Financial traders monitor data on computer screens. (Photographer: Jasper Juinen/Bloomberg)

All You Need To Know Going Into Trade On Oct. 5

Asian stocks rounded out a tough week with further declines after U.S. equities fell to a three-week low amid the surge in bond yields.

Shares in Japan and Australia declined and futures indicated losses when trading begins in Hong Kong. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.6 percent to 10,540 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 fell the most since June and volatility spiked higher as the rout in Treasuries that took yields to multiyear highs fueled a repricing of risk assets.
  • The yield on 10-year Treasuries held at 3.19 percent. The two-year rate was flat at 2.87 percent and the 30-year yield stayed at 3.35 percent.

Also read: Elon Musk Mocks SEC, Calls for Short-Selling to Be Made Illegal

Europe Market Check

  • European shares dropped the most in a month as the luxury sector declined and a selloff in bonds spurred concerns over rising borrowing costs.
All You Need To Know Going Into Trade On Oct. 5

Also read: Italy Hangs Its Budget Plan on an Unrealistic View of Economy

Asian Cues

  • Japan’s Topix index fell 0.6 percent.
  • Australia’s S&P/ASX 200 Index lost 0.1 percent.
  • Futures on Hong Kong’s Hang Seng Index declined 1 percent.
  • The MSCI Asia Pacific Index fell 0.3 percent, taking this week’s decline above 3 percent.

Also read: Hong Kong's Economy Gets Stuck Between U.S.-China Trade War

Commodity Cues

  • West Texas Intermediate crude fell 2.3 percent to $74.63 a barrel. It’s up 1.9 percent this week.
  • Brent crude traded 0.5 percent higher at $85.02 a barrel.
  • Gold was steady at $1,199.81 an ounce.

RBI Decision-Day Guide

Policy makers are expected to raise the key repurchase rate by 25 basis points to a two-and-a-half-year high of 6.75 percent, according to 40 of 49 economists in a Bloomberg survey, with the rest expecting no change.

An altered stance would be a clear signal that the RBI will continue raising rates in the coming months.

Read these to get up to speed:

  • Four charts that explain the complex decision facing the MPC.
  • Should the inflation-targeting MPC attempt to tackle issues beyond its mandate? Or should it leave that to the RBI? (Click here to read)
  • The case to hike rates purely to defend the currency is not very strong, writes Nomura’s Sonal Varma here.

Meanwhile, equity investors in India have been increasing the amount of cash they’re holding ahead of the central bank’s interest-rate decision later today.

Indian ADRs

All You Need To Know Going Into Trade On Oct. 5

Stocks To Watch

  • Titan Q1: Growth in jewellery business has picked up and gain in market share on the back of new collection launches and extended diamond studded activation, the company said. On a year to date basis the company has added 35,000 square feet of retail space. Strong growth momentum in the watch segment continue. The eye wear segment has shown a muted growth this quarter.
  • Cadilla Healthcare’s biologics managing facility at Ahmedabad received an establishment inspection report from the U.S. FDA. The audit was completed with zero form 483 observations.
  • Lupin launched generic potassium chloride oral solutions, after the company received an approval from the U.S.FDA earlier.
  • Dixon Technologies commenced manufacturing of Mi LED TVs for Xiaomi. The manufacturing will take place in Andhra Pradesh facility of the company.
  • Dilip Buildcon received a letter of acceptance for an EPC project for a dam in Rajasthan for Rs 601 crore. The order was given by the Water Resource Department of Kota.
  • TVS Motor Company launched TVS Jupiter Grande scooter for the festive season.
  • Jai Prakash Power said ICICI Bank has filed an application initiating corporate insolvency process against the company.
  • Jet Airways: ICRA downgraded long term rating to ‘B’ from ‘BB’. The rating downgrade has primarily been attributed to the impact of steep increase in jet fuel prices and rupee depreciation as well as the delays in implementation of liquidity initiatives by the company.
  • United Spirits Chairman MK Sharma said in the company’s annual general meeting that the company needs to resolve some legacy issues and will reduce financial leverage by selling interest bearing debt by disposal of non-core or surplus assets.
  • LIC made an open offer for 26 percent stake in IDBI Bank at Rs 61.73 per share.
  • Jet Airways gets Rs 258 Crore from JetPrivilege for advance ticket sale, according to a PTI report.

Also read: IL&FS Has 348 Entities, More Complex Than Expected, Says Board

Earnings To Watch

  • Goa Carbon

Bulk Deals

Navkar Corporation

  • Reliance Mutual Fund acquired 35 lakh shares, or 2.33 percent equity at Rs 78 each.
  • Goldman Sachs India Fund sold 39.8 lakh shares, or 2.64 percent equity at Rs 78 each.

Who’s Meeting Whom

  • Finolex Industries to meet Peerless Securities on Oct. 5.
  • Mahanagar Gas to meet Maquarie Capital Securities and Jupiter Asset Management on Oct. 5.

Insider Trades

  • Grasim Industries promoter group acquired 12 lakh shares on Sept. 28.
  • Hindalco Industries promoter group acquired 6.7 lakh shares on Sept. 28.
  • Greaves Cotton promoter DHB International Pvt acquired 1.07 lakh shares on Oct. 1.
  • Deepak Fertilizers & Petrochemicals Corporation promoter group acquired 10,000 shares on Oct. 1.
  • IRB InvIT Fund promoter and director Deepali Mhaiskar acquired 2 lakh shares on Oct. 1.

(As reported on Oct. 4)

Trading Tweaks

  • IL&FS Transportation Networks Ltd price band revised to 10 percent.
  • IL&FS Engineering and Construction Company Ltd price band revised to 10 percent.
  • 5paisa Capital Ltd price band revised to 5 percent.

Money Market Update

  • The rupee closed at an all time low on Thursday at 73.58 per dollar against Wednesday’s closing of 73.34 per dollar.

Also read: UTI Asset Looks Beyond Rupee Slump as India's Poll Season Nears

F&O Cues

  • Nifty October futures closed trading at 10,631, premium of 32 points.
  • Nifty October open interest up 10.2 percent; Nifty Bank October open interest down 13.5 percent.
  • Max open interest for October series at 11,000 strike value call option (open interest at 38.8 lakh shares).
  • Max open interest for October series at 10,500 strike value put option (open interest at 44.4 lakh shares).

Put-Call Ratio

  • Nifty PCR at 1.21 versus 1.36.
  • Nifty Bank PCR at 0.82 versus 0.75.
All You Need To Know Going Into Trade On Oct. 5

Brokerage Radar

Brokerages On ICICI Bank

UBS

  • Maintained ‘Buy’; raised price target to Rs 440 from Rs 410.
  • Kochhar’s exit is positive for the bank as stakeholders will focus on core banking business.
  • Loan book clean-up should contribute to improvement in earnings.
  • Core banking business and retail franchise key to our Buy thesis.

Macquarie

  • Maintained ‘Outperform’ with a price target of Rs 416.
  • Chanda Kochhar resignation removes a major overhang.
  • Don’t expect any challenges by RBI on Sandeep Bakshi’s appointment as CEO.
  • RoE to improve due to falling credit costs; Expect the stock to rerate.

Brokerages On Oil Marketing Companies

JPMorgan

  • Today’s policy step makes the entire Indian energy space un-investable in the near term
  • Subsidies effectively return for OMCs
  • Earnings impact is manageable for IOCL and BPCL; much larger for HPCL
  • Positives: private sector market share effectively capped, oil price point much higher than expected

CLSA

  • Government's move will bring down the EPS by 23-46 percent.
  • Raise fears of return of subsidy regime if crude spikes further in upcoming elections.
  • ONGC and Gail may also be impacted but these already build-in risk.
  • IOCL: Maintained ‘Sell’; cut price target to Rs 105 from Rs 155.
  • BPCL: Maintained ‘Sell’; cut price target to Rs 240 from Rs 390.
  • HPCL: Maintained ‘Sell’; cut price target to Rs 150 from Rs 270.

Motilal Oswal

  • Marks U-turn from deregulation and raises possibility of return to subsidy regime.
  • Changed scenario warrants different valuation method; value OMCs on price-to-book.
  • Cut in marketing margins would result in 24-28 percent cut in EPS.
  • IOCL: Maintained ‘Buy’; cut price target to Rs 164 from Rs 254.
  • BPCL: Maintained ‘Buy’; cut price target to Rs 393 from Rs 535.
  • HPCL: Downgraded to ‘Neutral’ from ‘Buy’; cut price target to Rs 203 from Rs 428.

Goldman Sachs

  • HPCL has the highest exposure to fuel retailing followed by BPCL and IOCL.
  • Move confirms reversal of de-regulation of fuel retail market.
  • Lower EV/EBITDA multiple to four times - low end of OMCs trading range in last 10-years.
  • IOCL: Maintained ‘Neutral’; cut price target to Rs 125 from Rs 185.
  • BPCL: Downgraded to ‘Sell’ from ‘Buy’; cut price target to Rs 260 from Rs 470.
  • HPCL: Downgraded to ‘Sell’ from ‘Buy’; cut price target to Rs 170 from Rs 345.

More Brokerages

UBS on Delta Corp

  • Initiated ‘Buy’ with a price target of Rs 310.
  • New casino policy should unlock the sector's potential.
  • Positives: rising popularity of Goa and casinos, increasing traffic for poker site.
  • Positives: less chances of issuance of new casino licenses, high option value of Daman license and increasing traction for the Sikkim casino.
  • Market may not pricing in Delta's growth sustainability.

HSBC on Titan

  • Maintained ‘Buy’ with a price target of Rs 1,050.
  • June quarter’s statement paints an outlook of a strong operating performance.
  • Should assuage market concern on whether 2018-19 guidance is achievable.
  • Stock has corrected in market sell-off; Strong earnings momentum will be key catalyst.