All You Need To Know Going Into Trade On Oct. 8

Asian stocks declined at the start of the week and the yuan slipped as investors assessed the latest move by the People’s Bank of China to loosen monetary policy.

Futures in Hong Kong indicated declines when trading starts, while stocks in Australia and South Korea fell. Japan is shut for a holiday, and Columbus Day in the U.S. means no Treasuries trade on Monday. Shares in China will be under pressure as traders return from a week-long holiday.

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.1 percent to 10,288.50 as of 7:10 a.m.

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BQ Live

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

U.S. Market Check

• U.S. stocks capped the worst week in a month, as the selloff in Treasuries that took yields to seven-year highs persisted amid speculation the latest jobs report clears the path for raising interest rates.
• Technology shares led losses on Friday, sending the Nasdaq 100 Index to a weekly drop of 3 percent amid concerns that the U.S.-China trade spat will intensify.

Europe Market Check

• European equities ended lower on Friday, capping their biggest weekly decline in four weeks, as concerns about rising U.S. Treasury yields added to Italy and Brexit woes.

Asian Cues

• Futures on Hong Kong’s Hang Seng fell 0.6 percent.
• Australia’s S&P/ASX 200 Index declined 0.8 percent.
• South Korea’s Kospi index lost 0.1 percent.
• The MSCI Asia Pacific Index fell 0.2 percent. It sank 3.4 percent last week and trades near the lowest in a year.

Commodity Cues

• West Texas Intermediate crude fell 0.5 percent to $73.97 a barrel.
• Brent crude traded 1.13 percent lower at $83.21 per barrel.
• Gold futures were flat at $1,203.69 an ounce.

Indian ADRs

Stocks To Watch

• Yes Bank finalised “search and selection committee” to find a new CEO. The board inducted TS Vijayan, former chairman of IRDAI and LIC, and OP Bhatt, former CMD of State Bank of India, as external experts in the committee. The internal members include Brahm Dutt, Mukesh Sabarwal and Subhas Chander Kalia. The bank has invited proposals from global leadership advisory firms specialising in banking, financial services and insurance. The first meeting of the committee will be on Oct. 11.
• Sobha Ltd. (quarterly update): The company is poised to launch one affordable housing project each in north Bengaluru and GIFT city in the second half of the financial year. Total sales up 9.7 percent year-on-year to Rs 740.8 crore.
• IDBI Bank announced Rakesh Sharma as managing director and chief executive officer for six months. He was formerly the MD and CEO of Canara Bank.
• Himachal Futuristic Communications received advanced purchase order of Rs 879 crore from TCIL. This includes operations and maintenance services of optical fibre cables and GPON equipment in Madhya Pradesh under the government’s BharatNet Phase II programme, being implemented by BSNL.
• Texmaco Rail and Engineering signed an MoU with international division of Russian Railways ‘RZD International LLC’ for working in collaboration for various domestic and international projects in the railways and infrastructure space.
• PNB Housing Finance raised first ECB of $200 million (Rs 1470 crore) under Automatic Route of RBI.
• Gravita India’s Rs 300 crore order with Singapore based Kyen Resources is cancelled due to some management and financial issues at the end of Kyen Resources. Management is of the view that termination of above contract will not have any material impact on the financials.
• Gati’s long- and short-term bank facilities and deposits worth Rs 228 crore downgraded by CARE ratings on account of revenue decline and additional debt taken.
• CARE Ratings downgraded long-term and short-term ratings of Reliance Power’s unit Sasan Power to 'CARE BBB+ (Stable Outlook)' and 'CARE A2' respectively, attributing to steep depreciation in rupee against the dollar, which would expose Sasan to higher interest outgo on the unhedge.
• GMR Infra’s board approved allotment of optionally convertible debentures worth Rs 402 crore to Doosan Power Systems India Pvt. Ltd.
• Sagar Cements’ production rose 43 percent to 2,18,519 MT, while sales rose 41 percent to 2,12,048 MT.
• Goa Carbon’s production fell 9 percent to 16271.7 MT, while sales down 36 percent to 14454.7 MT.

Earnings To Watch

• Tata Elxsi

Trading Tweaks

• A2Z Infra Engineering Ltd placed under ASM framework.

New Listing

• Housing finance company Aavas Financiers, which raised Rs 1,734 crore through an initial public offering recently, will list its shares on the exchanges today. The IPO, which opened from Sept. 25-27, was subscribed 97 percent at a price band of Rs 818 to Rs 821 per share.

Who’s Meeting Whom

• Shriram Transport Finance to meet Wellington Management on Oct. 11.

Insider Trades

• JSW Steel promoter acquired 13 lakh shares from Oct. 1-3.
• Apollo Tyres promoter group PTL Enterprises Ltd. acquired 4.75 lakh shares on Oct. 1.
• Greaves Cotton promoters acquired 2 lakh shares on Oct. 4.
• Bodal Chemicals promoters acquired 3.65 lakh shares on Oct. 3.
• Shakti Pumps promoter group acquired 14,600 shares from Oct. 3-4.
• Cox & Kings promoter acquired 50,000 shares on Oct. 4.
• IRB InvIT Fund promoter and director Deepali Mhaiskar acquired 1.3 lakh shares on Oct. 3.

(As reported on Oct. 5)

Money Market Update

• Rupee ended at an all-time closing low of 73.77 against dollar compared with Thursday’s close of 73.58.

F&O Cues

• Nifty October Futures ended at 10,347, with a premium of 31 points.
• Nifty October open interest up 8.5 percent; Nifty Bank October open interest down 8 percent.
• Maximum open interest for October series call at 10,800 strike price call option contract. Open interest at 28.7 lakh shares.
• Maximum open interest for October series put at 10,500 strike price put option contract. Open interest at 36.1 lakh shares.

Put-Call Ratio

• Nifty PCR at 1.07 versus 1.21
• Nifty Bank PCR at 0.71 versus 0.82

Brokerage Radar

JPMorgan on Hindustan Zinc

• Initiated ‘Neutral’ with a price target of Rs 290, implying a potential upside of 3 percent from the last regular trade.
• Best-in-class mining company, but zinc markets entering surplus.
• Expect largely balanced market in 2019, and a surplus market in 2020.
• Strong cash-rich balance sheet; Expect elevated dividend payout.
• Prefer parent Vedanta at current valuations.

Maybank on Hexaware Tech

• Upgraded to ‘Buy’ from ‘Hold’; raised price target to Rs 470 from Rs 440, implying a potential upside of 15 percent from the last regular trade.
• Believe fundamentals are improving led by the rupee depreciation and stronger U.S. economy.
• Catalysts: potential large contract wins and accelerating revenue and EPS growth.
• Expect third quarter to be another strong quarter.

CLSA on Maruti

• Maintained ‘Buy’; cut price target to Rs 9,200 from Rs 11,300, implying a potential upside of 34 percent from the last regular trade.
• Some demand headwinds but sanguine on Maruti’s volume.
• Weaker rupee poses a headwind for its margin.
• Believe sharp correction provides an entry point.

JPMorgan on Vedanta

• Maintained ‘Overweight’; cut price target to Rs 345 from Rs 400, implying a potential upside of 49 percent from the last regular trade.
• Cut EPS estimates by 19-20 percent for FY19-20 driven by lower zinc business.
• Macro is unhelpful, but progress on projects should be a positive catalyst.
• Given growth prospects, diversified earnings and attractive valuations, share price should rebound.

UBS on Power Financing NBFCs

• Rural Electrification Corp.: Maintained ‘Buy’; cut price target to Rs 145 from Rs 190, implying a potential upside of 44 percent from the last regular trade.
• Power Finance Corp.: Maintained ‘Buy’; cut price target to Rs 115 from Rs 150, implying a potential upside of 52 percent from the last regular trade.
• Expect net interest margins to decline by 50 basis points in the current financial year.
• Rising cost of funds and a lag in increasing lending rates to impact NIMs.
• Loan growth to remain subdued; RoEs to remain in 12-14 percent range.
• Risk-reward favourable given low asset quality risks and high dividend yields.

CIMB on Chemicals

• Seeds posing increasing competition to agrochemicals.
• RM cost pressure and new product launches by innovators negative for generic agrochemical makers.
• Business model of Indian agchem distribution companies is at risk.
• SRF and Navin fluorine are doing well because of refrigerants.
• Maintain Neutral on sector, PI and UPL remain top Reduce.

Brokerages On RBI Policy

Morgan Stanley

• RBI Policy Review: Surprise Pause but Hikes to Continue.
• RBI's decision could partly be in response to manage the liquidity situation.
• View this as only a delay of impending monetary tightening, since the external environment remains challenging.
• Attracting marginal capital flow will require an increase in real rates in an environment where India runs a current account deficit of meaningful size.
• Maintain view of another 25-50 basis point of rate hikes in the current financial year.

Credit Suisse

• Remain more pessimistic about India’s inflation outlook.
• Continue to expect further policy rate hikes in the coming quarters, although December may still be too early.
• A continued rise in oil prices might pull hikes forward to December.
• In contrast, if the recent liquidity stress in the NBFC sector accelerates the slowing in credit growth, it might argue against further hikes.

Goldman Sachs

• Policy decision and the change in stance in line with expectations.
• See 100 basis points hike by RBI in 2019.

JPMorgan

• Continue to believe that inflation in the first half of 2019 will average 5 percent or above.
• Higher inflation will necessitate more monetary tightening.
• Still pencil in 50 basis points of tightening across the December and February reviews.