Expect market to open on a flat note on account of global cues. On Friday, US market strong earnings and better than expected GDP data (2.1% while expectation 1.8%) pushed the S&P 500 and Nasdaq Composite to record highs (up 1% each). Dow Jones gained 0.2%.
Among the Asian markets – Both Nikkei and Hong Kong Index slipped half percent each ahead of US-China trade deal, with a trade delegation from Washington scheduled to fly to China on Monday for negotiations with Beijing officials. Expectations for a major breakthrough are low, however, with National Economic Council Director Larry Kudlow telling that he “wouldn’t expect any grand deal.” SGX Nifty slipped 8 points.
In the domestic front, positive factor that the Finance Minister likely to consider to roll back surcharge on FPI which have imposed in the Union Budget (Media news). ET News today that the FM promise to hear out FPI (Foreign Portfolio Investors), but sound note of caution about privileging overseas investors over domestic players.
Major concern in the market that the continued FIIs selling. FIIs net sellers $2bn during the month of July after the govt. imposed higher surcharge and higher tax of HNI. Traders BUY on dips for long term prospects like ICICI, Axis, HDFC, HDFC Bank, UltraTech.
Sectors watch – Auto, Banking & NBFC and Pharma
Stock to be watch – Buy ICICI Bank, Axis Bank. Maruti, SBI Life,
Momentum BUY – IndiGo, NBCC k
Brokers Radar – ICICI Bank – Morgan Stanley TGT 625, CLSA Vodafone TGT 7. Nomura TGT on Maruti 6250. M&M Finance TGT by Morgan at 400.
Market summary – ICICI Bank reported impressive results and improved asset quality, AU Small Bank announced strong Q1 results, JSW Steel, Maruti and Bajaj Auto announced inline with expected Q1 results. Vedanta and Vodafone Idea announced poor Q1 results. GST Council cut rate of Electric Vehicle from 12% to 5%/
Major events today – US-China trade talks likely to be began from today, Karnataka Assembly Trust Vote today. Alembic Pharma, Castrol, Chennai Petro, DLF, Dr Reddy, BEL, Reliance Nippon, Shriram City Union Finance, Strides Pharma, Sun Pharma Advance results today
Monsoon Rain fall 16% below normal while previous day was 19% below normal – Recovery monsoon will be positive for the market. Expect Auto stocks to be positive
Major events to be watch this week – Among the global factors – US-China trade talk will began from Monday, US Fed interest rate decision on 31st August and BoJ interest rate decision on 30th June. In the domestic front, July Auto monthly sales data on 1st August and Manufacturing PMI data. Export and Import data on 31st July. Major results this week – Dr Reddy (Monday), Axis Bank, Hero Motocorp, Piramal Ent, Tech Mahindra (Tuesday), Ashok Leyland, Eicher Motor, Apollo Tyres, UPL, Petronet (Wednesday), Bharti Airtelm CEAT, GSK Consumer, Marico (Thursday), Bata India, HDFC, ITC, Nestle, Power Grid and SBI (Friday).
India Bull Housing clarification by Shri Subramanian Swamy – This is with reference to Shri Subramanian Swamy’s letter dated June 28th being circulated in social media, alleging embezzlement of more than rupees one lac crores from NHB. We wish to highlight the following facts regarding the same: Loans outstanding as on date from NHB to Indiabulls Housing is zero. Indiabulls Housing, in its history, has never taken any loan or refinancing facility from NHB – Expects volatile on India Bull Housing.
Escorts reported Q1 net profit Rs880mn and derclined volume growth. Havell’s India reported Q1 Net profit Rs1.74bn (down 17% YoY)
ICRA down graded YES Bank Rs36bn rating from A to –A – Negative for Yes Bank
Trade war China – US may continue after US President remarks – U.S. President Donald Trump on Friday offered a pessimistic view on reaching a trade deal with China, saying Beijing may not sign one before the November 2020 election in hopes a Democrat who will be easier to deal with, will win.
Next week will be important for the market. Nifty just over 1% above the 100-DMA (11135 levels) while it has closed 11284 previous day. Sensex, Nifty clock longest weekly losing streak in six months in the previous week since the end of January 2019.
Expect positive for IndiGo after a long pending issue between the two promoters resolve major issues of stake sales. The shareholders’ agreement between Rakesh Gangwal and Rahul Bhatia — which is to remain valid for four years after the company’s initial public offering (IPO) in 2015 — conferred on the founders the right of first refusal (RoFR) for each other’s shares in case one of them wanted to sell. The agreement also contains a ‘tag-along’ clause, which stipulates that the other promoter has the right to join any share-sale transaction and sell his stake along with the one who is exiting. The Bhatia family and Inter-Globe Enterprises (IGE) together own 38.23%, while Gangwal, his wife and a trust hold 36.65%.
Positive for M&M – The GST Council on Saturday lowered tax on electric vehicles to 5 percent from 12 percent earlier. It also reduced the tax rate on the EV chargers or charging stations to 5 percent from 18 percent.
ICICI Bank reported good Q1 results due to improved asset quality. We have a buy rating on the stocks. The country’s largest private sector lender, ICICI Bank, posted Q1 profit of Rs19.08bn vs loss Rs1.19bn (over lower provisioning and healthy NII growth). NI Rs77.4bn (up 26.8% YoY), Loan growth strong at 15% YoY, GNPA 21bps sequentially to 6.49% – expectation 7.4% and net NPAs fell 29bps QoQ to 1.77% – expectation 2.3%.
Media major Zee climbed up 10% to closed above 400 mark of 2-month high. Media news that the promoters received two bidders nearly half of the promoters stake sale. Bharti Airtel, Warburg Pincus and Singapore Tele communication to collectively buy Zee group company Dish TV, leading DTH player. DISH TV owner want at least Rs45 a share of 57.52% stake but offer in the table is Rs30-Rs35.
Vodafone Idea announced better than expected EBITDA but Q1 loss widen sharply and ARPU lower than expectation. Company reported Q1 loss Rs48.7bn (expectation Rs38.4bn) vs Rs14.33bn last year, EBITDA Rs36.5bn (up 454%) – expectation Rs18.9bn, ARPU Rs108 while expectation Rs127 and Income Rs112.7bn (up 90% YoY) – expectation Rs118.8bn
Vodafone Idea plan to Monetize 11.2% stake in Indus Tower – It is a positive development on Vodafone to reduce debt (Consolidated debt Rs1085bn).
Maruti reported inline with expected Q1 results while realization increased marginally. We have a buy rating on the stock. Mariti Q1Net realizations grew 7% YoY (+4.6% QoQ) to Rs489.8k (v/s estimates Rs475k). Company reported Q1 net profit Rs14.4bn (down 27% YoY) – expectation Rs13.7bn, other income Rs8.36bn (expectation Rs8bn) vs Rs2.72bn (YoY), EBITDA Rs20.48bn (down 39% YoY) – expectation Rs19.4bn, EBITDA Margin 10.4% vs 10.5% (YoY) – expectation 10.2% and Income Rs197.3bn (down 12% YoY) – expectation Rs191bn
Vedanta reported better than expected Q1 results. Company reported Q1 net profit Rs13.5bn (down 12% YoY) – expectation Rs10.9nm and income Rs211.7bn
Cadila Healthcare – US FDA inspection Ankleswar unit I and unit II. Company says US FDA didn’t issue any observation on Ankleswar unit I and unit II – Positive for Cadila
PNB Q1 reported higher profit on account of lower provision. Company reported Q1 net profit Rs10.2bn vs loss Rs9.4bn – expectation loss Rs1.96bn, Provision Rs20.2bn vs Rs100bn (QoQ) – expectation Rs36.8bn, GNPA 16.5% vs 15.5% (Expectation 14.9%), NNPA 7.17% vs 6.75% (Expectation 6.2%) and NII Rs41.4bn (up 13% YoY) – expectation Rs43.17bn
Bajaj Auto reported inline with expected Q1 result. Net realizations grew 2.8% YoY (+0.4% QoQ) to Rs62.2k (v/s estimates Rs60.7k) Company reported Q1 net profit Rs11.3bn(up 1% YoY) – expectation Rs10.83bn, EBITDA Rs11.98bn (down 6.5% YoY) – expectation Rs11.73bn, EBITDA margin 15.45% – expectation 15.5%, other income Rs4.41bn – expectation Rs4.4bn and income Rs77.5bn (up 4% YoY) – expectation Rs75.7bn. PNB expects to lower GNPA to below 12% by year end – CNBC – It will be positive on PNB if GNPA fell to below 12% from 16%.
JSW STEEL: Export orders, long-term contracts protect margins; Strong project pipeline to drive growth; Maintain Buy. Consolidated EBITDA was down 16% QoQ to INR37.2b (our est. INR35.7b) on lower volumes, while consol. PAT was down 33% QoQ to INR10.3b (est. INR9b). Realization surprised positively, increasing ~INR741/t QoQ to INR46,664/t (v/s expectation of decline). EBITDA/t declined INR183/t QoQ to INR9,936/t, impacted by negative operating leverage as volumes were lower QoQ. While the near term outlook is weak, we continue to like JSTL given its strong pipeline of projects and cost reduction initiatives.
Vedanta – Both Aluminum and Zinc division reported lower than expectation. Company reported EBITDA at INR52b (-15% QoQ) was below our est. of INR54.9b on lower than expected volumes in Aluminum and realization in Zinc International. Other income declined 77% QoQ to INR3.8b (est. INR6b) on mark-to-market losses on its structured investment. Adj. PAT decreased 64% QoQ/39% YoY to INR9.3b (our est. INR10.9b). We cut TGT price to Rs150.
Satin Credit gets $9.4mn via foreign currency loan – positive
Shriram Transport bought back redeemable NCDs for Rs2.1bn – Positive for Shriram Transport
Yes Bank surges on reports of fund injection by Investors – Yes Bank surged nearly 10% on Friday after a Mint newspaper report that the Indian arm of TPG Capital and Advent International were in talks to inject fresh capital. TPG and Advent will most likely invest about $350m each, the newspaper report said – Stock is volatile avoid, can take delivery
L&T Finance seeks to raise Rs2.65bn via debenture – Positive for L&T Finance. Company reported inline with expected Q1 results.
Jubliant Life to consider option of reorganization business. Jubliant Life to create units for drugs, life science business, company to forms panel to consider demerger proposals – positive for Jubliant Life for de-merger its business.
AU Small Finance reported strong Q1 results, AUM Grew 44%YoY to Rs256bn. We have a buy rating on the stock. Company reported 1QFY20 PAT at INR1.9b (+61% QoQ), aided by pre-tax gains of INR770m from the 0.8% stake sale in Aavas Financiers Ltd. Excluding the stake sale gains, PAT came in at INR1.19b (v/s our est. of INR1.10b). NII grew 38% YoY (2% QoQ) to INR3.9b (5% miss to our est.).
PI Industries reported better than expected income, both net profit and EBITDA inline. We have a buy rating on the stocks. Revenue increased 25% YoY to INR7.5b (our estimate: INR7.1b) in 1QFY20. EBITDA grew 28% YoY to INR1.5b (our estimate: INR1.4b), with the margin expanding 60bp YoY to 20.1% (our estimate: 19.9%). Adj. PAT was up 23% YoY to INR1b (in-line).
South India Bank reported inline with expected Q1 results and stable asset quality. We have a buy rating on the stock.1QFY20 PAT at INR733m was up 4% QoQ (v/s INR230m in 1QFY19), led by higher other income (+25% YoY) and a decline in provisions. NII grew 8% YoY to INR5.4b, aided by NIM expansion that increased 7bp QoQ to 2.53%. Absolute GNPLs increased 0.7% QoQ to INR31.5b, while NNPLs declined 1.3% QoQ to INR21.3b. GNPA ratio increased 4bp QoQ to ~4.96%, while NNPA ratio declined 4bp QoQ to 3.41%.
Rating Agency S&P – Jain Irrigation to CCC/ Watch negative from B- – Negative for Jain Irrigation
JSW Steel approves raising up to $1bn via bonds in global markets – Positive for JSW Steel
Manpasand Beverage says CFO, director issued bail in tax case – Avoid on the stock
Results Monday – Alembic Pharma, Bank of Maharashtra, Castrol, Chennai Petro, Cochin Shipyard, DLF, Dr Reddy, EID Parry, General Insurance Corporation, GHCL, KPR Mills, Navin Fluorine, Kansai Nerolac, Orient Cement, Reliance Nippon, Sanofi India, Shriram City Union Finance, Strides Pharma, Sun Pharma Advance and Supreme Industries.
Dividends – Adani Enterprises, Asahi India Glass, Karnataka Bank, Lupin Labs, Minda Industries, Pidilite Industries, Sudarshan Chemical, Titan