percent EPS growth in the next financial year.
• Strong reported earnings growth may continue to support elevated valuation.
• Recommend shift to Godrej Consumer, Marico and Dabur.

On IndusInd Bank

Citi

• Maintained ‘Buy’ with a price target of Rs 1,980.
• Q1: Merger benefits visible, NPA coverage low.
• Strong loan growth, stable LCR.
• Merger leads to better NIM and CAR.

Nomura

• Maintained ‘Buy’ with a price target of Rs 1,775.
• Weaker NII was offset by lower opex/ higher treasury gains.
• Asset quality comforting with reduction in stressed pool and negligible corporate slippages.
• Loan growth muted sequentially; liability profile stable inspite of the merger.

CLSA

• Maintained ‘Buy’ with a price target of Rs 2,160.
• Asset quality holds up; coverage could have been improved.
• MFI book lifts margins, but lending environment needs to improve.
• CASA grows well; branch expansion and MFI clients to aid growth.

On Infosys

Nomura

• Maintained ‘Reduce’ with a price target of Rs 680.
• Q1: Guidance slightly raised and increased capital allocation.
• Revenue growth guidance raised led by strong deal win momentum and traction in digital business.
• Increased its capital allocation policy and now plans to return 85 percent of FCF versus 70 percent earlier.

Citi

• Upgraded to ‘Buy’ from ‘Neutral’; hiked price target to Rs 820 from Rs 785.
• Deal wins, revenue guidance raised and capital return being raised were all positive.
• Expect growth visibility and margins improving from current low levels.
• Attrition remains elevated – something to monitor.

CLSA

• Maintained ‘Buy’ with a price target of Rs 900.
• Q1 Review: strong revenue growth and deal wins.
• Margin appears to have bottomed out with positive outlook.
• Buy for strong growth momentum, expected margin recovery and higher payouts.