All You Need To Know Going Into Trade On Oct. 16

Asian stocks followed their U.S. peers higher, though gains were pared by U.S.-China tensions over Hong Kong that also sent the yen edging up.

U.S. futures dropped after China threatened to retaliate if the U.S. Congress passes a bill offering support to pro-democracy protestors in Hong Kong. Stocks were still up about 1 percent in Japan, and benchmarks were also higher in Australia and Korea after the news.

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.4 percent to 11,477 as of 6:55 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 all that could influence equities today.

• U.S. stocks touched four-week highs, led by health care and financial shares, as earnings season began in earnest.
• Treasuries ticked higher, though 10-year yields remained close to the highest in a month thanks to the earlier risk-on moves across markets.
• The pound strengthened and gilts fell after two EU officials said negotiators in Brussels are closing in on a draft Brexit deal that could lead to a breakthrough before the end of Tuesday.
• Crude oil ticked higher and gold was little changed.

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Earnings Reaction To Watch

Wipro (Q2, Consolidated QoQ)

• Revenue rose 2.3 percent to Rs 15,130 crore.
• Net profit rose 6.6 percent to Rs 2,561 crore.
• EBIT rose 6.6 percent to Rs 2,613 crore.
• Margin stood at 17.3 percent versus 16.6 percent.
• IT services revenues rose 0.5 percent to $2,049 million.
• IT services Q3FY20 guidance $2,065 million to $2,106 million.
• Translates to 0.8 percent to 2.8 percent QoQ growth.

ACC (Q3CY19, Standalone YoY)

• Revenue rose 2.7 percent to Rs 3,527.6 crore.
• Net profit rose 45.9 percent to Rs 300 crore.
• Ebitda rose 25.7 percent to Rs 556.4 crore.
• Margin stood at 15.7 percent versus 12.9 percent.

SBI Life Insurance (Q2, YoY)

• Gross premium rose 33 percent to Rs 10,243.4 crore.
• Net profit rose 21 percent to Rs 348.91 crore.
• Thirteen month persistency at 83.13 percent versus 80.03 percent.

MCX (Q2, Consolidated YoY)

• Revenue rose 40.9 percent to Rs 100.2 crore.
• Net profit rose 2 times to Rs 71.8 crore.
• Ebitda rose 2.1 times to Rs 47.3 crore.
• Margin stood at 47.2 percent versus 32.2 percent.

Karnataka Bank (Q2, YoY)

• Net interest income rose 6.6 percent to Rs 498.7 crore.
• Net profit fell 5.4 percent to Rs 105.9 crore.
• Provisions stood at Rs 262.4 crore versus Rs 193.2 crore. (Rs 201.1 crore QoQ)
• GNPA stood at 4.78 percent versus 4.55 percent (QoQ).
• NNPA was at 3.48 percent versus 3.33 percent (QoQ).

Alicon Castalloy (Q2, Consolidated YoY)

• Revenue fell 13.1 percent to Rs 266.2 crore.
• Net profit was down 31.9 percent to Rs 9.4 crore.
• Ebitda fell 7.7 percent to Rs 34.7 crore.
• Margin stood at 13 percent versus 12.3 percent.

Reliance Industrial Infrastructure (Q2, Consolidated YoY)

• Revenue declined 6.1 percent to Rs 20 crore.
• Net profit rose 4.2 percent to Rs 2.5 crore.
• Ebitda was down 27.6 percent to Rs 2.1 crore .
• Margin stood at 10.5 percent versus 13.6 percent.

Earnings To Watch

• Mindtree
• Federal Bank
• Aditya Birla Money
• DB Corp
• Eimco Elecon
• Hathway Cable & Datacom
• Kokuyo Camlin

Brokerage Radar

On MCX

Morgan Stanley

• Maintain Overweight; hike target price to Rs 1,365 from Rs 1,260.
• Earnings beat estimates on stronger revenue and lower costs.
• Management highlighted structurally increasing participation and product suite in addition to cyclical factors.
• Hike earnings per share estimates by 6 percent-14 percent for FY20-22 largely due to higher fee realisation and lower operating costs.

UBS

• Maintain Buy with target price of Rs 1,200
• Strong quarter driven by high turnover levels
• Significant revenue growth along with controlled costs resulted in profitability
• Future prospect looks good; management hoping to maintain volume levels with upcoming cotton season

On SBI Life

Emkay

• Maintain Buy; hike target price to Rs 965 from Rs 900
• Results were inline with strong gross written premium and gross written premium and annual premium equivalent growth
• Distribution reach and focus on diversifying product mix helping SBI Life deliver better premium growth
• Strategy largely remains the same with focus on higher-margin products

Morgan Stanley

• Maintain Overweight with target price of Rs 985
• Strong delivery across key metrics
• Persistency ratio on regular premium products improved across cohorts
• Expect strong growth and improving margins aided by rising protection mix, improving persistency and cost ratios

On Wipro

Morgan Stanley

• Maintain Underweight; cut target price to Rs 233 from Rs 240
• Q2 had weaker IT services revenue while margins were better
• Margin beat was aided by better collections and cost credits
• Organic revenue growth guidance is softer than expected; uncertain of macro environment

UBS

• Maintain Sell with target price of Rs 205.
• Q2 IT services revenue in line.
• EBIT margin above estimates due to cost controls and lower sub-contractor costs.
• Expect positive reaction near term to margin beat and better-than-expected Q3 guide.

On ACC

Citi

• Maintain Buy; cut target price to Rs 2,150 from Rs 2,175
• Q3CY19: no great surprises; costs slightly better
• Little to look forward to near term; expect demand/price improvement post Diwali

Morgan Stanley

• Maintain Underweight with target price of Rs 1,425
• Ebitda beat led by lower than expected costs
• Key concerns persist with respect to muted volume growth and weak realizations
• Valuation is cheap but expect muted earnings growth

Nomura

• Maintain Neutral with target price of Rs 1,750
• Q3 ahead of consensus; cement volumes continue to remain weak
• Near-term focus will be on demand recovery; expect pickup by November
• Lower coal and pet-coke prices to aid companies in Q4CY19

BofAML on Reliance Industries

• Maintain Buy; Hike target price to Rs 1,615 from Rs 1,560.
• New commerce initiatives, entry in SME enterprise, fibre broadband and digital initiatives to aid growth.
• Hike FY20-22 EPS estimates by 4-5 percent on the back of tax cuts.
• Favourable risk-reward; continued execution is key.

Stocks To Watch

• Bajaj Consumer Care promoter sold 3.22 crore shares or about 21.9 percent stake, according to data from stock exchanges. This brings down its holding in the company to 38 percent. Interestingly, nearly 38 percent of the company’s equity is pledged with Axis Finance Ltd.
• Entertainment Network: Bahrain-based Adline Media has terminated brand and content license agreement signed in March 2018 with the company. Adline Media has expressed their inability to continue with the aforesaid agreement due to insufficient advertising market to profitably supporting the operating costs of the radio station.
• MCX accepted the resignation of its Chief Financial Officer Sanjay Wadhwa.
• ACC said it is executing projects that will add new capacity in the markets of Uttar Pradesh, Madhya Pradesh, Bihar, Jharkhand and West Bengal. They also maintained a positive outlook for demand in the coming months.
• SBI said that the impact of nationwide strike on Oct. 22 on the bank will be minimal.
• Sterling & Wilson Solar signed contract for a new engineering, construction and procurement for Solar Farm In Australia for 220.83 million Australian dollar.
• NBCC has secured total business of Rs 852.17 crore for the month of September.
• ONGC’s arm ONGC Videsh has recorded discoveries of oil in Colombia and Brazil.
• International Paper APPM: West Coast Paper Mills acquired 17.2 percent stake in the company on Oct. 11, through an open offer pursuant to the letter of offer dated Aug. 30.
• Dalmia Bharat clarified that its arm Calcom has not committed any default in its obligations towards GuarantCo. GuarantCo had originally executed guarantee(s) in favour of certain Indian banks with respect to loan facilities availed by Calcom under the management of erstwhile promoters. Upon default of the erstwhile promoters in December 2011 and January 2012, the Indian banks had invoked the guarantee(s) as beneficiaries and GuarantCo in turn paid the money to the said banks. GuarantCo is now demanding that Calcom additionally pay GuarantCo for the difference on account of the exchange rate fluctuation which has occurred during the tenure of loan repayment and this company stated that this additional amount of demand is not within Reserve Bank of India regulations.
• United Bank of India to seek shareholder nod on Nov. 7, regarding the issuance of preference shares worth Rs 1,666 crore to the Government of India.
• Sheela Foam has incorporated its arm in U.S. named SleepX US Inc.
• Emami: Blackstone, KKR and TPG Capital join race for Emami Cement. (BN)
• Future Enterprises to consider selling assets to Future Retail on November 8.
• Arss Infra Projects received work order of Rs 60.6 crore for construction of roads in Odisha by Rail Vikas Nigam.

Pledge Share Details

• JSW Steel promoters released pledge of 1.7 crore shares on Oct. 7 in favour of HDFC, Tata Capital Financial Services and Housing Development Corporation.
• JSW Energy promoters created pledge of 20 lakh shares on Oct. 7.
• Future Retail promoter Future Corporate Resources created pledge of 50,000 shares on Oct. 11.

Trading Tweaks

• Gruh Finance ex-date for amalgamation.
• Gujarat Fluorochemicals to be listed on bourses pursuant to scheme of arrangement.
• Satia Industries record date for share split from Rs 10 to Rs 5 per share
• Reliance Infrastructure to move into ASM Framework.
• Jain Irrigation Systems, Jaiprakash Power Ventures, Winsome Yarns to move into short term ASM Framework.
• Indiabulls Real Estate, Indiamart Intermesh to move out of short term ASM Framework.
• Jain Irrigation Systems, Edelweiss Financial Services, Jaiprakash Power Ventures, Aurionpro Solutions price band revised to 10 percent.

Who’s Meeting Whom

• Affle to meet Arohi Asset Management on Oct. 17

Money Market Update

• The rupee declined by 21 paise to close at a three-week low of 71.23 against the U.S. currency on Monday as investors rushed to safe-haven bets on fading hopes of an initial trade deal between the US and China. Weak Chinese trade data also weighed on the domestic currency.
• Rupee could fall on Wednesday as currencies across the region come under the pressure due to US-China tensions.
• Traders will also weigh Tuesday’s data that showed a narrower trade deficit.

F&O Cues

Futures

• Nifty October futures closed at 11439.4, premium of 11 points.
• Nifty October futures up 2.3 percent, adds 3.2 lakh shares in open interest.
• Nifty Bank futures closed at 28,618.6, premium of 63.6 points.
• Nifty Bank October futures open interest down 1 percent, sheds 11,000 shares in open interest.

Options

• Nifty PCR at 1.31 versus 1.17 (across all series).

Nifty Weekly Expiry: Oct. 17

• Max open interest on call side at 11,500 (16.1 lakh shares).
• Max open interest on put side at 11,300 (23.4 lakh shares).
• Open interest addition seen at 11,400P (+10.8 lakh shares), 11,300P (9.3 lakh shares).

Nifty Monthly Expiry: Oct. 31

• Max open interest on call side at 12,000 (24 lakh shares).
• Max open interest on put side at 11,000 (30.8 lakh shares).