All You Need To Know Going Into Trade On July 17

Asian markets are mixed at the start of the final trading day of the week. Relations between the U.S. and China continue to remain tense while the rally in tech stocks in the U.S. is showing signs of fragility.

The U.S. dollar has dipped while treasuries held on to modest gains post mixed employment data from the U.S.

The Singapore-traded SGX Nifty, an early indicator of the Nifty 50 Index’s performance in India, rose 0.56% to 10,761 as of 7:40 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:

• Benchmark indices in Japan are fluctuating while those in South Korea and Australia are seeing modest gains.
• Initial jobless claims showed a slowing labour market rebound. Initial jobless claims stood at 1.3 million.
• "The numbers illustrate the economic challenges posed by secondary infection outbreaks," Michael McCarthy, Chief Market Strategist at CMC Markets told Bloomberg.
• Yield on the 10-year treasuries remained at 0.62%.
• West Texas Intermediate crude rose 0.3% to $40.85 per barrel.

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Stocks To Watch

• BPCL: Arm finalises senior debt financing of $14.9 billion for 2-train LNG project. Final investment decision for the same was made in June 2019.
• PTC India: Exploring opportunities for monetisation of investment in PTC India Financial Services and to sell controlling stake. The company currency has 65% stake in the financial services business, the market value of which stands at Rs 884 crore as of July 16. The final date of submission of interest in bidders is July 31.
• Endurance Technologies: Italian arm to undertake consolidation of its foundry activities whereby the plant operations including workmen and necessary plant and machinery from Grugliasco are shifted to the Chivasso plant. Post the consolidation of plant operations, the group now has nine manufacturing plants - six in Italy and three in Germany.
• Century Plyboards: Operations at Joka unit in West Bengal, which were partially suspended due to cyclone AMPHAN on May 20, have normalised.
• Covid-19 Impact On Symphony: Several orders were cancelled towards the end of March. Current quarter sales severely impacted. OEMs facing production constraints due to labour shortages and logistical bottlenecks.
• Aavas Financiers: SBI Mutual Fund reduces stake in the company to 3.06% from 3.52% on July 15.
• L&T Technology Services: To acquire Orchestra Technologies for $25 million. The sum will be paid in tranches. The target company is based in the U.S. and specialises as a technology solutions provider to the telecom industry.
• Thomas Cook India: Signs agreement to take over the portfolio of Dnata Travel India's corporate travel business.
• Godrej Industries: Allotted NCDs worth Rs 750 crore
• Non-Nifty Earnings Today: Coffee Day Enterprises, GNA Axles, Granules India, ICICI Lombard, Hathway Cable

Earnings Reported After Market Hours

Cyient Q1FY21

• Revenue down 7.6% to Rs 991.7 crore
• Net profit up 76.2% to Rs 81.4 crore
• Ebit up 22.2% to Rs40.2 crore
• Ebit margin at 4% from 3%
• Impairment of non-current assets worth Rs 40 crore in the base quarter
• Lower employee and other expenses, higher other income aid net profit growth
• All numbers are consolidated and compared on a quarter-on-quarter basis

L&T Finance Holdings Q1FY21

• Net Interest Income down 15.7% to Rs 1,408.9 crore
• Net profit down 73% to Rs 148.3 crore
• Incremental provision of Rs 577 crore out of which provision for Covid-19 this quarter stands at Rs 277 crore
• Exceptional gain of Rs 225.6 crore on divestment of entire stake in L&T Capital Markets
• Moratorium on Retail lending book at 44% from 79% in the previous quarter
• Overall moratorium for infrastrucure finance, real estate borrowers remains close to 40%
• Disbursement momentum may pick-up, especially in Rural portfolio
• Raised Rs 3,200 crore till July 15
• All numbers are consolidated and compared on a year-on-year basis

L&T Technology Services Q1FY21

• Revenue down 3.9% to Rs 1,294.7 crore
• Net profit down 42.5% to Rs 117.2 crore
• Ebitda down 24.5% to Rs 205.9 crore
• Ebitda margin at 15.9% from 20.2%
• Higher employee costs impact margins
• Other income of Rs 56.5 crore in the base quarter
• All numbers are consolidated and compared on a year-on-year basis

Earnings Expectations: HCL Tech Q1FY21

• Dollar revenue seen down 7.6% at $2351 million vs $2543 million (BQ Poll)
• Consolidated, QoQ (Bloomberg mean)
• Revenue seen down 3.8% at Rs 17882 crore vs Rs 18590 crore
• EBIT seen down 11.8% at Rs 3424 crore vs Rs 3881 crore
• EBIT margins seen at 19.1% vs 20.9%
• Net profit seen down 14.9% at Rs 2684 crore vs Rs 3154 crore

Watch out for

• Expect steady conversion of projects in the pipeline
• IP acquisitions to support revenue
• Organic growth to be volatile
• Margins may see pressure owing to transitioning to Covid-19 environment
• Rupee depreciation to partially aid margins
• Co has indicated earlier that there will be little impact of Covid-19 on operations
• Expect company to guide for subdued FY21 revenue and margins to stay flat

Earnings Expectations: Britannia Q1FY21

• Revenue seen 21% higher at Rs 3,265 crore
• Ebita seen 42% higher at Rs 562 crore
• Ebitda margin seen at 17.2% from 14.6%
• Net profit seen 58% higher at Rs 417 crore
• All estimates are Bloomberg estimates and compared on a year-on-year basis

Key Factors At Play For Britannia:

• Strong quarter driven by estimated volume growth of 19-20%
• Distribution may pick up in North Indian states
• Expected to gain from higher volumes in smaller packages
• Margins to benefit from strong revenue, low input costs
• Watch out for outlook on demand for next two quarters

Brokerage Radar

CLSA On Maruti

• Sell rating maintained
• Price target of Rs 4,700
• Expect relative weakening of its model cycle
• Acceleration in launch pipeline and high success rate for yet-announced models can pose upside risks to forecast
• Collective resurgence in new launches by competition is already impacting market share in some categories like SUVs and Sedans
• Can face headwinds from Hyundai Aura and Honda Amaze

Macquarie On Bajaj Consumer Care

• Outperform rating maintained
• Price target of Rs 171
• Recovery run-rate ahead of expectations
• Accelerated cost savings and lower A&P spends led to margin normalisation
• Improving rural distribution one of the key focus areas
• Trading at a significant discount to peers

UBS On Indian Auto Sector

• Demand remains in the early stages of recovery
• Channel checks with two-wheeler dealers indicates caution on financing has not materialised
• Raise FY21/FY22 two-wheeler volume growth estimates to -17%/22% from -19%/16%
• Raise FY21/22 Passenger Vehicle growth estimates to -17%/23% from -18%/20%
• Rising share of replacement demand supports medium-term growth for the sector
• Margins have scope for upside surprise in FY22
• Preferred picks remains Hero MotoCorp and Ashok Leyland
• Expect Hero MotoCorp and Maruti to gain market share

Stock Picks

• Hero MotoCorp: Buy rating; price target raised to Rs 3,400 from Rs 2,550
• Bajaj Auto: Buy rating; price target raised to Rs 3,400 from Rs 2,950
• Eicher Motors: Neutral rating; price target raised to Rs 21,500 from Rs 14,500
• Maruti: Buy rating; price target raised to Rs 7,400 from Rs 5,700
• M&M: Buy rating; price target raised to Rs 660 from Rs 460
• Bosch: Buy rating; price target raised to Rs 17,000 from Rs 12,500
• Ashok Leyland: Buy rating; Price target raised to Rs 69 from Rs 63

Pledged Share Details

• Future Consumer: Promoter Future Capital Investment invoked pledge of 1.8 crore shares on July 16.
• Omaxe: Promoter Guild Builders created pledge of 63 lakh shares between July 13-15.
• JSW Energy: Promoter Glebe Trading revoked pledge of 47.67 lakh shares on July 13

(As Reported On July 16)

Who’s Meeting Whom

• 5paisa Capital: To meet Mathews Asia, Alchemy Capital and LOBCO on July 20
• Prince Pipes and Fittings: To meet Chrys Capital Advisors, Motilal Oswal Securities and Nirmal Bang on July 17

Trading Tweaks

• AGM Date: Karnataka Bank, RBL Bank, L&T Technology Services, Nippon Life India AMC, Indian Hotels, Shankara Building Products, Srikalahasthi Pipes
• Fund Raising: Can Fin Homes
• Price Band Revised From 20% To 10%: Sangam
• Move Into Short-Term ASM Framework: Paisalo Digital, Silly Monks Entertainment, Vertoz Advertising.
• Move Out Of Short-Term ASM Framework: Magadh Sugar & Energy, South Indian Bank

Money Market Update

• The rupee ended little changed at 75.19 against the U.S. Dollar as compared to Wednesday’s close of 75.13.
• The rupee ended as the second best performing currency in Asia for the second straight day.

F&O Cues

• Nifty July futures closed at 10,714; premium widens to 26 points from 10 points
• Nifty July futures add 10% and 9.5 lakh shares in Open Interest
• Nifty Bank July futures closed at 21,571; premium of 26 points from 20 points
• Nifty Bank July futures shed 5.5% and 88,000 shares in Open Interest
• Out of F&O Ban: Equitas, Escorts, Mindtree, SAIL
• Stocks In F&O Ban: Canara Bank, Century Textiles, Vodafone Idea, L&T Finance, PNB, Sun TV

Nifty Monthly Expiry: July 23

• Maximum Open Interest on Call side at 11,000 strike (13.5 lakh shares)
• Maximum Open Interest on Put side at 10,500 strike (13.8 lakh shares)
• Active Options: 10,500 Put (+9.2 lakh shares) and 11,000 Call (+7.3 lakh shares)

Nifty Monthly Expiry: July 30

• Maximum Open Interest on Call side at 11,000 strike (25.7 lakh shares)
• Maximum Open Interest on Put side at 10,000 strike (34.5 lakh shares)