A vendor pours chai at a market stall in Ahmedabad, Gujarat. (Photographer: Dhiraj Singh/Bloomberg)

All You Need To Know Going Into Trade On Oct. 4

Japanese equities opened higher and futures tipped a modest rise in Hong Kong.

The yen sank to its weakest against the dollar in more than a year after U.S. Treasury yields climbed, with traders assessing American economic strength and prospects for sustained further Federal Reserve tightening.

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 1.1 percent to 10,770 as of 7:30 a.m.

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U.S. Market Check

  • U.S. equities flirt with record high.
  • The yield on 10-year Treasuries climbed about 12 basis points Wednesday, to 3.18 percent. It was at 3.19 percent early Thursday.

Also read: Bill Gross Blames Hedging Costs as U.S. Treasury Rout Deepens

Europe Market Check

  • Equities in Europe rose the most in two weeks on the sign of Italy concession.
All You Need To Know Going Into Trade On Oct. 4

Also read: Dancing Theresa May Wins Herself Brief Relief From Brexit Splits

Asian Cues

  • Japan’s Topix Index rose 0.8 percent.
  • Futures on Hong Kong’s Hang Seng added 0.1 percent.
  • Australia’s S&P/ASX 200 Index gained 0.1 percent.

Also read: JPMorgan Cuts China Stocks on Risks of Full-Blown Trade War

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

  • American factory orders for August are due Thursday; data on the trade balance will come Friday.
  • The U.S. government’s September jobs report is also due on Friday.
  • The Reserve Bank of India’s policy decision is due Friday.

Indian ADRs

All You Need To Know Going Into Trade On Oct. 4

Stocks To Watch

  • Shriram Transport Finance intimated that corporate guarantee worth Rs 650 crore (in NCDs) had been terminated. They were issued by SVL Ltd. Consequently, the contingent liability of the company with respect to redemption/maturity of the said NCDs stands terminated.
  • Reliance Communications was granted relief by telecom tribunal, after it stayed the demand of bank guarantee of Rs 2,900 crore by Department of Telecommunications. The company said it will receive Rs 975 crore from the sale of spectrum, and the proceeds thereof will be used to pay Rs 550 crore to Ericsson and Rs 230 crore to RITL minority investors.
  • HDFC Q2: Income from dividend at Rs 6 crore versus Rs 537 crore on a year-on-year basis (the base quarter earned Rs 433 crore from HDFC Bank). The company assigned loans amounting to Rs 6,059 crore versus Rs 3,531 crore for the second quarter. During the quarter, all loans were sold to HDFC Bank pursuant to the buyback option embedded in the home loan arrangement between the company and HDFC Bank.
  • Larsen & Toubro’s board members gave nod for the buyback of equity shares. The company will buyback around 6.1 crore shares, representing 4.35 percent of the paid-up equity capital at a price of Rs 1,475 each, aggregating to a total consideration not exceeding Rs 9,000 crore. Oct. 15 has been set as the record date for the buyback.
  • Federal Bank was fined Rs 5 crore by the RBI for non-compliance with certain norms. The central bank found that non-compliance was there in reporting of data CRILC (risk- based supervision), payment of compensation in ATM-related issues and KYC norms.
  • IL&FS Transportation Networks defaulted in the payment of interest worth Rs 20.8 crore due on three non-convertible debentures due to insufficient funds. Former chief secretary of Rajasthan CS Rajan inducted in IL&FS board. (Bloomberg)
  • Aditya Birla Capital arm received a seven-year long-term loan worth Rs 7,000 crore from the World Bank group member International Finance Corporation.
  • Amara Raja Batteries signed a technology collaboration agreement with Johnson Controls. The companies will share and improve product design and manufacturing technologies for batteries. As part of this collaboration, the battery maker will license Johnson Controls’ proprietary PowerFrame grid technology.
  • TVS Motor invested additional Rs 30 crore in its subsidiary company TVS Credit Services. The holding of the company will increase to 7.09 percent in its arm. The company also stated that its model TVS Apache RTR 160 4V crossed the 1 lakh sales mark within six months of its launch.
  • GATI clarified on reports of sale of Kintetsu joint venture stake for Rs 2,000 crore and said that the deal had not been finalised and the management was still evaluating options.
  • Reliance Industries and Hathway Cable clarified that both companies were looking at various options to grow their business and they did not want to comment on any market speculations and rumours regarding the news that Reliance was in talks to buy Hathway Cable.
  • VST Tillers Tractors’ September sales of power tillers were down by 38 percent at 1,152 units versus 1,855 units on a year-to-year basis. Tractor sales were down 40 percent at 801 units versus 1,341 units for the same period.
  • NLC India board announced it will consider buyback on Oct. 9.
  • Just Dial set Oct.12 as the record date for the buyback.
  • L&T Finance Holdings to decide on issue of preference shares worth Rs 250 crore on Oct. 8.
  • Bharti Airtel’s subsidiary Bharti Airtel International (Netherlands) B.V. has offered to repay outstanding EURO notes worth €1 billion which were due in Dec. 2018.
  • IOCL, BPCL and HPCL in focus as RBI allows OMCs to raise ECB for working capital purposes with minimum average maturity period of three to five years. Overall ceiling for ECBs under the facility will be $10 billion. Individual limit of $750 million and hedging policy waived for this facility.
  • ONGC awarded contract worth $1.69 billion to Baker Hughes, McDermott International and L&T’s unit – L&T Hydrocarbon. ONGC expects start of first gas production by Dec. 2019, first oil by March 2021 and overall project completion by August 2021, according to Bloomberg report.
  • Moody’s downgraded GMR Infra- run Hyderabad International airport.

Also read: Cyberattack On Indian Operations Of State Bank Of Mauritius 

Data To Watch

  • 10:30am: Nikkei India Services PMI for September, prior 51.5.
  • 10:30am: Nikkei India Composite PMI for September, prior 51.9.

Bulk Deals

  • Ahlada Engineers: Resonance Opportunities Fund sold 1.28 lakh shares at Rs 135 apiece. (Note: This stock is listed on NSE Emerge)

Also read: Cabinet Hikes Wheat MSP By 6 Percent

Offerings

  • Dinesh Engineers IPO withdrawn due to turbulent market conditions.

Who’s Meeting Whom

  • Thyrocare Technologies to meet Sundaram Mutual Fund on Oct. 5.
  • Lumax Auto Technologies to meet investors on Oct. 4.
  • Finolex Industries to meet Capital World on Oct. 4.

Insider Trades

  • Apollo Tyres promoter Classic Auto Tubes acquired 2.5 lakh shares on Sept. 28.
  • Shakti Pumps promoter group acquired 20,000 shares on Oct. 1.
  • Welspun Enterprises promoters acquired 4 lakh shares from Sept. 28-Oct. 1.
  • Lemon Tree Hotels promoter acquired 1.25 lakh shares from Sept. 28-Oct. 1.

(As reported on Oct. 3)

Trading Tweaks

  • IL&FS Investment Managers Ltd price band revised to 5 percent.
  • Hindusthan National Glass & Industries Ltd price band revised to 5 percent.
  • JMC Projects ex-date for stock split to Rs 2 from Rs 10 per share.

Money Market Update

  • Rupee closed at an all-time low as oil advances. The home unit ended 0.6 percent lower at 73.34 against the U.S. dollar.
  • Sovereign bonds fall the most in three weeks as the 10-year benchmark bond yield rose 12 basis points to 8.11 percent.

Also read: Rupee Closes Below 73/$ Mark For The First Time

F&O Cues

  • Nifty October futures closed trading at 10,893 with a premium of 35 points.
  • Nifty October open interest up 4.8 percent; Nifty Bank October open interest up 2 percent.
  • Max open interest for October series at 11,200 strike value call option (open interest at 28.3 lakh shares).
  • Max open interest for October series at 10,500 strike value put option (open interest at 37.6 lakh shares).

Put-Call Ratio

  • Nifty PCR at 1.36 versus 1.41.
  • Nifty Bank PCR at 0.75 versus 1.08.

Fund Flows

All You Need To Know Going Into Trade On Oct. 4

Brokerage Radar

Brokerages On Shriram Transport

UBS

  • Maintained ‘Buy’ with a price target of Rs 1,550, implying a potential upside of 44 percent from the last regular trade.
  • Termination of SVL guarantee key positive.
  • Recent liquidity crisis to hurt growth in the third quarter but long-term impact limited.
  • Preferred pick among NBFCs; Expect re-rating driven by strong EPS growth.

Credit Suisse

  • Maintained ‘Neutral’ with a price target of Rs 1,250, implying a potential upside of 16 percent from the last regular trade.
  • Termination of corporate guarantee takes away significant overhang on the stock.
  • Remain watchful of corporate actions at the group level.
  • Fares reasonably well on our ALM framework and should command reasonable pricing power.

More Brokerage Calls

Goldman Sachs on Adani Ports

  • Maintained ‘Buy’; cut price target to Rs 414 from Rs 455, implying a potential upside of 26 percent from the last regular trade.
  • Concerns: weaker rupee, potential slowdown in cargo due to trade wars and rising bond yields in India.
  • Impact of the rupee depreciation significant on P&L, but no significant impact on cash flow.
  • Expect second quarter to see Rs 400 crore of foreign exchange losses.

Edelweiss on SAIL

  • Upgraded to ‘Buy’ from ‘Reduce’; hiked price target to Rs 87 from Rs 70, implying a potential upside of 27 percent from the last regular trade.
  • Completion of modernisation and expansion plan aids profitability.
  • Cost concerns receding and under control.
  • SAIL is turnaround story with FY18–20 Ebitda CAGR of 35 percent.

Deutsche Bank on Indian Metals

  • Depreciating rupee supports Indian Steel producers' margins.
  • Weaker rupee allowed Steel producers to take price hikes.
  • Major HRC steel producers increased prices by 2-3 percent for October 2018.
  • JSW Steel is preferred pick in the sector.

Nomura on Alunorte Shutdown

  • Reduced demand from Alunorte a key contributing factor in recent caustic softness.
  • Shutdown further reduces U.S. export demand, likely pressuring domestic pricing.
  • Shutdown implies downside risk to current caustic price forecast.

Deutsche Bank on City Gas Companies

  • City Gas companies pass on increase in input gas price hike.
  • Expect recent price hikes to be margin accretive for IGL and Gujarat Gas.
  • IGL and Gujarat Gas trading at attractive valuations.