All You Need To Know Going Into Trade On July 18

Stocks in Asia tracked losses seen in the U.S. session amid a flurry of corporate earnings and lingering concern over the Sino-American trade dispute.

Decline among Japanese shares put the Topix index on course for a fourth day of losses. A drop in South Korean and Australian equities was more modest. Futures on the S&P 500 Index dipped. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.2 percent to 11,648 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

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

U.S. Market Update

• U.S. stocks fell as investors assessed mixed corporate earnings amid concern over the U.S.-China trade spat. Treasuries rallied.
• The yield on 10-year Treasuries remained at 2.05 percent.

Asian Cues

• Futures on the S&P 500 dipped 0.1 percent.
• Japan’s Topix index fell 0.7 percent.
• South Korea’s Kospi index dropped 0.1 percent.
• Australia’s S&P/ASX 200 Index lost 0.1 percent.

Commodity Cues

• Brent crude extended declines for the third consecutive trading session, down 1.07 percent.
• West Texas Intermediate crude fell 0.4 percent to $56.58 a barrel.
• Gold was little changed at $1,424.72 an ounce.

London Metal Exchange

• Copper ended a two-day gaining streak, closed 0.53 percent lower.
• Lead extended gains for the eighth consecutive trading session, closed 1.06 percent higher.
• Aluminium ended a two-day gaining streak, closed 0.16 percent lower.
• Nickel extended gains for the sixth consecutive trading session, closed 2.7 percent higher.

• Tin ended 0.42 percent lower.
• Zinc closed 0.3 percent lower after gaining for five consecutive trading sessions.

Indian ADRs

Stocks To Watch

• Reliance Power ICRA downgraded borrowings worth Rs 8,015 crore of the company to ‘Default’. Company continues to remain in the non-cooperating category. (Press release)
• NMDC Karnataka High Court has allowed the writ petition in Donimalai case and set aside the condition imposed to levy premium equivalent to 80 percent of average sale price of the iron-ore as published by Indian Bureau of Mines.
• Mindtree board appointed AM Naik as non-executive chairman with effect from July 18. He is the group chairman of L&T.
• DFM Foods stated that they will commission a new extrusion line which will add 5,000 MT per annum capacity for an investment of Rs 20 crore and have also taken an industrial premise on a long term-lease in UP.
• Punjab and Sind Bank reported fraud of Rs 238.3 crore in Bhushan Power and Steel account. Provisions of Rs 189.35 crore have been made, according to prudential norms. Bank said that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks.
• Dewan Housing Finance defaulted in payment of interest on NCDS, amounting to Rs 23.75 crore, which were due on July 16. Besides, the board plans to meet on July 22 to consider and approve joint statutory auditors reports, matters related to AGM and March quarter results.
• Torrent Pharma: U.S. FDA classified company’s Dahej facility as Official Action Initiated. The inspection was undertaken in March.
• Allahabad Bank reported fraud of Rs 688.27 crore in SEL Manufacturing and the NPA account has been fully provided for this amount.
• Oil India stated in their press release that they have been awarded 12 oil and gas blocks under Open Acreage Licensing Policy of the government.
• Suzlon Energy stated in their press release that company is working on holistic solutions for its debt and all the secured lenders of the company and certain arms have signed an inter-creditor agreement in terms of RBI Circular for resolution of the debt of the group.
• Strides Pharma clarified that it had received warning letter from U.S. FDA for its Puducherry facility. On May 6 the, U.S. FDA had classified this facility as Official Action Initiated. The pharma company stated that the afore mentioned site produces six ANDAs which will not be impacted by the current development, but 10 ANDAs pending approval from the site will get deferred till the site is reclassified.
• Newgen Software Technologies secured patent for automated assessment of scanned documents.
• Eveready Industries India Ratings and Research has downgraded long term credit rating to ‘IND BBB-’ from ‘IND BBB’, with a negative rating watch.
• Jammu Kashmir Bank stated in its annual report 11 cases of frauds were reported to the RBI involving an amount of Rs 182.9 crore for financial year 2019.
• 8K Miles Software Services postponed its board meeting for quarterly results from July 18 to a later date.
• CARE Ratings sends its Managing Director Rajesh Mokashi, on leave with immediate effect on an anonymous complaint received by SEBI. The board has appointed TN Arun Kumar as interim CEO.

Earnings To Watch

• Larsen & Toubro Infotech
• ACC
• Colgate Palmolive (India)
• Cyient
• D B Corp
• Hatsun Agro Product
• Pioneer Distilleries
• Rallis India
• Sasken Technologies
• Sterlite Technologies
• Trident
• Uttam Galva Steels

Earnings Reaction To Watch

Yes Bank (Q1, YoY)

• Net interest income up 2.8 percent to Rs 2,280.84 crore.
• Net profit down 90 percent to Rs 113.76 crore.
• Provisions up 2.85 times to Rs 1,784.11 crore.
• Gross NPAs at 5.01 percent versus 3.22 percent.(QoQ)
• Net NPAs at 2.91 percent versus 1.86 percent. (QoQ)

Wipro (Q1, QoQ)

• IT services revenues down 1.8 percent to $2039 million.
• Revenue down 2.5 percent to Rs 14786 crore.
• Net profit down 3.7 percent to Rs 2402 crore.
• EBIT down 9.2 percent to Rs 2452 crore.
• Margin narrows to 16.6 percent versus 17.8 percent.

Mindtree (Q1, QoQ)

• Dollar revenue up 0.8 percent to $264.2 million.
• Revenues flat at Rs 1,834.2 crore.
• Net profit down 53.3 percent to Rs 92.7 crore.
• Ebitda down 31 percent at Rs 193 crore.
• Margin narrows to 10.4 percent from 15.2 percent.

DFM Foods (Q1, YoY)

• Revenues up 29.4 percent at Rs 127.7 crore.
• Net profit up 52 percent at Rs 7.6 crore.
• Ebitda up 34.2 percent at Rs 16.1 crore.
• Margin widens to 12.6 percent versus 12.2 percent.

Bulk Deals

• Sudarshan Chemical Industries: Amansa Holdings acquired 9.63 lakh shares or 1.39 percent equity at Rs 315 each.
• Tata Elxsi: Avendus Enhanced Return Fund sold 3.57 lakh shares or 0.57 percent equity at Rs 755.68 each.

Pledge Share Deals

• Eveready Industries promoters invoked pledge of 26 lakh shares on July 8.
• Mcleod Russel promoter Williamson Financial Services invoked pledge of 40.8 lakh shares on July 8
• JSW Steel promoters created pledge of 55 lakh shares and released pledge of 77 lakh shares from July 8-11
• JSW Energy promoters released pledge of 2.64 crore shares on July 9.
• Aurobindo Pharma promoter Nityananda Reddy created pledge of 2 lakh shares on July 16.
• Future Lifestyle Fashions promoter Ryka Commercial Ventures revoked pledge of 1.75 lakh shares on July 16.
• Apollo Hospitals promoter PCR Investments released pledge of 80,000 shares from July 15-16.

Trading Tweaks

• Bhageria Industries record date for bonus issue at 1:1.
• Religare Enterprises to move out of short term ASM framework.

Who’s Meeting Whom

• Bosch to meet Franklin Templeton on July 22.
• Manappuram Finance to meet Reliance MF, Birla Sunlife Insurance on July 18.
• Shriram City Union Finance to meet Haitong Securities on July 18.

Money Market Update

• The rupee weakened to 68.81/$ on Wednesday from 68.71/$ on Tuesday.

F&O Cues

Nifty Futures

• Nifty futures closed at 11,675.8, discount of 11.7 points.
• Nifty futures open interest down 4.5 percent, sheds 7.3 lakh shares in open interest.

Bank Nifty

• Bank Nifty futures closed at 30,737.7, premium of 2 points.
• Bank Nifty futures open interest up 1 percent, adds 10,000 shares in open interest.

Options

• Nifty PCR unchanged at 1.34 (across all series).

Nifty Weekly Expiry July 18

• Max open interest on call side at 11,700 (20.4 lakh shares).
• Max open interest on put side at 11,600 (22 lakh shares).
• Open interest addition seen in 11,650P (+6.8 lakh shares), 11,700P (+6.6 lakh shares), 11,700C (+4.5 lakh shares).
• Open interest shedding seen in 11,500P (-5.6 lakh shares), 11,600C (-4.3 lakh shares).

Nifty Monthly Expiry July 25

• Max open interest on call side at 12,000 (32.2 lakh shares).
• Max open interest on put side at 11,300 (25 lakh shares).

Stocks In F&O Ban

• DHFL*
• IDBI Bank
• Reliance Capital
• Reliance Infrastructure
• Tata Elxsi*

*New In Ban

Brokerage Radar

On Wipro

CLSA

• Maintained ‘Sell’ with a price target of Rs 220.
• Revenue miss; soft September quarter guidance.
• Margins beat but levers unsustainable at current growth rates.
• Strong digital revenues are yet to help overall growth rates.

Macquarie

• Maintained ‘Neutral’; cut price target to Rs 270 from Rs 290
• June quarter review: EBIT margin beat was key highlight
• Revenue growth to remain sub-par to the industry in 2019-20.
• Uncertainty still persists around manufacturing and healthcare business.

Investec

• Maintained ‘Hold’; cut price target to Rs 255 from Rs 265.
• Revenue growth estimates revert to low single-digit after weak June quarter.
• Uncertainty in BFSI and Manufacturing & Tech continue to thwart growth.
• Low growth and weak margins to keep the stock at bay.

On Yes Bank

CLSA

• Maintained ‘Outperform’; cut price target to Rs 110 from Rs 150.
• Slippages high and stressed loan high.
• Consolidation of assets also affects CASA growth.
• Change in norms and ratings downgrade consume capital.
• Capital raise and managing CASA growth is key.

Morgan Stanley

• Maintained ‘Underweight’ with a price target of Rs 95.
• Key negative was weaker than expected progression on key metrics.
• Slippages were high and more importantly, BB & below rated exposure rose sharply.
• CET 1 moved lowere QoQ to 8 percent despite decline in loan book.

Credit Suisse

• Maintained ‘Neutral’; cut price target to Rs 94 from Rs 205.
• June quarter review: Drop in CASA deposits highlights pressing recap needs.
• Bank loan book contracted 2 percent QoQ as it looked to conserve capital.
• Cut EPS by 72 percent on the back of larger dilution, weaker growth and higher credit costs.

Edelweiss

• Maintained ‘Hold’; cut price target to Rs 110 from Rs 250.
• June quarter was impacted by weak asset quality, precarious capital position, softer growth and lower NIM.
• Bank is still in early stages of transition in strategy, asset quality recognition and capital.
• Upside will hinge on bank’s ability to raise capital.

On Mindtree

Macquarie

• Downgraded to ‘Underperform’ from ‘Neutral’; cut price target to Rs 660 from Rs 970.
• Q1 started off on weak note with EBIT margin drop.
• Uncertainty has increased significantly post senior management exit.
• Growth deceleration likely given flux at executive level.

Kotak

• Maintained ‘Reduce’; cut price target to Rs 725 from Rs 930.
• June quarter was weak due to muted constant currency revenue growth, sharp margin contraction and pricing decline.
• Positive is a solid TCV despite hostile acquisition process and strong deal pipeline.
• Overall revenue growth can recover provided attrition is contained.

More Calls

BofA Securities on Autos

• Lowering EPS by 2-10 percent across OEMs; Prefer four wheelers over two wheelers.
• Cut prompted by low dispatches in the June quarter and muted outlook for the first half.
• Consensus EPS likely to be cut further. Remain selective.
• Ashok Leyland, Mahindra & Mahindra and Hero MotoCorp are Buys.
• Maruti Suzuki and Tata Motors are rated Neutral.
• Bajaj Auto, TVS Motor and Eicher Motors are rated Underperform.