All You Need To Know Going Into Trade On June 2
Asian markets are mixed at the start of trade today as investors assess prospects of deployment of the U.S. military to quell social unrest.
A gauge of U.S. manufacturing rose in May for the first time in four months, suggesting stabilisation after a pandemic-driven plunge.
The Singapore-traded SGX Nifty, an early indicator of the NIfty 50 index's performance in India, was little changed at 9,822 as of 7:10 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.
Lets take a look at all that can influence equities in today’s trading session:
- Benchmarks in Japan and South Korea are seeing modest gains while those in Australia are fluctuating in early trade.
- Futures on the Dow Jones are currently trading lower by 100 points after the gauge posted a modest advance overnight.
- U.S. President Donald Trump promised to deploy large number of troops if the cities and states do not act to contain violence from protests over police brutality.
- Equities shrugged off reports that Chinese officials had told agricultural companies to pause purchase of some U.S. farm goods, threatening the trade deal.
- Goldman Sachs in a note said that the U.S. labour market is showing the earliest signs of rebounding.
- The Bloomberg Dollar Spot Index was stable after declining 0.7%.
- West Texas Intermediate crude was little changed at $35.49 per barrel.
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Moody’s Downgrades India
- Sovereign rating downgraded by one notch to Baa3 from Baa2.
- Outlook remains negative. Still remains an investment grade.
- Prolonged period of slow growth cited as one of the concerns.
- Covid-19 not the sole cause for the downgrade, according to Moody's.
- Moody's had the highest rating on India, having upgraded it in 2017
- Ratings of Fitch Ratings and Standard & Poor are one notch below Moody's.
- Moody's expects India's real GDP to contract 4% in FY21
- Debt-GDP ratio likely to rise fo 84% of the GDP this year.
Stocks To Watch
- Kotak Mahindra Bank: Founder and CEO Uday Kotak plans to sell 5.6 crore shares or 2.83% equity through a 100% secondary placement. The price range is between Rs 1,215 - 1,240 per share, implying a 0.7-2.7% discount to Monday's closing price. Objective for the share sale is to bring Kotak's stake in the lender down to 26% by August, 2020 - in-line with the Reserve Bank's regulation.
- Tata Power: Acquired 51% stake in TP Central Odisha Distribution for Rs 178.5 crore. Government of Odisha will hold the remaining stake in the venture. Company will manage power distribution in central Odisha from June 1.
- MOIL: Prices of different grades of Manganese Ore and other products reduced by 10% from June 1 as compared to the previous month.
- SBI Cards: 27,000 new cards were issued from applications already in the pipeline at a rate of 1,000 cards per day. With zone-based relaxations in May, new cards run rate has reached more than 2,500 per day. 11.8% customers are in moratorium as of May 22. Corporate card spends have seen a moderate recovery with partial resumption of domestic air travel.
- Max India: Gets NCLT nod for scheme to merge its healthcare assets into Max Healthcare.
- NCC: Gets four new orders worth Rs 1,136 crore in May.
- Eicher Motors: Nearly two-third of the dealerships are open for business, by May-end. These dealerships nearly attained the Pre-Covid-19 level of bookings towards the end of the month.
- NMDC: Sale of iron ore in May fell 24% to 2.55 million tons, while production declined 25% to 2.29 million tons.
- Coal India: Production in May fell 11.3% to 41.43 million tons, while offtake declined 23.3% to 39.35 million tons.
- Bajaj Finance: Allotted NCDs worth Rs 250 crore.
- IRCON International: Signs a Memorandum of Understanding (MoU) with National Investment and Infrastructure Fund (NIIF) and Ayana Renewable Power to explore and collaborate on opportunities in the solar energy sector.
- Ratnamani Metals and Tubes: Gets orders worth Rs 57 crore for steel tubes.
- KEC International: To consider repurchase of NCDs issued in October 2016 on June 4. The NCDs are worth Rs 100 crore.
- Welspun Enterprises: Board approved raising Rs 300 crore via equity and increasing share capital from Rs 180.05 crore to Rs 275 crore. Balkrishna Goenka re-appointed as Executive Chairman till June 2025. Post April 14, work has resumed on all projects. Company has written to authorities invoking Force Majeure which ensures interest of the company is protected under concession agreement.
- Companies That Resumed Operations: Kajaria Ceramics, Rama Steel Tubes, Kirloskar Oil Engines.
- Non-Nifty Earnings Today: Granules India, InterGlobe Aviation, Motherson Sumi, Spandana Sphoorty Financial, Sun Pharma Advanced Research Company.
Covid-19 Impact On Companies
Camlin Fine Sciences
- Expect elongation of working capital cycle.
- Have approached lenders for additional working capital of Rs 30 crore.
- Has also opted for a moratorium from all it's working capital and term lenders.
- Some plants operating at a lower Plant Load Factor.
- Expect demand to recover as lockdown eases and industrial activity picks up.
- Availability of contractual manpower impacted.
- Sufficient inventory of fuel, consumable spares and capital spares to ensure all plants keep operating reliably.
- Implementation and commissioning of the 1,600 MW ultra-super critical coal-based thermal power project in Jharkhand impacted and delayed.
- Sales loss during summer months has a significant impact on the overall financial results due to seasonal nature of certain products.
- Financials of FY21 will be impacted.
- Wires factory at Chavadi and Kashipur operating at 30% capacity.
- Plan to re-open other factories and branch offices progressively during June.
- Not resorted to any layoffs or salary cuts.
- Do not foresee any incremental risk in terms of receivables, investments or assets.
Adani Green Energy
- All solar and wind projects operated at full capacity during the lockdown.
- No material curtailment in offtake, say for certain issues in Tamil Nadu and Andhra Pradesh.
- May see increase in project costs.
- Getting regular payments from discoms and counterparties.
- No major overdue in receivables from any counterparty barring TANGEDCO.
- Expect appropriate relief on force majeure conditions in the Power Purchase Agreements and the supply chain at large.
Bank Of India
- Recoveries may be affected from Q2FY21.
- Revenue and provisioning may be affected for later quarters.
- Have sufficient liquidity to honour debt and other financial commitments.
- Witnessing increase in inventory levels.
- Creditors extending credit terms wherever possible.
- Supply chain adversely affected due to the lockdown.
- Situation improving as the lockdown eases.
May Auto Sales
- Hero MotoCorp: Total sales at 1,12,682 units
- Eicher Motors: Total sales at 19,113 units for Royal Enfield while those for the Commercial Vehicle division (VECV) at 686 units
- TVS Motor: Total sales at 58,906 units
- Ashok Leyland: Total sales at 1,420 units
- Atul Auto: Total sales at 410 units
- SML Isuzu: Total sales at 16 units
Earnings Reported After Market Hours
V-Guard Industries Q4FY20
- Revenue down 27.5% to Rs 536.6 crore
- Net profit down 45.1% to Rs 32.5 crore
- Ebtida down 42.1% to Rs 45.2 crore
- Ebitda margin narrows to 8.4% from 10.5%
- Higher other expenses, lower sales impact margins
- Electronic segment revenue down 27% to Rs 150.3 crore
- Electricals segment revenue down 32% to Rs 242.2 crore
- Consumer Durables segment revenue down 20% to Rs 144.1 crore
- Lockdown led to revenue loss of Rs 250 crore
- All numbers are standalone and compared on a year-on-year basis
Orient Electric Q4FY20
- Revenue down 11.7% to Rs 563.1 crore
- Net profit down 7.2% to Rs 35.8 crore
- Ebitda down 7.6% to Rs 65.2 crore
- Ebitda margin at 11.6% from 11.1%
- Lower other expenses aid 50 basis point expansion in margins
- ECD segment revenue down 4% to Rs 454.5 crore
- Lighting and Switchgear revenue down 33% to Rs 108.6 crore
- Effect of accounting change of leased assets impacted the higher depreciation cost
- No new tenders for street lighting came up in the quarter and pricing pressure remained in the lighting segment
- All numbers are standalone and compared on a year-on-year basis
Welspun Enterprises Q4FY20
- Revenue down 35.1% to Rs 470.7 crore
- Net profit up 3 times to Rs 90.7 crore
- Ebitda down 27.5% to Rs 65.2 crore
- Ebitda margin at 13.9% from 12.4%
- Deferred tax reversals, lower taxes aid profit
- Gain of Rs 22.2 crore realised from associate and JV companies
- Profit also boosted by other income of Rs 30.9 crore this quarter
- Revenue adversely affected due to delay in certain regulatory approvals, unseasonal rains and lockdown on account of Covid-19
- All numbers are consolidated and compared on a year-on-year basis
Earnings Estimates: Britannia Q4FY20
- Net sales seen flat at Rs 2,817 crore
- Ebitda seen 2% higher at Rs 446 crore
- Ebitda margin seen at 15.8% from 15.6%
- Net profit seen 9.5% higher at Rs 323 crore
- All estimates are Bloomberg estimates, consolidated and compared on a year-on-year basis
Key Factors At Play For Britannia:
- Volumes in biscuits, dairy may remain flat
- Gross margin may see expansion
- Lockdown across the country may impact revenue
- Likely to see stalling of expansion in distribution network
- Lower taxes may aid profit
- Commentary on demand for essentials and pent-up demand for premium goods to be watched out for
- Also crucial to watch will be commentary on distribution and logistics and expectation of manufacturing facilities coming back fully online
Nomura On Nestle
- Initiate coverage with neutral rating
- Price target of Rs 17,250
- To benefit from rising demand for ready-to-cook foods
- Revving up the innovation engine for volume growth
- Cluster-based approach, out-of-home consumption to redefine law of the land
- Expect robust long-term growth, high earnings visibility and strong pricing power
Morgan Stanley On OMCs
- Retail fuel prices remain unchanged making marketing margins turn negative
- Demand for key products like diesel/gasoline is 60-65% of pre-Covid-19 levels
- OMCs would need a Rs 3-4.5 per litre increase in fuel prices to see normalised marketing margins
- Refinery margins should also improve with demand
Credit Suisse On OMCs
- Marketing margins can drop sharply to Rs 0.3 per litre
- Profitability can be protected by strategic crude reserve
- Reason for not passing on the increase in crude prices can be the low cost crude inventory built by OMCs
Credit Suisse On United Spirits
- Downgrade to neutral from outperform
- Price target cut to Rs 615 from Rs 620
- Near-term challenges outweigh medium-term prospects
- High tax increase, hit to on-premise sale and general economic slowdown are some near-term challenges
- Opening up of home delivery and online ordering a significant long-term positive
- Relaunch of McDowells No.1 and Royal Challenge has seen positive feedback
JM Financial On India
- Negative impact of ratings downgrade likely to be limited
- Baa3 is still an investable grade
- India's share of external debt in total government debt is one of the lowest among other Emerging Markets
- Negative outlook could be a matter of concern
- Any further downgrade can classify India's government bond as junk category
Deutsche Bank On India
- Ratings cut not a major surprise
- Focus shifts to Fitch and S&P as to what action they take in their next review
- There isadded risk that others may also consider revising the outlook to negative, citing fiscal and growth concerns
- Can still manage to get government bonds included in global bond indices
- SH Kelkar: Promoter Kedar Ramesh Vaze acquired 8.5 lakh shares (0.6%) at Rs 58.45 per share while HDFC MF sold 14.35 lakh shares (1.02%) at Rs 58.41 per share.
- IFB Industries: Plutus Wealth Management acquired 2.55 lakh shares (0.63%) at Rs 392.62 per share.
- NCC: Aditya Birla Sun Life Insurance acquired 40 lakh shares (0.66%) at Rs 25.92 per share.
- Supreme Petrochem: Promoter acquired 5.34 lakh shares (0.55%) at Rs 161.65 per share.
Who’s Meeting Whom
- Mahindra Lifespace Developers: To meet ICICI Prudential AMC on June 3
- Supreme Industries: To meet Kotak, Enam AMC and other investors between June 2-3
Pledged Share Details
- Sadbhav Engineering: Promoter Shantaben Patel created pledge of 10 lakh shares on May 22.
- Ajanta Pharma: Promoter Aayush Agrawal created pledge of 95,000 shares between May 27-28
- Zuari Global: Promoters released pledge of 4.95 lakh shares on May 26
(As Reported On June 1)
- Apollo Tyres: Promoter PTL Enterprises acquired 5.45 lakh shares between May 28-29.
- Aarti Drugs: Promoters sold 13,000 shares between May 26-28
- Mindtree: Promoter Subroto Bagchi sold 7,000 equity shares on May 29
(As Reported On June 1)
- Price Band Revised From 10% to 5%: Federal-Mogul Goetze
- Move Into Short-Term ASM Framework: JBF Industries, Andhra Cements.
- Move Into ASM Framework: Nagarjuna Fertilizers and Chemicals, Gyscoal Alloys.
Money Market Update
- The rupee pared early gains in Monday's trading session to end little changed at 75.55 against the U.S. Dollar as compared to Friday's close of 75.62.
- Nifty June futures closed at 9,791; discount narrows to 35 points from 86 points
- Nifty June futures add 1% and 1 lakh shares in Open Interest
- Nifty Bank June futures closed at 19,894; discount of 64 points from premium of 200 points
- Nifty Bank June futures shed 4.3% and 64,000 shares in Open Interest.
- Nifty Put-Call Ratio at 1.53 from 1.61 across all series
Nifty Weekly Expiry: June 4
- Maximum Open Interest on Call side at 10,000 strike (19.9 lakh shares)
- Maximum Open Interest on Put side at 9,000 strike (27.7 lakh shares)
- Active options: 10,000 Call (+6.2 lakh shares), 9,900 Call (+5.5 lakh shares)
Nifty Monthly Expiry: June 25
- Maximum Open interest on Call side at 10,000 strike (18.8 lakh shares)
- Maximum Open interest on Put side at 9,000 strike (25.9 lakh shares)