All You Need To Know Going Into Trade On May 18
A sign points the way to flight departure gates and quiet area in Terminal 5 at London Heathrow Airport in London, U.K. (Photographer: Laurel Chor/Bloomberg)

All You Need To Know Going Into Trade On May 18

Asian markets are mixed at the start of a fresh trading week. Investors are finding encouragement in businesses reopening across major economies.

However, the U.S. Federal Reserve has warned of a potential asset-price declines if the pandemic worsens.

Treasuries are flat while oil prices are rising.

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 index's performance in India fell 0.4 percent to 9,072, as of 6:50 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 can influence equities in today’s trading session:

  • Markets in Japan, South Korea gave up early gains while those in Australia are edging higher. The Yen is seeing declines in early trade.
  • Futures on the Dow Jones are trading higher by nearly 200 points after the benchmark ended with modest gains on Friday, trimming a weekly loss.
  • The U.S. on Friday reported record slumps in retail sales and factory output. Retail sales fell 16.4 percent from the previous month while industrial production contracted 11.2 percent in April - the most on record.
  • Japan's economy contracted 3.4 percent in the first quarter, taking the economy into a recession.
  • Federal Reserve Chair Jerome Powell said that the U.S. economy will recover from the pandemic but the process could stretch through until the end of next year and depend on the delivery of the vaccine.
  • The Pound Sterling is declining after a Bank of England official said that the central bank is examining a range of unconventional policy tools, including negative interest rates.
  • Yield on the 10-year treasury stood at 0.64 percent.
  • West Texas Intermediate Crude gained 3.3 percent to $30.40 per barrel.

Get your daily fix of the global markets here.

All You Need To Know Going Into Trade On May 18

Earnings Fineprint: Cipla Q4FY20

  • Revenue down 1 percent to Rs 4,376 crore
  • Net profit down 33 percent to Rs 246 crore
  • Ebitda down 34 percent to Rs 634 crore
  • Ebitda margin narrows to 14.5 percent from 21.8 percent
  • Lower other operating income impacts revenues
  • Third straight quarter of double-digit growth for India business
  • South African business grows 10 percent on a year-on-year basis in local currency terms
  • Sub-Saharan Africa business impacted by receivables related challenges
  • 14 percent growth on a full-year basis for the European business
  • 38 percent growth in the API business for the quarter and 5 percent for the full year in U.S. Dollar terms
  • All numbers are compared on a year-on-year basis

Management Commentary From Cipla:

  • Revenue growth at 7 percent excluding sensipar sales in the base quarter
  • Covid-19 related cut-off impacts margins by 200 basis points
  • Management says working with the U.S. FDA comprehensively to resolve all observations received in Goa
  • Repaid loan of $275 million in FY20 ahead of schedule
  • The company will raise funds of up to Rs 3,000 crore by issue of equity shares or ADRs, GDRs or Foreign Currency Convertible Bonds or other financial instruments through a public issue or private placement subject to necessary approvals.

Brokerages On Cipla

Ambit

  • Buy rating maintained
  • Price target cut to Rs 608 from Rs 621
  • Negative margin development comprehensible
  • Cut FY21/22 Ebitda estimates by 9 percent and 4 percent owing to tepid acute demand environment
  • Robust performance continues in South Africa private market

IDFC Securities

  • Outperformer rating maintained
  • Price target cut to Rs 656 from Rs 678
  • Inhalation capabilities take center stage in a soft quarter
  • India and South African market should further improve cash flow generation and return ratios
  • Expect U.S. run-rate to steadily improve going forward

Stocks To Watch

  • Reliance Industries: General Atlantic to buy 1.34 percent stake in Jio Platforms amounting to Rs 6,598 crore. General Atlantic values Jio Platforms at an equity value of Rs 4.91 lakh crore and an Enterprise Value of Rs 5.16 lakh crore. General Atlantic becomes the fourth investor in Jio Platforms in less than a month.
  • Reliance Industries: Board has decided the timeline to call the balance amount for the rights issue. On allotment, the company will ask for Rs 314.25 per share. The rest, will be sought in two tranches - Rs 314.5 in May 2021 and Rs 628.5 in November 2021.
  • Maruti Suzuki: To re-start production of vehicles at its Gurugram plant from May 18.
  • Piramal Enterprises: Board to consider NCD issue worth Rs 500 crore on May 20.
  • NCC: Aditya Birla Sun Life Mutual Fund reduces its stake to 3.96 percent from 7.24 percent.
  • GAIL: Bloomberg News reports that the company has stalled LNG imports at the Ratnagiri port.
  • Godrej Consumer Products: Increases stake in Canon Chemicals to 100 percent from 75 percent. The stake increase has been done for a sum of Rs 106.5 crore
  • Persistent Systems: Awarded a multi-year contract by a leading U.S.-based multi-cloud enterprise software company. The engagement is for a period of five years with an estimated revenue of $50 million.
  • M&M Financial Services: Board approves raising the borrowing limits of the company to Rs 90,000 crore from Rs 80,000 crore.
  • Berger Paints: Starts business in the area of products related to hand sanitisers, multi-purpose sanitisers and home hygiene chemical products.
  • NIIT Tech: HDFC Mutual Fund reduces its stake to 3.03 percent from 5.06 percent on May 13.
  • InterGlobe Aviation: Clarifies that it has not formulated any indicative proposal or expressed any interest in the sale of Virgin Australia. The company has also said that InterGlobe Enterprises is a separate legal entity and a shareholder in the company.
  • Companies That Resumed Operations: Eveready Industries, Filatex India, Polycab, Kirloskar Oil Engines, Crompton Greaves Consumer Electricals
  • Non-Nifty Earnings Today: AstraZeneca Pharma, Delta Corp, Dr Lal Pathlabs, GSK Pharma, Torrent Power, Maharashtra Scooters.

Earnings Reported After Market Hours

L&T Technology Services Q4FY20

  • Revenue up 7.7 percent to Rs 1,446 crore
  • Net profit up 6.9 percent to Rs 204.8 crore
  • Ebitda up 8.1 percent to Rs 268.3 crore
  • Ebitda margins flat at 18.5 percent
  • All numbers are consolidated and compared on a year-on-year basis

Tata Chemicals Q4FY20

  • Revenue down 7.2 percent to Rs 2,378.1 crore
  • Net profit down 46 percent to Rs 184.7 crore
  • Ebitda down 10.4 percent to Rs 400.2 crore
  • Ebitda margin at 16.8 percent from 17.4 percent
  • Net profit is ex-consumer products business
  • Exceptional gain of Rs 98 crore in the base quarter
  • Completed transfer of consumer products business to Tata Consumer Products in February
  • All numbers are consolidated and compared on a year-on-year basis

L&T Finance Holdings Q4FY20

  • Net Interest Income up 5.5 percent to Rs 1,552.1 crore
  • Net profit down 29.5 percent to Rs 386.2 crore
  • Cost of funds at 8.43 percent from 8.54 percent
  • Impairment of Rs 502 crore on financial instruments in the current quarter of which Rs 314 crore is for the Covid-19 impact
  • All numbers are consolidated and compared on a year-on-year basis

M&M Financial Services Q4FY20

  • Net Interest Income up 3.7 percent to Rs 1,670.4 crore
  • Net profit down 65.8 percent to Rs 234.8 crore
  • Impairment of Rs 822 crore on financial instruments in the current quarter of which Rs 681 crore is for the Covid-19 impact
  • Standalone AUM up 12 percent to Rs 77,160 crore
  • All numbers are consolidated and compared on a year-on-year basis.

CG Consumer Electricals Q4FY20

  • Revenue down 15 percent to Rs 1,026.3 crore
  • Net profit down 27.3 percent to Rs 102.1 crore
  • Ebitda down 15.5 percent to Rs 141.2 crore
  • Ebitda margin remains flat at 13.8 percent
  • Gross margin rises 30 basis points due to improves sales mix
  • ECD Segment revenue down 14 percent to Rs 864 crore
  • Lighting segment revenue down 19 percent to Rs 277 crore
  • All numbers are consolidated and compared on a year-on-year basis

Nippon Life AMC Q4FY20

  • Revenue down 20 percent to Rs 274.5 crore
  • Net profit down 97.6 percent to Rs 3.7 crore
  • Net profit impacted by MTM loss in treasury operations due to market volatility in March
  • All numbers are consolidated and compared on a year-on-year basis

IIFL Securities Q4FY20

  • Revenue down 4.8 percent to Rs 196.5 crore
  • Net profit flat at Rs 37.3 crore
  • AUM down 18 percent to Rs 23,508 crore
  • All numbers are consolidated and compared on a year-on-year basis

Huhtamaki PPL Q1CY20

  • Revenue down 8.7 percent to Rs 574.6 crore
  • Net profit down 35 percent to Rs 27.3 crore
  • Ebitda down 43.8 percent to Rs 50 crore
  • Ebitda margin down to 8.7 percent from 14.1 percent
  • Ebitda margin impacted by higher raw material costs and employee costs
  • All numbers are consolidated and compared on a year-on-year basis

Earnings Estimates: Bharti Airtel Q4FY20

  • Revenue seen 5.5 percent higher at Rs 23,154 crore
  • Ebitda seen 8.5 percent higher at Rs 10,056 crore
  • Ebitda margin seen at 43.4 percent from 42.2 percent
  • Net loss may narrow to Rs 417 crore from Rs 1,035 crore
  • Average Revenue Per User seen 10.4 percent higher at Rs 149 from Rs 135
  • All estimates are BloombergQuint estimates, consolidated and compared on a quarter-on-quarter basis

Key Factors At Play For Bharti Airtel:

  • May see biggest consolidated revenue jump since Q2FY13 (30 quarters)
  • ARPU likely to be the highest since 11 quarters
  • India mobile business to lead growth aided by hike in tariffs
  • India mobile subscribers may decline to 28.1 crore from 28.3 crore
  • Data volume may rise due to pent-up data demand in the lockdown period
  • Africa business saw 15.1 percent rise in revenue and 16.1 percent rise in Ebitda
  • Customer additions, higher data revenue aids Africa business
  • Impact of Covid-19 on subscriber additions, churn, ARPU and tariff outlook some key things to watch
  • Other factors to watch include commentary on AGR matter and development on floor pricing norms

Brokerage Radar

Investec On L&T Technology Services

  • Buy rating maintained
  • Price target cut to Rs 1,375 from Rs 1,510
  • Buy into weakness for a stronger recovery
  • Maximum impact of the crisis in Q1FY21 with recovery from Q2
  • Recovery in H2FY21 likely to be led by telecom, hi-tech and medical devices

Investec On Zensar Technologies

  • Upgrade to buy from hold
  • Price target cut to Rs 140 from Rs 180
  • Retail has been a key portfolio drag
  • Q1FY21 may see a decline due to Covid-19 related demand issues
  • Valuations suggest there is not much to lose
  • Trades at 0.92 times FY20 book value

Elara On ICICI Lombard

  • Initiate coverage with accumulate rating
  • Price target of Rs 1,400
  • See huge scope in general insurance
  • Well placed to capture underpenetration
  • Well placed to capitalise on the opportunity and generate superior RoE

Emkay On Nippon Life AMC

  • Hold rating maintained
  • Price target raised to Rs 271 from Rs 232
  • Current volatility and economic slowdown to impact inflows and revenue
  • Liquidity position upbeat
  • Technology advancement supported smooth operations during challenging times
  • Like the AMC business due to limited credit risk

Kotak Securities On Cement

  • Cement prices surge but limited read-through due to fractional volumes
  • Dealer checks suggest abrupt price hikes in April-May 2020 with constrained supply chain
  • Volumes unlikely to see a V-Shaped recovery and normalise in H2FY21
  • Costs remain stable but margins to be hit by negative operating leverage in FY21
  • Valuations are not demanding post recent correction
  • Cement companies are trading at a discount of 15-20 percent
  • Top Picks: ACC, Ultratech & Dalmia Bharat

Maybank On Cyient

  • Downgrade to hold from buy
  • Price target cut to Rs 215 from Rs 360
  • Q4 results were below expectations
  • Aerospace business to impact growth
  • Aerospace exposure at 40 percent of revenue to impact FY21 performance
  • Hold is premised on trough P/E, net cash and niche engineering services

Morgan Stanley On Biocon

  • Overweight rating maintained
  • Price target of Rs 327
  • Q4 earnings were a miss
  • Steadfast on $1 billion Biosim target for FY22
  • Company expects Biosim sales to recover in Q1FY21 and grow thereafter
  • Current portfolio of four biosims in developed markets can expand to eight in two years

Centrum On Biocon

  • Buy rating maintained
  • Price target of Rs 377
  • Revenue below our estimate due to the impact of the biologics segment
  • Most of the one-time impact of Covid-19 should be reversed in Q1FY21
  • Margins should gradually accelerate as the R&D spend flattens

Morgan Stanley On M&M Financial

  • Overweight rating maintained
  • Price target cut to Rs 235 from Rs 285
  • Q4 trough as expected
  • Cut EPS estimates for FY21
  • Assgn a high bear case probability weight given uncertainty; see meaningful upside despite that
  • Parentage positions it better than many NBFCs
  • View Medium-term risk-reward as attractive amid volatility

Kotak Securities On M&M Financial

  • Buy rating maintained
  • Price target of Rs 270
  • Q4 severely hit by Covid-19
  • Gearing up for challenging times
  • Long track-record, strong ALM position and M&M parentage provide comfort to debt markets and will ensure comfortable funding
  • Trough valuations provide a good entry point for those with patience

Bulk Deals

  • AU Small Finance Bank: Bharti SBM Holdings, a entity promoted by Sunil Bharti Mittal, acquired 24.12 lakh shares or 0.79 percent stake in the company at Rs 414.6 per share from promoter Chirinjee Lal Agarwal who sold the stake.
  • Equitas Holdings: Julius Baer sold 27.5 lakh shares or 0.8 percent stake in the company at Rs 49.17 per share.
  • Indian Energy Exchange: Westbridge Crossover Fund sold 37.33 lakh shares or 1.25 percent stake at Rs 160.52 per share

Pledged Share Details

  • Adani Green Energy: Promoter Adani Trading Services revoked pledge of 2.17 crore shares on May 14
  • Solara Active Pharma: Promoters invoked pledge of 6.5 lakh shares on May 12.

As reported On May 15

Trading Tweaks

  • Price Band Revised From 10 Percent To 5 Percent: NDTV, TCI Developers
  • Moves Into ASM Framework: Take Solutions
  • Moves Into Short-ASM Framework: Subex
  • Move Out Of Short-Term ASM Framework: Astec LifeSciences, Spandana Sphoorty Financial, Aavas Financiers, Filatex India, GHCL , HPL Electric & Power, JBM Auto, Mahindra Logistics, Shalby, Suzlon Energy, Welspun Enterprises, Sadhna Nitro Chem, DCM Shriram

Money Market Update

  • The rupee ended flat at 75.58 against the U.S. Dollar as compared to Thursday's close of 75.57. For the week, the currency ended little changed.

F&O Cues

  • Nifty May futures end at 9,137; premium narrows to 0.2 points from 1 point
  • Nifty May futures add 2.2 percent in Open Interest and 1.6 lakh shares
  • Nifty Bank May futures end at 18,808; a discount of 26 points from 31 points
  • Nifty Bank May futures add 10.4 percent in Open Interest and 1.2 lakh shares
  • Nifty Put-Call Ratio at 1.11 from 0.89 across all series
  • Securities Out Of F&O Ban: Vodafone Idea

Nifty: May 21 Expiry

  • Maximum Open Interest on Call side at 9,500 strike (17.3 lakh shares)
  • Maximum Open Interest on Put side at 9,000 strike (9.6 lakh shares)
  • 8,600 Put (2.97 lakh shares) and 9,200 Call (2.3 lakh shares) see addition in Open Interest

Nifty: May 28 Expiry

  • Maximum Open Interest on Call side at 10,000 strike (21.9 lakh shares)
  • Maximum Open Interest on Put side at 9,000 strike (24.4 lakh shares)

F&O Buzzers & Fund Flows

All You Need To Know Going Into Trade On May 18
BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.