All You Need To Know Going Into Trade On July 7
Passengers wearing protective masks travel on a bus in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

All You Need To Know Going Into Trade On July 7

Asian markets have opened mixed this morning, taking a breather after a strong rally last week that extended to Monday.

Treasuries are little changed while the U.S. Dollar traded at a one-month low.

The Singapore-traded SGX Nifty, an early indicator of the Nifty 50 Index’s performance in India, rose 0.3% to 10,797 as of 6:45 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 may influence equities in today’s session:

  • Markets in Japan are declining while those in South Korea and Australia are trading with gains.
  • Futures on the Dow Jones are trading higher by 90 points after the benchmark ended with gains of 1.8% on Monday - its fifth straight day of gains.
  • Amazon shares rose past $3,000 for the first time while Tesla extended its five-day rally to over 40%.
  • “The market has started to sense we might see better than anticipated results fairly broadly across a wide spread of companies,” Nancy Prial, Co-CEO at Essex Investment Management told Bloomberg Television in an interview.
  • Yield on the 10-year treasuries was little changed at 0.68%.
  • West Texas Intermediate crude rose 0.2% at $40.71 per barrel.

Get your daily fix of the global markets here.

All You Need To Know Going Into Trade On July 7

First Quarter Business Updates

Bajaj Finance

  • Customer franchise as of June 30 stood at 43 million. Acquired 0.5 million new customers during the quarter.
  • New loans booked during the quarter at Rs 1.7 million from 7.3 million.
  • Assets Under Management at Rs 1.38 lakh crore from Rs 1,28,898 crore
  • Capital Adequacy ratio of 26.4%.
  • Consolidated liquidity surplus of Rs 17,600 crore.
  • Deposit book at Rs 20,000 crore from Rs 15,084 crore.
  • AUM under moratorium has reduced to 15.5% from 27% as of April 2020.
  • May consider additional provisioning in Q1FY21 to further strengthen balance sheet.

Godrej Consumer

  • Expect close to mid-single digit, volume driven sales growth in the quarter.
  • Demand trends mixed for categories and geographies.
  • Resurgence of household insecticide category continued with strong underlying consumer demand.
  • Saw strong momentum in the Hygiene category.
  • Hair colour and air freshner demand remained muted.
  • Expect close to mid-single digit constant currency sales growth in Indonesia.
  • Expect sales decline in the early twenties in constant currency terms for the Africa business.
  • Performance in Latin America is expected to be steady.
  • Absolute sales likely to be marginally lower than the base quarter.

Bandhan Bank

  • Advances up 18% to Rs 71,846 crore
  • Deposits up 35% to Rs 57,082 crore
  • CASA ratio at 37.1% from 34.1%
  • Micro banking loan vertical has shown positive traction subsequent to Unlock 1.
  • Collection efficiency has improved to nearly 70% as on July 3, 2020
  • Collection efficiency for non-micro banking advances in June at ~84%
  • Liquidity Coverage Ratio at ~159%

SH Kelkar

  • Witnessed encouraging demand pick-up from the last week of May and continued into June.
  • Revenues in Q1FY21 stood between Rs 190-192 crore (provisional)
  • Debt in Q1FY21 reduced to Rs 254-258 (provisional) crore as against Rs 299 crore as on March 31, 2020.
  • Witnessing initial signs of recovery in FMCG industry and gradual normalisation of demand.

Stocks To Watch

  • Hindustan Unilever: Moves Bombay High Court seeking injunction against threats by Emami over the Glow and Handsome trademark. HUL has sought at least seven days prior written notice from Emami before it initiates any legal proceedings. HUl also said that it has registered the Glow and Lovely and Glow and Handsome trademarks in September 2018.
  • PVR: Sets the rights issue price at Rs 784 per share, a 25% discount to Monday's closing price. Rights entitlement ratio set at 7 shares for every 94 held as on the record date of July 10. The rights issue will be open from July 17 to July 31. The board had approved raising Rs 300 crore from the rights issue on June 8.
  • Shriram Transport Finance: Board approves rights issue worth Rs 1,500 crore. The issue price has been set at Rs 570 per share, which is a discount of 18% to Monday's closing price. Rights entitlement ratio is set at 3 equity shares for every 26 held on record date of July 10. Promoter group will fully subscribe to their rights entitlement and will not renounce their rights.
  • Axis Bank: SAT has allowed the lender to sell securities in its clearing account to recover dues worth Rs 21 crore in the Modex International Securities case. The lender is allowed to sell securities relating to Modex's debit clients to the extent of debit balance in their accounts. The bank has also been directed to return any surplus arising from the sale to Modex's clients.
  • Pharma Stocks: Bloomberg News reports that the Drug Controller General of India has given approval to Mylan's remdesivir 100 mg / vial for restricted emergency use in India. The drug will be launched under the brand name DESREM in India and will be available to patients at a price of Rs 4,800. The price is 80% lower than the branded version of this product available to governments in the developed world.
  • Uniply Industries: Malabar India Fund reduced stake to 5.36% from 7.45%
  • Insecticides India: Zonal and territory manager in Chhattisgarh along with 16 distributors and dealers were found indulging in commission of breach of trust, criminal misappropriation and fraud over a period of time thereby causing severe loss to the company worth Rs 20 crore. A complaint has been filed with the superintendent of police.
  • Camlin Fine Sciences: Infinity Holdings acquired 6.64 lakh shares or 0.55% stake at Rs 56 per share.
  • Punjab National Bank: To consider raising capital on July 9.
  • Canara Bank: To consider raising capital for FY21 on July 10.
  • Adani Transmission: Promoter SB Adani Family Trust revoked pledge of 20 lakh shares on July 4.
  • Reporting Earnings Today: Best Agrolife, Shree Renuka Sugars.

Brokerage Radar

Goldman Sachs On Infosys

  • Buy rating maintained
  • Price target raised to Rs 895 from Rs 756
  • Add the stock to our conviction list
  • To benefit from acceleration of information system digitalisation
  • Large Indian delivery base to be key competitive advantage
  • Increase U.S. Dollar revenue growth estimates to 11.9% and 9.9% for FY22E and FY23E respectively from 10.8% and 9.8% earlier
  • Street is under-appreciating the technological strength of the company and medium-term tailwinds around outsourcing and offshoring

Bernstein On Bandhan Bank

  • Outperform rating maintained
  • Price target raised to Rs 470 from Rs 420
  • Clear proxy to rural recovery
  • Collection efficiency may improve to 90% by September 2020
  • Assume credit costs of 300 basis points for FY21 and 200 basis points for FY22
  • Value the bank at 17 times FY22 EPS

Key Risks To Upside:

  • Promoter dilution may create supply overhang
  • Political risk due to concentrated microfinance portfolio in some eastern and north eastern state
  • Operating cost overrun due to geographic and product expansion
  • Sub-par small business lending portfolio leading to higher credit costs

UBS On India Oil & Gas

  • Long-term volume and margin growth of city gas distributors is at risk from potential gas sector reforms
  • Current pricing formula makes natural gas production economically unviable
  • Bring natural gas under GST will increase costs for players and further price hikes would be necessary
  • Reduce FY21 volume estimates to reflect a nearly 15% YoY decline in FY21
  • Near-term earnings estimates are lower than consensus
  • Downgrade Mahanagar Gas to neutral from buy; price target of Rs 1,150
  • Extended disruptions in Mumbai to further depress its already-slowing CNG volume offtake
  • Maintain sell rating on Gujarat Gas; price target raised to Rs 205 from Rs 190
  • May face headwinds from a potentially slower recovery of Morbi and industrial volumes as well as face competition from cheaper feedstock
  • Maintain sell rating on Indraprastha Gas; price target cut to Rs 410 from Rs 440
  • May reduce valuation gap with peers if volume growth is not a distinctive factor
  • Least-favoured stock in the region

CLSA On GAIL Vs ONGC

  • Prefer GAIL on valuations, stock triggers and earnings surprise potential
  • ONGC pricing in $52 per barrel Brent, even as futures suggest a sub-$45 per barrel price for the next two years.
  • GAIL offers 20% upside at a spot Brent of $41 per barrel.
  • GAIL to benefit from upcoming domestic gas price cut which will be a drag on ONGC.
  • GAIL Trading well below average PE while ONGC is trading at a big premium to its history
  • Expect ONGC's FY22 RoE to be sub-4% while GAIL's FY22 RoE is seen at 10%
  • Reiterate buy rating on GAIL with a price target of Rs 125
  • Reiterate sell rating on ONGC with a price target of Rs 55

Macquarie On Godrej Consumer Products

  • Outperform rating maintained
  • Price target of Rs 817
  • FY21 can be a year of resurgence for the household insecticides business
  • New hygiene-based products expected to see strong growth and can be a multi-year growth vector
  • Building in 20% sales growth in H1FY21E
  • Expect margin expansion on better mix, costs savings, lower A&P spends and benign input costs
  • One of our top picks and part of our India Focus top-10 list

Who’s Meeting Whom

  • Dixon Technologies: To meet Sundaram Mutual Fund, C Worldwide AMC and other investors between July 7-14
  • Mahindra Lifespace Developers: To meet Altavista Capital Advisors on July 7
  • Eicher Motors: To meet Eastspring on July 7
  • Affle India: To meet Morgan Stanley Investment Management on July 7
  • Escorts: To meet Basant Maheshwari Wealth Advisors on July 8
  • Mahindra Logistics: To meet P&Y Estates, Enam Holdings and Axis Capital on July 8

Trading Tweaks

  • AGM Date: MindTree, Hindusthan National Glass & Industries, Britannia, Sanofi India, Tata Chemicals.
  • Fund Raising Date: PI Industries.
  • Price Band Revised From 10% To 5%: Aurionpro Solutions, Cimmco, Hubtown, Intense Technologies, Walchandnagar Industries.
  • Price Band Revised From 20% To 10%: Bharat Dynamics, Omfurn India.
  • Move Into ASM Framework: Lakshmi Finance & Industrial Corporation, Transwind Infrastructures, Enkei Wheels.
  • Move Into Short-Term ASM Framework: Vertoz Advertising, Bhartiya International.
  • Move Out Of Short-Term ASM Framework: A2Z Infra Engineering, Surya Roshni, 5Paisa Capital, Indiabulls Real Estate, Trident, Allied Digital Services, Arvind Fashions.

Money Market Update

  • The currency snapped a two-day winning streak on Monday.
  • Rupee ended at 74.68 against the U.S. Dollar as compared to Friday's close of 74.64.
  • The currency ended as the worst performer in Asia.

F&O Cues

  • Nifty July futures closed at 10,755; discount narrows to 10 points from 35 points
  • Nifty July futures add 2.7% and 2.9 lakh shares in Open Interest
  • Nifty Bank July futures closed at 22,226; premium widens to 28 points from 8 points
  • Nifty Bank July futures shed 8% and 1 lakh shares in Open Interest
  • Nifty Put-Call Ratio at 1.59 from 1.5 across all series
  • Stocks In F&O Ban: Glenmark, Indiabulls Housing Finance, Vodafone Idea, SAIL, BHEL

Nifty Monthly Expiry: July 9

  • Maximum Open Interest on Call side at 11,000 strike (30.8 lakh shares)
  • Maximum Open Interest on Put side at 10,000 strike (37.7 lakh shares)
  • Active Options: 10,600 Put (+18.4 lakh shares) and 10,800 Call (+8.3 lakh shares)

Nifty Monthly Expiry: July 30

  • Maximum Open Interest on Call side at 11,000 strike (24 lakh shares)
  • Maximum Open Interest on Put side at 10,000 strike (30.7 lakh shares)
All You Need To Know Going Into Trade On July 7
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