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All You Need To Know Going Into Trade On May 28

Stocks in the news, big brokerage calls of the day, complete trade setup and much more!

A worker checks the temperature of a traveler at Guarulhos International Airport (GRU) in Sao Paulo, Brazil, Photographer: Jonne Roriz/Bloomberg
A worker checks the temperature of a traveler at Guarulhos International Airport (GRU) in Sao Paulo, Brazil, Photographer: Jonne Roriz/Bloomberg

Asian markets have opened higher this morning as investors lay more emphasis on economies re-opening from the Covid-19 lockdown over rising U.S.-China tensions over Hong Kong.

The Yen has retreated, as have the treasuries. Futures in Hong Kong are pointing to a subdued start.

The Singapore-traded SGX Nifty, an early indicator of the NIfty 50 index's performance in India, rose 0.25% to 9,320 as of 7:00 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 opened 1% higher this morning, as did Australian stocks. Gains are more modest in South Korea.
  • Futures on the Dow Jones are trading higher by 180 points after the benchmark index ended 2% higher for the second straight day. The S&P 500 closed at a 12-week high.
  • The Trump administration said it can no longer certify Hong Kong's political autonomy from China, a move that may have consequences on its special trading status with the U.S.
  • St. Louis Fed President James Bullard said that the American economy may already have bottomed out.
  • “Eventually we will see a recovery but to be honest I think analysts are still way too optimistic about corporate profits,” David Kelly of JPMorgan Asset Management told Bloomberg TV in an interview.
  • The U.S. will report its weekly jobless claims data later today.
  • Yield on the 10-year treasury edged higher to 0.69%
  • West Texas Intermediate crude fell 3.1% to $31.80 per barrel.

Get your daily fix of the global markets here.

All You Need To Know Going Into Trade On May 28

Stocks To Watch

  • State Bank of India: To extend the moratorium by another 3 months for loan accounts of all eligible customers.
  • Adani Power: Signs power purchase agreement with the Madhya Pradesh government for procurement of 1,230 MW of electricity on long-term basis from a new power station of 1,320 MW capacity to be set up on super critical technology.
  • Aditya Birla Fashion and Retail: Says it has managed to resume operations at all manufacturing facilities and most warehouses. As of May 27, out of a total network of 3,041 stores, more than 1,300 stores have resumed operations.
  • Vedanta: India Ratings and Research downgrades the long-term issuer rating to IND AA- from IND AA with a negative outlook. The downgrade reflects likely deterioration in the company's credit profile following a substantial decline in economic activity due to Covid-19. Balance sheet leverage remains elevated both in FY20 and FY21.
  • VRL Logistics’ Covid-19 Update: Operations adversely affected due to mass exodus of drivers. Business volumes as good as non-existent. Exodus of migrant labour will aggravate the situation further in the short-term. Freight volumes to remain low till the business finds alternative and competent manpower, thereby casting a shadow on capacity utilisation. Expect to post a significant loss in Q1FY21. Business volumes may start picking up significantly from August and restoration of freight volume normalcy is likely by the last quarter of FY21.
  • Future Consumer: Board approved termination of the joint venture arrangement with Mibelle A.G. and liquidation of joint venture company, Mibelle Future Consumer Products A.G. in Switzerland. There is no material impact on the business of the company consequent to this termination.
  • Bharat Forge’s Covid-19 Update: Operations in Germany have restarted from the beginning of May, while plants in North America and Sweden continue to operate to address customer demand, albeit at sub-optimal utilisation.
  • KPIT Tech’s Covid-19 Update: Expect significant impact in H1FY21 while recovery may begin from the third quarter. The company has deferred medium-term capex plans and not given any guidance for the full year.
  • IndoStar Capital Finance: Completes equity raise of Rs 1,225 crore from Brookfield. Post infusion capital adequacy stands at 40% and leverage at 1.5 times. Brookfield will become a Promoter, along with IndoStar Capital Mauritius and will have the ability to nominate two members to IndoStar’s Board of Directors. Open Offer likely to be launched in June or July, after regulatory approvals.
  • Indian Hotels: To consider raising Rs 300 crore via NCDs on May 30.
  • Vardhman Textiles: To consider raising Rs 200 crore via NCDs on May 30.
  • India Grid Trust: Evaluating 2-3 proposals to acquire stressed solar assets, Chief Executive Officer Harsh Shah said in an earnings call.
  • Non-Nifty Earnings Today: Federal Bank, TVS Motor, Ceat, Heidelberg Cement, Lupin, Radico Khaitan, Rain Industries, IIFL Finance, LT Foods.

Earnings Reported After Market Hours

United Spirits Q4FY20

  • Revenue down 11.4% to Rs 1,993.8 crore
  • Net profit down 81.1% to Rs 23.9 crore
  • Ebitda down 4.3% to Rs 271.4 crore
  • Ebitda margin at 13.6% from 12.6%
  • Lower employee and advertising expenses aid margins
  • Higher taxes from disputed litigations impact net profit
  • Gross margins fall 433 basis points to 42.2%
  • COGS inflation and dilutive impact of last tranch of bulk scotch sale impacts gross margins
  • Prestige and above portfolio sees sharp deceleration
  • Volume de-growth of 13.5% this quarter
  • All numbers are standalone and compared on a year-on-year basis

Aditya Birla Fashion & Retail Q4FY20

  • Revenue down 5.1% to Rs 1,817.4 crore
  • Net loss of Rs 140.3 crore from net profit of Rs 202.6 crore
  • Ebitda up 25.3% to Rs 156 crore
  • Ebitda margin at 8.6% from 6.5%
  • Deferred tax reversal of Rs 194 crore in the base quarter
  • Operating numbers aided by IND-AS 116
  • Sales loss due to Covid-19 at Rs 339 crore while impact on gross margin was Rs 200 crore
  • All numbers are standalone and compared on a year-on-year basis

Ujjivan Financial Services Q4FY20

  • Net Interest Income up 40.7% to Rs 496.2 crore
  • Net profit up 48.5% to Rs 64 crore
  • Provision for Covid-19 at Rs 70 crore
  • All numbers are consolidated and compared on a year-on-year basis

Tube Investments of India Q4FY20

  • Revenue down 23.4% to Rs 1,031 crore
  • Net profit up 5.8% to Rs 59.8 crore
  • Ebitda up 3.9% to Rs 127.4 crore
  • Ebitda margin expands to 12.4% from 9.1%
  • Lower raw material costs and other expenses aid margins
  • Revenue impacted due to de-growth in the auto industry
  • All numbers are consolidated and compared on a year-on-year basis

India Grid Trust Q4FY20

  • Revenue up 93% to Rs 328.4 crore
  • Net profit doubles to Rs 299.3 crore
  • Distribution of Rs 3 per unit
  • All numbers are standalone and compared on a year-on-year basis

Quess Corp Q4FY20

  • Revenue up 30.5% to Rs 2,995 crore
  • Ebitda up 27.8% to Rs 169 crore
  • Ebitda margin at 5.6% from 5.7%
  • Net loss of Rs 630 crore from net profit of Rs 75.5 crore
  • Exceptional loss of Rs 664 crore due to impairment of assets due to Covid-19 outbreak which will impact future operations.
  • All numbers are consolidated and compared on a year-on-year basis

Brokerage Radar

Credit Suisse On Dabur

  • Outperform rating maintained
  • Price target cut to Rs 475 from Rs 500
  • Revenue declines due to impact of Covid-19
  • See further impact of Rs 400-450 crore in Q1FY21
  • Current run-rate at 85-90% of normal
  • International business did well in Q4 but may drag in FY21
  • Healthcare business poised to gain well due to Covid-19
  • New launches to strengthen healthcare portfolio

Emkay On Dabur

  • Hold rating maintained
  • Price target of Rs 465
  • Sharp decline in sales affected by non-essential products and severe impact on summer placements
  • Margin impact to be lower going ahead due to cut in discretionary spends
  • Growth outlook remains mixed

Morgan Stanley On Sun Pharma

  • Overweight rating maintained
  • Price target of Rs 449
  • Q4 numbers a miss
  • Margins decline but specialty segment stands out
  • Global Specialty business steadily gaining traction and can be a mid-term re-rating catalyst
  • Forthcoming earnings up cycle and potential re-rating underscore overweight rating on the stock

Equirus On Sun Pharma

  • Long rating maintained
  • Price target raised to Rs 529 from Rs 489
  • Sales in Q4 in-line with estimates
  • Ebitda misses estimates due to lower gross margins led by Taro and forex losses
  • Specialty business scales-up; momentum to continue
  • U.S. base business turns favourable
  • Remains top pick in the Indian pharma space as we see strong operating leverage

Morgan Stanley On Tata Power

  • Overweight rating maintained
  • Price target raised to Rs 53 from Rs 38
  • Earnings impact from Covid-19 is limited
  • Large part of bull case looks plausible
  • Management aims to reduce debt by Rs 21,000 crore in FY21
  • Always been a complex equity story
  • Continues to trade at a steep discount to intrinsic value

Nomura On AIA Engineering

  • Buy rating maintained
  • Price target of Rs 1,900
  • Capacity utilisation at 70% of pre-Covid levels
  • Strategy of maintaining inventory close to customer sites have helped service the clients
  • Positive on stable earnings profile
  • Working capital levels are in-line with historic cycle; view this development as a key positive

Emkay On Aditya Birla Fashion

  • Buy rating maintained
  • Price target cut to Rs 150 from Rs 220
  • 5% sales decline indicates healthy growth in pre-Covid-19 period
  • Higher overhead cost structure results in steeper impact on profitability
  • Cost saving and balance sheet strengthening initiatives are positive

Bulk Deals

  • IndoStar Capital Finance: Amundi Funds Equity India sold 4.71 lakh shares (0.51 percent) at Rs 280.01 per share.

Who’s Meeting Whom

  • Manappuram Finance: To meet IIFL Capital on May 28
  • Endurance Tech: To meet ICICI Prudential Life Insurance on May 28
  • HFCL: To meet ICICI Securities and Maybank Kim Eng Securities on May 28
  • CG Consumer Electricals: To meet Motilal AMC and HDFC Life between May 29-June 1
  • Info Edge: To meet Motilal Oswal on May 28
  • Cipla: To meet GIC, Investec Capital Services and other investors between May 28-June 22

Trading Tweaks

  • Price Band Revised From 20% To 10%: Birla Corporation, Kothari Products
  • Move Into Short-Term ASM Framework: Rolta, JMT Auto, Urja Global
  • Move Into Short-Term ASM Framework: Affle
  • Move Out Of Short-Term ASM Framework: Saurashtra Cement, Black Rose Industries

Insider Trading

  • Apollo Tyres: Promoter PTL Enterprises acquired 15,000 shares on May 22
  • Aarti Drugs: Promoter sold 17,000 shares from May 21-22

(As Reported On May 27)

Money Market Update

  • The rupee had a flat close on Wednesday, ending at 75.71 against the U.S. Dollar as compared to Tuesday's close of 75.66.

F&O Cues

  • Nifty May futures closed at 9,309; discount of 5 points from premium of 5 points
  • Nifty May futures shed 18% and 11.3 lakh shares in Open Interest
  • Nifty Rollovers at 59%
  • Nifty Bank May futures closed at 18,663; premium widens to 47 points from 5 points
  • Nifty Bank May futures shed 39% and 5.7 lakh shares in Open Interest
  • Nifty Bank Rollovers at 50.7%
  • Nifty Put-Call Ratio at 1.56 from 1.16 across all series
  • Stocks In F&O Ban: Vodafone Idea

Nifty Monthly Expiry: May 28

  • Maximum Open Interest on Call side at 9,500 strike (27.9 lakh shares)
  • Maximum Open Interest on Put side at 9,000 strike (43.8 lakh shares)
  • Active options: 10,000 Call (-8.8 lakh shares), 9,200 Put (+14.1 lakh shares)
All You Need To Know Going Into Trade On May 28