Stocks To Watch: Axis Bank, Dr. Reddy’s, Essel Propack, ICICI Bank, L&T, Wipro
An employee uses binoculars to look out towards the Arabian Sea in the Port Control Center at Saudi Aramco’s Ras Tanura oil refinery and terminal in Ras Tanura, Saudi Arabia. (Photographer: Simon Dawson/Bloomberg)  

Stocks To Watch: Axis Bank, Dr. Reddy’s, Essel Propack, ICICI Bank, L&T, Wipro

Asian stocks stabilised in early trading Tuesday after a technology rout sank Nasdaq shares overnight.

Equities fluctuated at the open in Japan, Australia and South Korea. Futures on the S&P 500 Index were flat. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.3 percent to 12,077.50 as of 6:45 a.m.

Short on time? Well, then listen to this podcast for a quick summary of All You Need To Know before the opening bell podcast.

Stocks To Watch

  • CESC Ventures: acquired 64.6 percent stake in Herbolab India Private Limited for Rs 32.2 crore. The company is involved in manufacturing of Ayurveda medicines and products.
  • L&T Technology Services’ promoter Larsen & Toubro plans to sell 3.88 percent stake in the company. The promoter will sell up to 40.34 lakh shares at a floor price of Rs 1,650 a piece—a discount of about 4 percent to current market price—through an offer-for-sale, according to an exchange filing.
  • Wipro set June 21 as record date for share buyback.
  • Dr. Reddys Laboratories to re-launch Zenatane capsules in the U.S. market.
  • GE Power India awarded contract worth Rs 738.3 crore by NTPC JV for engineering work on a full turnkey basis.
  • Mahindra’s arm entered into a partnership with Japan based Mitsui to jointly develop and operate distributed solar power generation projects in India. The unit will continue to hold 51 percent stake in the joint venture.
  • Competition Commission of India approved acquisition of up to 75 percent of shareholding in Essel Propack by Epilson Bidco. (Twitter)
  • Welspun Enterprises’s HAM project in Maharashtra received appointed date for the project as May 26 from Public Works Department. The project has achieved financial closure.
  • Lemon Tree Hotels said that it has taken a Chandigarh property of 102 rooms from its arm on a lease basis.
  • Saregama India lauched Carvaan Mini in Bengali.
  • ICICI Bank’s long-term issuer default rating downgraded by Fitch to ‘BB+’ (Junk) from ‘BBB-’. Senior unsecured debt rating rated by Fitch to ‘BB+’. Outlook remains stable.
  • Axis Bank’s long-term issuer default rating downgraded by Fitch to BB+ from BBB-. Senior Unsecured Debt Rating was downgraded by Fitch to BB+ from BBB-. Outlook to stable from negative.

Also read: A $13 Billion Fund Makes Contrarian Bet on India Consumer Stocks

Bulk Deals

Mahindra & Mahindra

  • Caisse De Depot Et Placement Du Quebec acquired 2.2 crore shares or 1.86 percent equity at Rs 648 each.
  • Promoter MM Benefit Trust sold 1.92 crore shares or 1.63 percent equity at Rs 648 each.

Bharat Financial Inclusion

  • Goldman Sachs Singapore acquired 8.32 lakh shares or 0.59 percent equity at Rs 1,004 each.
  • Europacific Growth Fund sold 8.32 lakh shares or 0.59 percent equity at Rs 1,004 each.

Swaraj Engines

  • Mahindra & Mahindra acquired 1.77 lakh shares or 1.46 percent equity at Rs 1,387 each.
  • Jupiter India Fund sold 1.77 lakh shares or 1.46 percent equity at Rs 1,387 each.

Allsec Technologies

  • Conneqt Business Solutions acquired 53.9 lakh shares or 35 percent equity at Rs 319 each.
  • Promoter Adiseshan Saravanan sold 27.31 lakh shares or 17.9 percent equity at Rs 319 each.
  • Promoter Ramamoorthy Jagadish sold 26.56 lakh shares or 17.4 percent equity at Rs 319 each.

Pledge Share Details

  • Adani Enterprises promoter group Gautam Adani revoked pledge of 41.62 lakh shares on May 31.
  • Sun Pharma promoter group Shanghvi Finance revoked pledge of 41 lakh shares on May 30.
  • Adani Ports & SEZ promoter group Gautam Adani revoked pledge of 40.21 lakh shares on May 30.
  • Max Financial Services promoter group Max Ventures Investment Holdings created pledge of 5 lakh shares on May 30.
  • Sical Logistics promoters created pledge of 17.2 lakh shares and revoked pledge of 6 lakh shares from May 8-30.
  • Atul promoter Aagam Holdings revoked pledge of 1.5 lakh shares on May 30.
  • Future Lifestyle Fashions promoter Ryka Commercial Ventures revoked pledge on 25 lakh shares on May 31.
  • Chambal Fertilisers & Chemicals promoter groups created pledge of 8.4 lakh shares on May 30.
  • AU Small Finance Bank promoter Chiranjilal Agarwal created pledge of 25.5 lakh shares from May 10-13.

Trading Tweaks

  • Kridhan Infra, Symphony to move into short term ASM Framework.

Who’s Meeting Whom

  • TCI Express to meet HSBC, Allard Partners and other investors from June 5-6.
  • Gujarat Pipavav Ports to meet Utilico Emerging Markets and Motilal Oswal Financial Services on June 4.
  • Torrent Power to meet Abu Dhabi Investment Authority and Utilico Emerging Markets from June 5-12.
  • Shriram City Union Finance to meet Ward Ferry Management on June 5.
  • All Cargo Logistics to meet ICICI Securities on June 4.

Money Market Update

  • Indian rupee on Monday strengthened for the second straight session to close at 69.26/$ versus Friday’s 69.69/$.

F&O Cues

June Futures

  • Nifty futures closed at 12,104, premium of 16 points
  • Nifty Futures open interest up 9 percent, adds 15.9 lakh shares
  • Bank Nifty futures closed at 31,679.9, premium of 26 points
  • Bank Nifty futures open interest up 9 percent, adds 1,6 lakh shares in open interest

Options

  • Nifty PCR at 1.75 Vs 1.3 (across all series)

Nifty Weekly Expiry June 6

  • Max open interest call side at 12,100 (14.8 lakh shares)
  • Max open interest on put side at 12,000 (25.9 lakh shares), 11,900 (25 lakh shares)
  • open interest addition seen at 12,000P (+21 lakh shares), 11,900 P (+13.4 lakh shares)
  • open interest shedding seen at 12,000C (-12.9 lakh shares)

Nifty Monthly Expiry June 27

  • Max open interest on call side at 12,500 (18 lakh shares)
  • Max open interest on put side at 11,500 (26 lakh shares)

Brokerage Radar

On Indian Autos

Nomura

  • May-19 volumes: PVs surprise positively, while other segments disappoint.
  • Measures to address liquidity and recent fall in oil prices can lead to demand recovery in the second half of the current financial year.
  • Recovery likely to be slower than expectation.
  • Most companies are likely to see further consensus estimate cuts.

UBS

  • Demand softness continues; Two wheelers demand sluggish.
  • Passenger vehicles and Tractors volumes slump.
  • Trucks remain weak but Ashok Leyland volumes relatively better.

Also read: Auto Sales Tumble Again But Stocks Jump On Optimism

More Calls

HSBC on Maruti Suzuki

  • Maintained ‘Hold’ with a price target of Rs 7,200.
  • Some green shoots but a long, tough ride ahead.
  • Maruti retail traction remains weak as well.
  • On a positive note, enquiries picked up post-election; quality and sustenance of these is critical.

UBS on Indian Consumer Sector

  • Key Highlights From Q4FY19:
  • Volume growth was 6.4 percent, a sharp slowdown from 9.9 percent growth in 9MFY19
  • Growth differential between rural and urban significantly narrowed in the fourth quarter.
  • Gross margin trends and commentary were different across sub-segments.
  • Discretionary companies grew at an average rate 2.2 times that of staples in 2018-19.
  • This indicates robust urban demand despite the uncertain rural outlook.
  • Our top picks in the sector: ITC, Asian Paints, Godrej, Titan and Britannia.

JMFinancial on AMC

  • Price hikes across liquid schemes should mitigate TER-cut pain.
  • Four of top five AMCs take price hikes in liquid MF schemes.
  • Banning of upfront commissions will continue to aid profitability in the transition period.
  • Larger AMCs will be able to maintain their profitability in the current financial year.

Citi on IndusInd Bank

  • Maintained ‘Buy’ with a price target of Rs 1,980.
  • Expects growth in CV financing segment to remain healthy.
  • Reiterated that entire 1.9 percent exposure to stressed groups is part of below investment grade.
  • Expects the merger to get formal NCLT approval in few weeks and will deliver synergies from day one.

Citi on HDFC Bank

  • Maintained ‘Buy’ with a price target of Rs 2,800.
  • HDBK is looking to step-up its branch presence from the current network of 5,103 branches.
  • Management depth remains strong.

Citi on Ambuja Cements

  • Maintained ‘Buy’ with a price target of Rs 285.
  • Pace of capacity additions has slowed down since 2005-11 and should decline further.
  • Mgmt. expects industry demand should grow 7-8 percent in 2019-20.
  • Pricing to be resilient in the North, Centre and West.
  • Management is evaluating solar power and participation in captive power projects to save cost.

Citi on Havells India

  • Maintained ‘Buy’ with a price target of Rs 850.
  • For room ACs, summers have been good and Havells has put through a price hike.
  • Next focus area is launching refrigerators; expect definite announcements over next 6-9 months.
  • Started working on expanding its distribution network to tier-3/ tier-4 towns.

Citi on Balkrishna Industries

  • Balkrishna growth to outperform industry growth.
  • FY20 volume growth guidance for Balkrishna is 3-5 percent versus negative 15-20 percent for the tyre industry.
  • Margins to remain in 25-28 percent range; currently, margins are at lower end of this range.
  • Balkrishna could be carbon black surplus with both phases of the carbon black plants operational.

Citi on Varroc Engineering

  • Despite slowdown in auto industry, mgmt. noted that there are no pricing pressures.
  • Volume growth in 2019-20 expected to be in range of 7-10 percent, Ebitda Margin to be in double-digits.
  • Varroc should benefit from BS-VI transition with increase in demand.
  • FY20 revenues from BS-VI related components expected to be Rs 550 crore versus Rs 100 crore.

CLSA on FY19 GST Collection

  • Weak end to FY19 fiscal builds FY20 worries.
  • GST collections weaken, cess issues may emerge.
  • FY20 has seen a sluggish start adding to concerns of limited fiscal space.
  • This puts a floor to the bond yield correction despite our expectation of a 100 basis point policy rate cut
  • GST compliance measures are badly needed.
  • Government’s ability to give a fiscal boost rests largely on RBI’s return of capital.

CLSA on India Financials

  • Fitch cuts ratings on ICICI and Axis.
  • Credit ratings lowered to below investment grade; see limited impact.
  • Incremental issuances may become a tad difficult, and risks can arise from other downgrades.
  • With slippages moderating see turnaround in earnings from FY20 as credit costs normalise.

CLSA on United Spirits

  • Maintained ‘Sell’ with a price target of Rs 450.
  • Management sounded positive on India and reiterated its double-digit medium-term growth and margin guidance of mid-to-high teens.
  • Focus to remain on execution, cost optimisation, working capital savings and agility.
  • Cost saving is in the DNA, but easy gains are already made; further upsides looks difficult.
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