All You Need To Know Going Into Trade On Oct. 25

An equities rout that wiped out this year’s gains for U.S. stocks spread to Asia Thursday as concerns mount that corporate profits and economic growth are peaking amid rising borrowing costs.

Stock gauges in Japan and South Korea lost more than 2 percent, and futuressank in Asian markets yet to open, threatening to push the MSCI Asia Pacific Index deeper into a bear market. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell over 1.2 percent to 10,110 as of 7:15 a.m.

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

U.S. Market Check

• The sell-off in U.S. stocks accelerated, wiping out gains for the year in both the S&P 500 Index and the Dow Jones Industrial Average, as mixed corporate earnings and weak housing data fueled anxiety that rising prices will crimp economic growth.
• The yield on 10-year Treasuries held at 3.10 percent. It dropped seven basis points Wednesday.

Europe Market Check

• Once again, Europe’s stock rebound was derailed by a crumbling U.S. market. Most Europe equities reversed gains.

Asian Cues

• Japan’s Topix index tumbled 2.9 percent and the Nikkei 225 Stock Average slumped 3.3 percent.
• Australia’s S&P/ASX 200 Index fell 1.9 percent.
• South Korea’s Kospi index slid 2.2 percent.
• FTSE China A50 contracts lost 1.4 percent.
• Hong Kong Hang Seng Index futures lost 0.3 percent.
• S&P 500 futures rose 0.1 percent.

Commodity Cues

• West Texas Intermediate crude dropped 0.8 percent to $66.27 a barrel.
• Brent crude traded lower for the third day, down 0.08 percent at $75.53 per barrel.
• Gold rose 0.2 percent to $1,236.47 an ounce.

Shanghai Exchange:

• Copper traded lower for the second day, down 0.4 percent.
• Zinc traded higher for the third day, up 0.4 percent.
• Steel resumed rally after a one-day decline, up 0.2 percent.
• Aluminium snapped a two-day rally, down 0.2 percent.
• Rubber traded lower for the third day, down 0.7 percent.

Here are the key events to watch out for this week:

• Earnings season rolls on with notable highlights including Twitter, UBS and Total.
• ECB policy makers could on Thursday confirm that asset purchases will end this year, reiterating its pledge to keep interest rates at record lows through summer 2019. President Mario Draghi will hold a press conference.

• U.S. gross domestic product growth may have slowed in the third quarter, yet remained near its best pace since mid-2015, according to forecasts ahead of Friday’s release.

Indian ADRs

Stocks To Watch

• Wipro Ltd. said its third quarter revenue will be in the range of $2.03-$2.07 billion, implying a sequential growth of 1 to 3 percent.
• Telecom subscription data for the month of August: RIL’s Reliance Jio added 1.2 crore subscribers, Vodafone added 11.4 lakh subscribers and Bharti Airtel added 10 lakh subscribers. Idea lost 4.35 lakh subscribers. Market Share Data - Bharti Airtel: 29.64 percent, Reliance Jio: 20.50 percent, Vodafone: 19.24 percent, Idea: 18.61 percent.
• Dynemic Products stopped work at Ankleshwar unit after receiving notice from Gujarat Pollution Control Board.
• Kilitch Drugs said it plans to start manufacturing operations in Ethopia, Africa. Commercial production to commence from mid-2019-20. Company expects to generate a revenue of 500 crore in next five years since it is bullish on the African markets.
• Schaeffler India successfully completed its merger of INA Bearings India Pvt. Ltd. and LuK India Pvt. Ltd. Combined entity will rake in revenue of over Rs 4,100 crore. The company will also open a new engine and transmission components manufacturing facility at Pune. Management said that they had doubled the investment in India to Rs 325 crore this year and will continue to do so for the next year.
• Tata Chemicals signed an MOU with CSIR-Central Electrochemical Research Institute, Karaikudi to scale up manufacturing of cathode materials for Lithium-ion cells with a view to eventually manufacture Lithium-ion batteries for various applications.
• IL&FS failed to pay interest on non-convertible debentures.
• Jet Airways clarified that that the company had not sought any moratorium on any loans or reduction of interest rates from its lenders.
• L&T Finance said it had about Rs 1,800 crore exposure to some IL&FS Infra SP versus and about Rs 800 crore exposure to projects of Supertech. Additionally, the company had raised Rs 18,468 crore via market instruments since Sept. 21.
• BOC, Praxair offered to acquire up to 25 percent in Linde India; BOC open offer for 2.13 crore Linde India shares at Rs 276.09 each.
• KPIT Tech to be tech partner for BMW’s autonomous driving project.
• SKF India said it will buy back 19 lakh shares at Rs 2,100 each (22 percent premium to the current market price).

Nifty Earnings To Watch

• Maruti Suzuki
• Yes Bank
• Bharti Airtel
• JSW Steel

Other Earnings To Watch

• Quess Corp
• Varun Beverages
• Crompton Greaves Consumer
• L&T Technology Services
• Piramal Enterprises
• Tata Coffee
• V-Guard Industries
• CEAT
• Shriram Transport Finance
• BHEL
• Raymond
• Kajaria Ceramics
• Mastek
• Dish TV India
• Biocon
• PVR

Earnings Reactions To Watch

Wipro (Q2, QoQ)

• Revenue up 2.4 percent at Rs 14568 crore.
• Net profit down 9.9 percent at Rs 1886 crore.
• Forex gain of Rs 121.7 crore versus gain of Rs 77.1 crore QoQ
• EBIT down 13.3 percent at Rs 2097 crore.
• EBIT Margins at 14.4 percent versus 17 percent.

InterGlobe Aviation (Q2 ,YoY)

• Revenue up 17 percent at Rs 6185 crore.
• Net loss of Rs 652 crore versus Net profit of Rs 552 crore
• Ebitdar down 93 percent at Rs 111 crore.
• Margin at 1.8 percent versus 29.4 percent.

Hexaware (Q3, QoQ)

• Dollar revenue up 1.7 percent at $171.1 million.
• Revenue up 6 percent at Rs 1210 crore.
• Net profit up 21 percent at Rs 172 crore.
• Ebitda up 18 percent at Rs 187 crore.
• Margin at 15.5 percent versus 14 percent.

Bharat Financial Inclusion (Q2, YoY)

• NII up 95 percent at Rs 519 crore.
• Net profit up 73 percent at Rs 233 crore.
• Gross NPA at 0.4 percent versus 0.3 percent (QoQ)
• Net NPA unchanged at 0.1 percent.

Lakshmi Vilas Bank (Q2, YoY)

• Net Interest Income down 35 percent at Rs 151 crore.
• Net loss of Rs 132 crore versus Net profit of Rs 10.5 crore.
• Provisions up 27 percent at Rs 205 crore (QoQ).
• GNPA at 12.31 percent versus 10.73 percent (QoQ).
• NPA at 6.88 percent versus 5.96 percent (QoQ).

Everest Industries (Q2, YoY)

• Revenue up 21 percent at Rs 313 crore.
• Net profit up 100 percent at Rs 9 crore.
• Ebitda up 54 percent at Rs 18.5 crore.
• Margin at 5.9 percent versus 4.6 percent.

Indiabulls Real Estate (Q2, YoY)

• Revenue up 121 percent at Rs 1040 crore.
• Net profit up 23 percent at Rs 76 crore.
• Ebitda down 4 percent at Rs 243 crore.
• Margin at 23.4 percent versus 53.7 percent.
• Finance cost down 47 percent at Rs 104 crore.

Agro Tech Foods (Q2, YoY)

• Revenue up 7 percent at Rs 211 crore.
• Net profit up 6 percent at Rs 9.1 crore.
• Ebitda up 3 percent at Rs 17.5 crore.
• Margin at 8.3 percent versus 8.6 percent.

Bharti Infratel (Q2, QoQ)

• Revenue down 1 percent to Rs 3,648 crore.
• Net profit down 6 percent to Rs 600 crore.
• Ebitda down 1 percent to Rs 1,506 crore.
• Margin at 41.3 percent versus 41.4 percent.

KPIT Tech (Q2, QoQ)

• Revenue up 6 percent at Rs 1079 crore.
• Net profit up 6 percent at Rs 82 crore.
• Ebitda up 19.5 percent at Rs 147 crore.
• Margin at 13.6 percent versus 12.1 percent.

IDFC Bank (Q2, YoY)

• Net Interest Income down 2 percent at Rs 451 crore.
• Net loss of Rs 370 crore versus Net profit of Rs 234 crore.
• Provisions at Rs 601 crore versus Rs 34 crore (QoQ).
• GNPA at 1.63 percent versus 3.24 percent (QoQ).
• NPA at 0.59 percent versus 1.63 percent.

L&T Finance (Q2, YoY)

• Total Income from operations up 25 percent to Rs 3,246 crore.
• Net Profit grew 62 percent to Rs 559 crore.
• Gross NPA at 7.10 percent versus 7.93 percent (QoQ).
• Net NPA at 2.79 percent versus 3.17 percent (QoQ).

Insider Trades

• Mayur Uniquoters promoter Kiran Poddar acquired 300 shares on Oct. 23
• NRB Bearings promoter Harshbeena Sahney Zaveri acquired 14,470 shares between Oct. 22 – 23.
• Skm egg products export (India) ltd promoter SKM Shree Shivkumar acquired 8,000 shares on Oct. 23.
• Axis Bank promoter Life Insurance Corporation of India sold 7.88 lakh shares on Oct. 23

(As Reported on Oct. 24)

Bulk Deals

Specialty Restaurants:

• Deepak Bhagnani sells 13.50 lakh shares or 2.9 percent equity at Rs 69 each.
• Tasha Investment Advisors LLP buys 11.6 lakh shares or 2.5 percent equity at Rs 69 each.

Den Networks: MSD India Fund sells 29.94 lakh shares or 1.5 percent equity at Rs 66.77 each.

Money Market Update

• Rupee closed at 73.16/$ on Wednesday versus 73.57/$ on Tuesday.

F&O Cues

• Nifty October Futures closed trading at 10228, premium of 4 pen interest.
• Nifty October open interest down 30 percent; Nifty Bank October open interest down 28 percent.
• Max open interest for October series at 11,000 strike value call option (open interest at 33.2 lakh shares).
• Max open interest for October series at 10,000 strike value put option (Open interest at 42.6 lakh shares).
• Nifty Rollovers at 65 percent.
• Nifty Bank Rollovers at 53 percent.

Stocks In F&O Ban

• Adani Enterprises
• Adani Power
• DHFL

Put Call Ratio

• Nifty PCR at 1.1 from 1.04.
• Nifty Bank PCR at 0.82 from 0.79.

Brokerage Radar

On Kotak Mahindra Bank

JPMorgan

• Maintained ‘Overweight’ with a price target of Rs 1,400, implying a potential upside of 19 percent from the last regular trade.
• September quarter review: Earnings beat driven by subsidiary performance.
• Deposit franchise continues to show strong traction.
• No clarity given on way forward for reducing promoter stake.

CLSA

• Upgraded to ‘Buy’ from ‘Outperform’; cut price target to Rs 1,420 from Rs 1,480, implying a potential upside of 21 percent from the last regular trade.
• Healthy growth in core profits, but investment provisions drag.
• Strong CASA and capitalisation to aid share gains.
• Expect pick-up in earnings growth; Valuations reasonable for Buy.

On Wipro

CLSA

• Maintained ‘Sell’ with a price target of Rs 300, implying a potential downside of 3 percent from the last regular trade.
• September quarter review: Sharp margin beat, in-line revenue and soft guidance.
• Digital strong and client mining volatile.
• Consistency on growth and margin missing over the past few years.

Morgan Stanley

• Maintained ‘Underweight’ with a price target of Rs 300, implying a potential downside of 3 percent from the last regular trade.
• September quarter’s performance better than expectations
• Revenue growth was broad based with four verticals growing 4 percent on a sequential basis.
• Net income was hit due to the impact from one time settlement charges.

On Bajaj Auto

Morgan Stanley

• Maintain Equal-weight with a price target of Rs 2,845, implying a potential upside of 15 percent from the last regular trade.
• Strong volumes but margin compression continues.
• Focus on market share led margins to slip.
• Gains from weaker rupee may not translate to better earnings as sector is facing some headwinds.

Deutsche Bank

• Maintained ‘Hold’; cut price target to Rs 2,700 from Rs 3,000, implying a potential upside of 9 percent from the last regular trade.
• September quarter’s operating results came in materially lower than estimates.
• Trading earnings growth for market share.
• Cut EPS estimates by 7-8 percent; Maintain Hold purely due to valuation.

Macquarie

• Maintained ‘Underperform’ with a price target of Rs 2,400, implying a potential downside of 3 percent from the last regular trade.
• Operating profit margin in September quarter fell short of expectation.
• Domestic motorcycle market share improved in September quarter.
• Export growth to continue in the near term.

On InterGlobe Aviation

JPMorgan

• Maintained ‘Neutral’ with a price target of Rs 900.
• Price war drive higher-than-expected loss; Competitive pricing may sustain for couple of quarters.
• Pricing growth may remain elusive until some consolidation takes place.
• See downside risk to earnings estimates; Near term stock may remain under pressure.

Credit Suisse

• Maintained ‘Neutral’; cut price target to Rs 940 from Rs 1,000.
• Results may disappoint market, but are better than expected.
• Remain watchful for continued yield pressure given aggressive capacity addition.
• Cut EPS estimates to factor lower yield, higher crude and weaker rupee.

Edelweiss

• Maintained ‘Buy’; cut price target to Rs 1,073 from Rs 1,153.
• Yield disappoints; Forex and fuel impact compounds pressure.
• Pricing pressure continues to persist, especially in the highly-profitable business segment.
• Robust passenger growth leading to market share gains.

Motilal Oswal

• Maintained ‘Neutral’ with a price target of Rs 785.
• Ebitdar significantly below estimate due to a lower yield, higher fuel cost and higher operating cost.
• Expect IndiGo to continue facing pricing pressure in the next few quarters.
• Cut 2018-19 estimates on dismal operating performance and likely continuance of the same.

SBICAP

• Maintained ‘Buy’ with a price target of Rs 881.
• See limited visibility on pricing improvement despite seasonally strong December quarter.
• Continued high industry supply in near term amidst rising costs to put pressure on profitability.
• Buy only on improvement in industry pricing scenario which appears remote.

On M&M Financial

JPMorgan

• Maintained ‘Underweight’ with a price target of Rs 420.
• September quarter earnings beat estimates driven by loan growth and credit cost reduction.
• Loan growth surprises positively; Asset quality improves on a sequential basis.
• Second half’s outlook may be challenging and put pressure on profit growth.

Macquarie

• Maintained ‘Neutral’; cut price target to Rs 420 from Rs 465.
• September quarter was strong – net profit ahead and GNPLs reduced.
• Management comfortable on liquidity position; 20 percent loan growth guidance maintained.
• Cut EPS estimates by 8-11 percent to factor higher cost of funds.

On Jubilant Foodworks

Macquarie

• Maintained ‘Outperform’ with a price target of Rs 1,600, implying a potential upside of 34 percent from the last regular trade.
• September quarter’s SSSG growth higher than estimate; Remain confident on demand sustainability.
• Cost pressures related to higher competition is significant but manageable.
• Remains top pick in India consumer.

CLSA

• Maintained ‘Buy’; cut price target to Rs 1,600 from Rs 1,900, implying a potential upside of 34 percent from the last regular trade.
• September quarter’s results slightly below; SSSG at above 20 percent stays strong.
• Next few quarters could be less predictable on the back of competition.
• Staff costs rose by competitive pressure and these pressures to weigh on cost.

More Brokerage Calls

CLSA on Bharti Infratel

• Maintained ‘Outperform’ with a price target of Rs 290, implying a potential upside of 10 percent from the last regular trade.
• September quarter results were ahead of estimates.
• Vodafone-Idea drive tenancy exits.
• Cost controls support margins.

Macquarie on Hexaware

• Maintained ‘Outperform’; cut price target to Rs 500 from Rs 560, implying a potential upside of 43 percent from the last regular trade.
• September quarter’s operating performance missed marginally due to one-offs in clients.
• Believe bulk of currency gains will be used to address attrition and improving onsite talent supply.
• Deal pipeline remains strong; Expect closing 2018 deal wins at higher value.

CLSA on Zydus Wellness-Heinz India Deal

• Deal negative for Cadila Healthcare, likely EPS dilution of 3-10 percent.
• Await further clarity on the deal structure.