A trader watches a monitor while working on the floor of the New Stock Exchange in New York, U.S. (Photographer: Jin Lee/Bloomberg News)

All You Need To Know Going Into Trade On Oct. 17

Stocks in Asia tracked a strong U.S. session after earnings handed investors a welcome distraction from trade tensions and rising yields.The dollar held declines and Treasuries were steady.

Japanese, South Korean and Australia shares climbed. Oil edged higher amid tensions between the Saudi Arabia and the U.S. over the disappearance of a prominent journalist.

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 1 percent to 10,688 as of 7:10 a.m.

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Here’s a quick look at all that could influence equities today.

U.S. Market Check

  • U.S. stocks gained the most in more than six months as corporate earnings provided a respite from tensions over trade and geopolitics.
  • The yield on 10-year Treasuries was steady at 3.16 percent.

Europe Market Check

  • European stocks climbed, buoyed by hopes for an orderly Brexit deal ahead of a meeting of EU ministers on Wednesday, as well as possible Saudi Arabian support for a purported investigation into the disappearance of journalist Jamal Khashoggi.
All You Need To Know Going Into Trade On Oct. 17

Also read: Cornered at Home, May Heads Into EU Summit Battle Over Brexit

Asian Cues

  • Japan’s Topix index rose 1.1 percent.
  • FTSE China A50 index futures rose 1.2 percent.
  • Australia’s S&P/ASX 200 Index gained 0.9 percent.
  • South Korea’s Kospi added 1.6 percent.

Also read: China Cuts U.S. Treasury Holdings for Third Straight Month

Commodity Cues

  • West Texas Intermediate crude rose 0.5 percent at $72.25 a barrel.
  • Brent crude traded higher for the third day, up 0.3 percent to $81.69 per barrel.
  • Gold climbed less than 0.1 percent to $1,225.32 an ounce.

Shanghai Exchange

  • Copper traded lower for the second day, down 0.5 percent.
  • Zinc traded lower for the second day, down 0.1 percent.
  • Steel traded a little changed.
  • Aluminium snapped a five-day losing streak, up 0.5 percent.
  • Rubber traded 0.1 percent higher.

Here are the key events to watch this week:

  • China’s new yuan loans may have risen to 1.36 trillion yuan ($196 billion) in September from August’s 1.28 trillion yuan as officials sought to buoy economic growth.
  • Third-quarter GDP for China comes Friday, with headline growth forecast to slow to 6.6 percent year on year from 6.7 percent, in addition to last month’s retail sales and factory output.
  • Minutes from the Fed are due on Wednesday.

Indian ADRs

All You Need To Know Going Into Trade On Oct. 17

Stocks To Watch

  • Cochin Shipyard said it will buy back 44 lakh shares representing 3.23 percent of equity shares at Rs 455 per share, aggregating to Rs 200 crore. The record date for buy back is set for Oct. 31.
  • Lakshmi Machine Works said it will consider buy back of equity shares on Oct. 22
  • IIFL Holdings’ wealth management arm acquired Chennai-based ‘Wealth Advisors India’ for Rs 253.6 crore. This acquisition will increase the company’s client base and further expansion of wealth management in South India. Besides, its another subsidiary—IIFL Home Finance Ltd. has raised Rs 1,000 crore from National Housing Bank and another $50 million from SBI through external commercial borrowing route.
  • Lemon Tree Hotels signed a license property for 70 room property in Mumbai. The hotel is expected to be operational by June 2019.
  • NHPC: Baira Siul Power Station (180MW) in Himachal Pradesh said it was going for a complete shutdown for six months, starting Oct. 15 for renovation and modernisation works.
  • NBCC signed a MoU with Ministry of External Affairs to construct convention center in West Africa’s Niger. Apart from this, the company said that eight more convention centres will come up in Africa, with the government spending for all these projects pegged at Rs 200 crore.
  • Federal Mogul Goetze (India) said its open offer for 25.02 percent capital, comprising 1.4 crore equity shares, will be offered to public at Rs 420.05 apiece by the America based acquirer Tenneco. The offer closing date is Dec. 12.

Media Reports

  • Amazon in talks to acquire just under 10 percent stake in Future Retail which is likely to be approved by its board on Oct. 29 (Times of India).

New Offerings

  • Prince Pipes files for Rs 600-crore IPO.

Nifty Earnings To Watch

  • Reliance Industries

Also read: All You Need To Know Going Into The Second Quarter Earnings Season

Other Earnings To Watch

  • NIIT Technologies
  • 5paisa Capital
  • ACC
  • Aditya Birla Money
  • Cyient
  • DCB Bank
  • Havells India
  • Mindtree
  • MphasiS

Earnings Reactions To Watch

Infosys (Q2, QoQ)

  • $ Revenue up 3.2 percent at $2,921million.
  • Revenue up 7.7 percent at Rs 20,609 crore.
  • Net profit up 13.8 percent at Rs 4,110 crore.
  • EBIT up 7.9 percent at Rs 4,894 crore.
  • Margin flat at 23.7 percent.

Hero MotorCorp (Q2, YoY)

  • Revenue up 8.6 percent at Rs 9,091 crore.
  • Net profit down 3.4 percent at Rs 976.3 crore.
  • Ebitda down 5.3 percent at Rs 1,378.7 crore.
  • Margin at 15.2 percent versus 17.4 percent.
  • Volume growth of 5.5 percent boost topline growth.
  • Other Income at Rs 223.7 crore versus Rs 117.6 crore.

Mahindra CIE Automotive (Q3, YoY)

  • Revenue up 21.7 percent at Rs 652.5 crore.
  • Net profit up 73.9 percent at Rs 42.6 crore.
  • Ebitda up 36.8 percent at Rs 80.3 crore.
  • Margin at 12.3 percent versus 10.9 percent.

Crisil (Q2, YoY)

  • Revenue up 3.9 percent at Rs 425.5 crore.
  • Net profit up 29.7 percent at Rs 90 crore.
  • Ebitda up 3 percent at Rs 112 crore.
  • Margin at 26.3 percent versus 26.5 percent.
  • Other Income of Rs 28.8 crore this quarter.

Shakti Pumps (Q2, YoY)

  • Revenue up 104.9 percent at Rs 138.7 crore.
  • Net profit up 210 percent at Rs 9.3 crore.
  • Ebitda up 90.8 percent at Rs 20.8 crore.
  • Margin at 15 percent versus 16.1 percent.

Insider Trades

  • Mukand promoter group Baroda Industries acquired 50,000 shares from Oct.10-11.
  • Cox & Kings promoter acquired 31,800 shares on Oct. 12.

(As reported on Oct. 16)

Trading Tweaks

  • Thyrocare Technologies completes share buyback programme.
  • Capital India Finance added to ASM Framework.
  • Gravita India and Adlabs Entertainment price band revised to 5 percent.
  • Aptech, GTPL Hathway and TD Power Systems price band revised to 10 percent.
  • Arshiya, RSWM and HEG price band revised to 10 percent.

Money Market Update

  • The rupee on Tuesday closed at 73.47 per dollar. It closed at 73.82 per dollar in trade on Monday.

F&O Cues

  • Nifty October futures closed trading at 10,587, premium of five points.
  • Nifty October open interest up 4.2 percent; Nifty Bank October open interest down 1.7 percent.
  • Max open interest for October series at 11,000 strike value call option (open interest at 47.3 lakh shares).
  • Max open interest for October series at 10,000 Strike value put option (open interest at 35.8 lakh shares).

F&O Ban

  • IDBI Bank
  • Adani Power

Put-Call Ratio

  • Nifty PCR at 1.24 versus 1.20.
  • Nifty Bank PCR at 1.19 versus 1.21.

Fund Flows

All You Need To Know Going Into Trade On Oct. 17

Brokerage Radar

Brokerages On Infosys

BofAML

  • Maintained ‘Buy’; raised price target to Rs 805 from Rs 790, implying a potential upside of 16 percent from the last regular trade.
  • Improved growth outweighs margin miss in the second quarter.
  • Expect a return to double-digit revenue growth by the end of the current financial year.
  • Attrition rates likely to normalize in next two quarters.

Nomura

  • Maintained ‘Reduce’ with a price target of Rs 670, implying a potential downside of 4 percent from the last regular trade.
  • September Quarter Review: Beat on growth, margin miss a negative.
  • Unchanged revenue growth and EBIT margin guidance despite easy asking rates a disappointment.
  • Growth was broad-based; Outlook appears optimistic on BFSI and Retail.

CLSA

  • Maintained ‘Buy’ with a price target of Rs 950, implying a potential upside of 36 percent from the last regular trade.
  • September quarter review: Sharp revenue beat and stellar deal wins, soft margins and guidance.
  • Digital focus keeps client relevance strong.
  • Growth acceleration potential at reasonable multiples.

Macquarie

  • Maintained ‘Outperform’; raised price target to Rs 775 from Rs 770, implying a potential upside of 11 percent from the last regular trade.
  • Focusing on investments for medium-term growth is a step in right direction.
  • Large deal wins were strong at $2 billion.
  • Believe Infosys deserves to trade at a 20 percent discount to TCS.

UBS

  • Maintained ‘Buy’ with a price target of Rs 890, implying a potential upside of 28 percent from the last regular trade.
  • Constant currency revenue grew higher than estimates.
  • Strong revenue growth and contract wins are early signs of investments paying off.
  • Expect a positive stock reaction.

Credit Suisse

  • Maintained ‘Neutral’ with a price target of Rs 680, implying a potential downside of 2 percent from the last regular trade.
  • September quarter results were mixed; Large deal wins were nearly twice that in the first quarter.
  • Revenue was encouraging across many segments.
  • Weaker-than-expected margins take away the sheen from strong growth.

Brokerages On Hero MotoCorp

Morgan Stanley

  • Maintained ‘Underweight’ with a price target of Rs 2,795, implying a potential downside of 4 percent from the last regular trade.
  • September quarter results largely in line.
  • Ebitda growth to remain weak due to competitive and inflationary pressures.
  • Market shares in scooters and premium bikes is key to monitor.

CLSA

  • Maintained ‘Sell’; cut price target to Rs 2,800 from Rs 3,000, implying a potential downside of 3 percent from the last regular trade.
  • Weak operating results due to higher input cost and expiry of duty benefits at Haridwar plant.
  • Higher ownership costs impacting two wheeler demand; Hero expects improvement.
  • Margin concern continues given high competitive intensity amidst a cost push.

UBS

  • Maintained ‘Buy’ with a price target of Rs 3,500, implying a potential upside of 21 percent from the last regular trade.
  • September quarter results came inline.
  • Expect growth to be supported by better demand momentum in rural.
  • For urban, see slower two wheeler demand outlook; Financing not yet an issue.

BofAML

  • Maintained ‘Buy’; cut price target to Rs 3,500 from Rs 3,800, implying a potential upside 21 percent from the last regular trade.
  • September quarter results were largely in line as higher volumes have offset pricing competition.
  • Tailwind from rural uptick likely to keep volumes healthy.
  • Recent correction makes risk reward favourable.

Credit Suisse

  • Maintained ‘Neutral’; cut price target to Rs 3,020 from Rs 3,500, implying a potential upside of 4 percent from the last regular trade.
  • September quarter results were almost in line with estimates.
  • Mgmt. says availability of finance is not a concern for growth in festive season.
  • Lower valuation multiple on concerns related to two wheeler industry growth.

Brokerages On Federal Bank

Deutsche Bank Research

  • Maintained ‘Buy’; cut price target to Rs 110 from Rs 115, implying a potential upside of 35 percent from the last regular trade.
  • Asset quality held up well despite floods; Core business momentum is strong.
  • Growth is steady and granular; CASA growth is also strong.
  • Lower recoveries and upgrades resulted in 11 percent rise on a sequential basis in GNPA.

UBS

  • Maintained ‘Buy’ with a price target of Rs 95, implying a potential upside of 16 percent from the last regular trade.
  • Strong loan growth and stable margins drove second quarter earnings
  • Expect loan book growth of 23 percent over FY18-20; RoA and RoE to improve to 0.8 percent and 10.3 percent respectively by March 2020.
  • Maintain Buy due to inexpensive valuation.

Kotak

  • Maintained ‘Buy’ with a price target of Rs 105, implying a potential upside of 29 percent from the last regular trade.
  • Strong performance led by strong loan growth even as higher provisions dented earnings.
  • Focus likely to shift back to RoE improvement.
  • Expect a rerating going forward.

Brokerages On Reliance – Hathway And Den Deal

CLSA

  • Potential deal to give RIL access to broadband homes and subscribers.
  • Absolute investment for acquisition would be small compared to its telecom capex.
  • Acquisition to help get permissions; Still investment in laying last mile fibre required.
  • Deal to drive market share gains and help gain wallet share among consumers at top-end.

Macquarie

  • Primary benefit of this deal would be access to the last mile.
  • Blending of Hathway and DEN’s cable operations with Jio’s plans will be key monitorable.
  • Deal to put pressure on urban-focussed DTH operators like Tata Sky and Airtel.
  • Deal to strengthen bargaining power of Hathway and DEN with regard to broadcasters.

More Brokerage Calls

Goldman on Industrials

  • The rupee depreciation, refinancing risks and higher borrowing costs impacted share performance.
  • Expect firms with good earnings visibility and reasonable valuations to outperform.
  • Downgrade Thermax to Sell as lower RoE improvement does not justify premium valuations.
  • Upgrade Blue Dart to Neutral post significant underperformance.
  • L&T best-placed in current macro environment; Remains our top pick.
  • Prefer NTPC, Powergrid and Tata Power which offer stable earnings and valuation support.

HSBC on Maruti Suzuki

  • Maintained ‘Buy’; cut price target to Rs 9,000 from Rs 10,000, implying a potential upside of 26 percent from the last regular trade.
  • Changing consumer patterns and slow income growth had an impact on new car demand.
  • Major car markets are already showing signs of stagnation.
  • Remains strong long-term play, but weak festive season and margin pressures are near-term risk.