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Asian equities opened lower as U.S. futures built on Monday declines ahead of a slew of key earnings reports this week.
Stocks fell in Japan, Australia and South Korea. Futures in China and Hong Kong were lower, suggesting the biggest jump in more two years in the Chinese equities Monday may not extend. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.7 percent to 10,172 as of 7:15 a.m.
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Here’s a quick look at all that could influence equities today.
U.S. Market Check
- Most U.S. equities fell, with financial and commodity shares pacing losses as an overnight rally in Asian equities failed to hold ahead of a spate of key earnings reports this week.
- The yield on 10-year Treasuries was little changed at 3.19 percent.
Europe Market Check
- European stocks declined for a fourth consecutive session, with the benchmark index erasing early gains as U.S. President Donald Trump’s planto pull out of a nuclear treaty with Russia prompted nations across the globe to urge him to reconsider.
- Japan’s Topix index fell 1.1 percent.
- The S&P/ASX 200 Index dropped 0.6 percent.
- Hong Kong Hang Seng Index contracts lost 0.5 percent.
- FTSE China A50 futures were declined 0.4 percent.
- South Korea’s Kospi index lost 0.7 percent.
- S&P 500 futures fell 0.4 percent.
- Crude oil increased 0.2 percent to $69.51 a barrel.
- Gold was steady at $1,222.58 an ounce.
- Copper resumed declines after a one-day breather; down 0.1 percent.
- Zinc snapped a two-day decline, up 0.7 percent.
- Steel extended gains for the second day, up 0.8 percent.
- Aluminium snapped a three-day decline, up 0.1 percent.
- Rubber resumed declines after a one-day rally, down 0.2 percent.
Here are the key events to watch out for this week:
- Earnings season gathers pace with notable highlights including Amazon.com, Alphabet, Intel, Verizon, Microsoft, Twitter, McDonald’s, UBS, Deutsche Bank, Barclays, Total, United Technologies, Caterpillar, Halliburton and Linde.
- Monetary policy decisions are due in Europe, Indonesia, Sweden and Canada.
- ECB policy makers could on Thursday confirm that asset purchases will end this year, reiterating its pledge to keep interest rates at record lows through summer 2019. President Mario Draghi will hold a press conference.
- U.S. gross domestic product growth may have slowed in the third quarter, yet remained near its best pace since mid-2015, according to forecasts ahead of Friday’s release.
Stocks To Watch
- ITD Cementation bagged multiple orders worth over Rs 1066 crore.
- Lakshmi Machine Works said it will buy back 2.66 lakh shares at Rs 6,000 each at a discount of 2.2 percent to CMP.
- Orient Press received order from the Maharashtra Pollution Control Board directing the company to stop all manufacturing activity at its Tarapur plant within 72 hours. The company derives 46.54 percent of its gross revenues from this plant.
- Digjam said the manufacturing of woollen and worsted fabrics at its mill in Jamnagar were suspended due to extremely tight liquidity and working capital position.
- Syndicate Bank raised Rs 728 crore via preferential allotment from the government.
- Himachal Futuristic Communications received Rs 366.36 crore advance purchase order from BSNL.
- Tata Steel: opposes JSW Steel’s bid for Bhushan Power, according to Bloomberg report.
- BHEL to consider proposal for shares buyback on Oct. 2.
Nifty Earnings To Watch
- Adani Ports
- Bajaj Finserv
- Bajaj Finance
- HCL Technologies
Other Earnings To Watch
- Ambuja Cements
- Bajaj Corp
- Bayer Cropscience
- HDFC Standard Life Insurance
- ICICI Prudential Life Insurance
- Rallis India
- RBL Bank
- Sasken Technologies
- Tata Metaliks
- TVS Motor Co
- Zensar Tech
Earnings Reactions To Watch
Asian Paints (Q2, YoY)
- Revenue up 8.8 percent at Rs 4639 crore.
- Ebitda down 2.1 percent at Rs 784 crore.
- Margin at 16.9 percent versus 18.8 percent.
- Net profit down 14.4 percent at Rs 493 crore.
Oberoi Realty (Q2, YoY)
- Revenue up 95 percent at Rs 592 crore.
- Profit up 105 percent at Rs 214 crore.
- Ebitda up 81 percent at Rs 295.8 crore.
- Margin at 50 percent versus 54 percent.
Lakshmi Machine Works (Q2, YoY)
- Revenue up 35 percent at Rs 772 crore.
- Profit down 13 percent at Rs 40.4 crore.
- Ebitda up 43 percent at Rs 90.3 crore.
- Margin at 11.7 percent versus 11 percent.
Welspun India (Q2, YoY)
- Revenue up 11 percent at Rs 1780 crore.
- Net profit up 19 percent at Rs 115 crore.
- Ebitda up 2.2 percent at Rs 289.5 crore.
- Margin at 16.3 percent versus 17.6 percent.
- Margin impacted due to higher raw material cost and higher other expenses
- Net profit growth aided by lower tax rate.
- Company says full impact of exchange rate will be evident in next financial year.
Schaeffler India (Q2, YoY)
- Revenue up 19 percent at Rs 1,191.5 crore.
- Net profit down 5 percent at Rs 91 crore.
- Ebitda up 19 percent at Rs 200 crore.
- Margin at 16.8 percent versus 16.7 percent.
- Exceptional expense of Rs 39 crore booked related to merger.
Omax Autos (Q2, YoY)
- Revenue up 7 percent at Rs 309 crore.
- Ebitda down 30 percent at Rs 10 crore.
- Margin at 3 percent versus 4.8 percent.
- Net loss at Rs 1.5 crore versus 3.3 crore.
- Higher cost of raw material impacted financials.
- Higher tax outgo versus tax refund led to higher losses.
Can Fin Homes (Q2 Standalone, YoY)
- NII up 2 percent at Rs 130.4 crore.
- Net Profit up 7.5 percent at Rs 76.8 crore
- Fee and Commission income fell 25.4 percent.
- DHFL: Jasmine Capital sold 71.2 lakh shares at Rs 197.77
- Hathway Cables: Rajasthan Global Securities bought 55.7 lakh shares at Rs 29.27. Ashish Dhawan sold 80.6 lakh shares at Rs 29.04
- Trident Limited: Trident Group bought 15.7 lakh shares at Rs 63.85; Asian Cotspin seller.
- Included in T to T segment: Raj Television Network, Shree Rama Newsprint, Subex
- Indiabulls Real Estate circuit filter changed to 5 percent.
- In ASM: Kwality, Hathway Cable.
- Nandan Denim promoter buys 45,000 shares from open market on Oct. 17.
Money Market Update
- The rupee in trade on Monday closed at 73.56 per dollar against Friday’s 73.33 per dollar.
- Nifty October futures closed trading at 10232, discount of 13 points.
- Nifty October open interest down 12 percent; Nifty Bank October open interest up 10.9 percent.
- Nifty 50 futures rollovers at 24 percent.
- Nifty Bank futures rollovers at 25 percent.
- Max open interest for October series at 11,000 strike value call option (open interest at 44.3 lakh shares).
- Max open interest for October series at 10,000 strike value put (open interest at 36.8 lakh shares).
Stocks In Ban
- In Ban: Adani Enterprises, Adani Power, Jet Airways
- New In Ban: Adani Enterprises
- Out Of Ban: DHFL
- Nifty PCR at 1.1 versus 1.07.
- Nifty Bank PCR at 0.78 versus 0.79.
On Oil Marketing Companies
- With strong oil prices and weaker rupee, risks high of further populist measures.
- Regaining marketing margins looks unlikely at least in the near term.
- Expect OMCs to share subsidy burden due to strong financials.
- Stake sales by Government another overhang.
- IOCL: Cut to ‘Neutral’ from ‘Buy’; cut price target to Rs 140 from Rs 220, implying a potential upside of 8 percent from the last regular trade.
- BPCL: Cut to ‘Neutral’ from ‘Buy’; cut price target to Rs 310 from Rs 555, implying a potential upside of 14 percent from the last regular trade.
- HPCL: Cut to ‘Neutral’ from ‘Buy’; cut price target to Rs 230 from Rs 415, implying a potential upside of 9 percent from the last regular trade.
On Asian Paints
- Maintained ‘Neutral’ with a price target of Rs 1,300, implying a potential upside of 8 percent from the last regular trade.
- September quarter was below estimates due to higher raw material prices.
- Decoratives volume growth continues in double digits of 11-12 percent.
- Margin pressure evident; Recent price hikes to alleviate some pressure.
- Maintained ‘Neutral’ with a price target of Rs 1,400, implying a potential upside of 17 percent from the last regular trade.
- September quarter was operationally weak on adverse mix and high cost inflation.
- Adverse mix weighs on value growth even as domestic volume growth was low.
- Believe there is need for more price hikes to offset high cost inflation.
- Maintained ‘Buy’ with a price target of Rs 1,650, implying a potential upside of 37 percent from the last regular trade.
- Healthy volume, but bottom-line miss on weak margins.
- Lower margin due to delay in price hikes led to a miss.
- Recent dealer checks suggest surging optimism for the second half of the current financial year.
On Kansai Nerolac
- Downgraded to ‘Underperform’ from ‘Outperform’; cut price target to Rs 400 from Rs 550, implying a potential upside of 3 percent from the last regular trade.
- September quarter results was slightly below estimates.
- Expect margin pressure and subdued growth for industrial segment.
- Cut EPS estimates by 13-17 percent on lower growth/margin forecasts.
Deutsche Bank Research
- Maintained ‘Buy’; cut price target to Rs 525 from Rs 575, implying a potential upside of 35 percent from the last regular trade.
- September quarter results were below estimates on all counts.
- Expect margins to improve on price hikes.
- Volume growth to sustain on aggressive growth strategies and festive sales.
On Hindustan Zinc
- Maintained ‘Neutral’ with a price target of Rs 290, implying a potential upside of 3 percent from the last regular trade.
- September quarter was in-line quarter with both Ebitda and net profit declining sharply.
- Large dividend declared – a strong positive, in our view.
- Expect second half to be materially stronger than the first half of the current financial year.
- Maintained ‘Buy’; cut price target to Rs 312 from Rs 327, implying a potential upside of 10 percent from the last regular trade.
- Performance in line; Outlook benign on favourable volumes.
- Expect Ebitda growth led by volume ramp-up, lower haulage cost and better grades.
- Cut price target to adjust for higher than expected interim dividend.
- Maintained ‘Neutral’; cut price target to Rs 270 from Rs 285, implying a potential downside of 4.5 percent from the last regular trade.
- September quarter was impacted due to higher cost, lower realisations and volumes.
- See costs at peak; Expect improvement in the second half.
- Cut price target to factor in higher costs.
On Glaxo Pharma
- Maintained ‘Underperform’ with a price target of Rs 1,185, implying a potential downside of 14 percent from the last regular trade.
- Positives: Higher revenue, inline employee and other costs; Negatives: Lower gross margins.
- Glaxo begun to show signs of turning the corner by clocking double digit revenue growth.
- Rich valuations and limited near-term triggers to cap upside.
- Maintained ‘Sell’ with a price target of Rs 1,340, implying a potential downside of 2 percent from the last regular trade.
- September quarter numbers were marginally ahead of estimates.
- Business is clearly recovering, but do not see margins back at over 30 percent range.
- Current valuations leave very little buffer for any potential risks.
Macquarie on IndusInd Bank
- Maintained ‘Outperform’ with a price target of Rs 1,975, implying a potential upside of 37 percent from the last regular trade.
- Stock fell as IL&FS rights issue postponed.
- Investors expect overall exposure to IL&FS group to be higher.
- Bank has strong loan growth and earnings power.
- Remain positive on the bank.
Macquarie on Jubilant Life Sciences
- Maintained ‘Outperform’; cut price target to Rs 1,038 from Rs 1,192, implying a potential upside of 59 percent from the last regular trade.
- Life Science Ingredients still recovering; Pharma business continues to deliver.
- Management expects second half to be better than first half for both segments.
- Remain bullish on Jubilant; Top mid-cap pharma pick.
Macquarie on ICICI Lombard
- Maintained ‘Underperform’ with price target of Rs 585, implying a potential downside of 27 percent from the last regular trade.
- September quarter’s net profit was ahead of estimates led by recoveries of written off dues.
- Corporate group health premium picked up.
- Positives already priced in; Trades at high valuations in a highly competitive industry.
CLSA on Inox Leisure
- Maintained ‘Buy’ with a price target of Rs 275, implying a potential upside of 27 percent from the last regular trade.
- Poor content, partial non-presence on BookMyShow impact footfalls.
- Steady advertising revenue growth; Strong screen additions.
- Management reiterated that Inox is open to any inorganic expansion.
. Read more on Markets by BloombergQuint.