Trade Talk | Where Are The Markets Headed
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00:00 Good morning and thanks so much for tuning in. You are watching Trade Talk on Wiki Prime.
00:03 My name is Alex Mathew and with me is Heeral Dharia. Morning, Heeral.
00:07 Good morning, Alex.
00:08 So, we are looking at the equity markets today and we are noticing that there is very little
00:13 news flow and there is also a lack of an overarching cue or direction. But there is a lot of individual
00:20 stocks that are likely to be in focus. There is a lot of stock specific action that we
00:25 could look forward.
00:26 Absolutely. And that's been the trend as well, Alex, over the last couple of trading
00:29 sessions. I mean, if you see the last four weeks itself, the markets have been in a consolidation
00:35 phase and we have constantly ended in the negative as well. Though the underlying tone
00:40 itself is not giving you as bad or as negative cues in terms of over the long term. What's
00:47 interesting to see is how yesterday's session also panned out because it was a gradual recovery
00:53 that we kept seeing and we nearly ended at the day's highest levels, not at but near
00:57 the day's highest levels. So, interesting moves that did come in yesterday's session.
01:01 You had almost even Stevens at the start in the first couple of hours, at least on the
01:06 Nifty 50 in terms of advances and declines. And you only had about 8 or 9 or 10 declines
01:12 towards the end of the session, most of them advance. But one of the big stories, of course,
01:16 was the decline of JFS as well as Reliance Industries.
01:19 Absolutely.
01:20 Subdued listing.
01:21 Absolutely. So, these were two stocks that are in focus. But clearly, from a sector perspective,
01:25 it's been IT as well as the metal counters that did outperform in yesterday's session.
01:30 Apart from that, if you see in terms of the market breadth that Alex was mentioning as
01:34 well, the breadth has been positive and that's something which is actually portraying a robust
01:39 market sentiment as well. Now, as long as Nifty is holding above those 19,320 levels,
01:45 the bullish sentiment is something which is expected to continue and it's holding at its
01:50 50 DEMA as well. Now, if you talk about the FPIs, since Friday, they have been covering
01:55 their short positions. And if you see the long-shot ratio, that has moved from 39.46
02:00 to almost 42% overall to the 17th of August. Now, moving to Bank Nifty, the resistance
02:07 is at 43.250 and this is on an intraday basis that we are looking at. Now, it closed almost
02:13 151 points higher. We have seen short covering at 43.800 and 43.900 strike. And from here,
02:22 that's the reason why we've seen that strong up move that did come in in terms of Bank
02:25 Nifty as well in yesterday's session. Now, clearly, last couple of trading sessions,
02:30 43.700 to 44.100 is the range where Bank Nifty has been consolidating as well. And this is
02:36 nearly for five consecutive sessions. So, a decisive breakout on either side will actually
02:41 help us understand and provide cues in terms of what direction Bank Nifty will take as
02:46 well. So, clearly, if you go to see that consolidation phase is something which is continuing, Alex,
02:53 but where from here on, because there is that indecisiveness that continues to prevail in
02:57 the markets and the terrain seems absolutely wobbly.
03:01 No, certainly. And I guess if you zoom out and you look at the global context as well,
03:05 then you will see similar scenes playing out. Though, overnight in the US, you saw tech
03:10 stocks rallying and you saw the Nasdaq as a result that gained over a percent. The Dow
03:15 was a bit subdued, but the S&P 500 gained about 0.7%. It's a bit of a mixed start in
03:21 the Asia-Pacific region as well. And on the global stage, of course, you're looking forward
03:25 to Jackson Hole at the end of the week in the lack of any other cues. But we've got
03:31 an interesting chat lined up. We've got Jaspreet Singh, who is the Chief Investment Officer
03:34 of Research and Ranking joining us. Jaspreet, thanks so much for joining us this morning
03:38 and good morning to you. How do you look at what is prevailing right now in the Indian
03:44 equity markets? Are you seeing any trends or is there a complete lack of an overarching
03:50 trend as we were looking at? And therefore, what are you focusing on?
03:53 Hi, good morning, both of you and good morning to the viewers. Thanks for inviting us. So
04:00 I think I'll go with your demise here. There is a lack of overarching theme or a trend
04:07 here. And it's getting very, very stock specific. And in fact, earlier, it was more a market
04:14 direction than it was going into sectors, themes which are doing well. And now over
04:19 the last few days, it's gone even deeper and it's been very, very stock specific. So I
04:24 guess that might continue in the near future. Because clearly, there doesn't seem to be
04:31 any big drivers in the very near term. And when I say that, I mean, the next two or three
04:36 months and at the same time, there are no big hurdles at the same time. So be it interest
04:40 rates, inflation, the crude, any geopolitical, I mean, good or negative news. There's nothing
04:50 one can really point out that this is going to be a road breaker or at the same time,
04:56 this is going to lift this thing. The good thing, the one shining spark that I can clearly
05:02 see and I may want to highlight is the quarterly earnings at an index level, nifty, nifty 200,
05:08 nifty 500. That continues to give a ray of hope. So even the top line growth, let's say
05:14 for the last quarter, first quarter of this financial year was in high single digit. But
05:18 the net growth, net profit growth was clearly 20, 25, 30% on a YOY basis higher, any index
05:26 you look at it. So I think that that's a ray of hope. And if that continues, there's no
05:30 reason to believe we should have any thoughts that over a one to one hour period, the markets
05:38 should trend only up.
05:39 Right. Just a point well taken. And as you mentioned that, yes, it is a stock pickers
05:45 market, but clearly, people, investors want to invest in the market at current levels.
05:51 But the key issue comes up is when they complain of the valuations. Where do you see the valuation
05:58 in terms of the Indian markets right now from an investment perspective as well?
06:03 Sure. So, you know, before I talk on valuations, I think the one thing that I hear continuously
06:10 is or frequently and we read often is that we are, you know, closer to 1SD or, you know,
06:18 two standard deviation, etc, etc. versus let's say 10 or 20 years. So my limited point here
06:24 that would be, you know, we've never been in this dominant position ever in that 10
06:29 or 20 year past, by which I mean, let's say, you know, the facts, right, we are the fifth
06:34 largest economy in the world going at six and a half, 7%, by far distant versus the
06:40 next, the number two, you know, the whole world is watching us. And India Inc is growing,
06:47 still growing at its best with a de-leveraged balance sheet, right, and per capita moving
06:52 up significantly. So with that, all that context in mind, the mean or the averages will go
06:58 up and the current number will go up. So even if I take a 20X Nifty PE on a one year forward,
07:07 which is March 25 Nifty EPS, let's say it's around between, you know, 1070, 1080 rupees,
07:14 our sense is that 11-12% upside is still available on a Nifty level. So no reason to worry. Obviously,
07:24 one might say 11-12% is not juicy enough. But as I said, yeah, one can always do staggered
07:31 buying, staggered approach. And at the same time, look at more stock specific, look at
07:36 more themes. So that can help build a reasonably good portfolio. And anyways, who said wealth
07:42 will be made from a one year? We can always look at a three to five year to make reasonable
07:46 with and not a one year.
07:47 No doubt, no doubt. Absolutely. Jaspreet, if I look at the various sectors that are
07:53 usually focused on, if I talk about banking, we've been speaking about how PSU banks have
07:59 been outperforming their private peers, at least in the near term. If I look at metals,
08:03 they've been underperforming because of the China concern. If I look at IT, there are
08:08 individuals that are saying that while earnings have not bottomed out, at least the prices
08:11 might have. If I look at pharma, there are people that are talking about the possibility
08:17 of a significant bull run because the bottom has been achieved. How do you look at all
08:20 of these sectors in which according to you is the biggest growth opportunity going forward?
08:25 Okay, yeah. So, you know, the, we largely, you know, our portfolio built up is positioned
08:35 a significant part around the three C's, which we call as, you know, the credit, the consumption
08:41 and the capex. And credit is obviously, you know, let's say, we don't say we're choosing
08:47 PSU over private banks, but PSU banks did not feature barring one odd name earlier,
08:54 let's say a year back. But in the last two years, the share of PSU banks in the portfolio
09:00 has gone up for us at research and ranking. Second, overall, and it'll remain so for a
09:07 good part of the current fiscal year, given clearly, you know, the balance sheets are
09:10 much lighter. They, the PSU banks management are now, you know, coming out and talking
09:16 openly about, you know, what they're trying to achieve, in terms of their own targets
09:20 that the board has assigned them, and they're trying to achieve them. And so it's clearly,
09:24 you know, what the talk that they're talking. And lastly, valuation still remains healthy
09:30 given the ROE, which used to be high, low single digit, and it's clearly either a low
09:35 double digit or a mid double digit in the PSU bank. So every reason for us to be to
09:41 be positive on that space. The other as I said, CapEx, I need not tell more, it's been
09:46 talked about on your channel, all channels every day, the manufacturing team, the defense
09:51 team, it's not a one year phenomena, and it's going to continue year after year. Our share
09:55 of GDP of manufacturing is abysmally low. And clearly, there's a big, big move up there.
10:02 The one space that we are very, very positive is consumption and within that very specifically,
10:08 semi discretionary. And what do I mean by that? Largely footwear, luggage, retail, QSR,
10:14 you know, the exhibitions, the multiplexes, etc. That space, the jewelry, let's say, holidaying,
10:24 etc. I think that pocket is clearly looking very, very interesting. So I would say largely
10:29 these three would be our dominant. Others, I would, let's say a pharma or a metal or
10:35 it or maybe even some others, maybe more on the neutral side is how we are positioned
10:41 at the current moment.
10:42 Thanks, Jaspreet for getting us those sectoral picks. A quick question in terms of you know,
10:48 when we're talking to a lot of FIs or you know, fund managers, clearly, a lot of them
10:55 are still sitting on cash right now, both in the domestic market, as well as if you
10:59 talk about FIs. Say, for example, hypothetically, we were expecting another two to 3% correction
11:05 further in terms of markets. Do you think that is something that could actually lead
11:09 to a lot of fund infusion, which could then start supporting our markets? And if so, with
11:15 within the sectors that you mentioned, which would be your topics?
11:20 Yeah, I would I would believe so. Two to 3% correction would mean, you know, let's say
11:29 a slightly more correction in specific sectors, whichever be the pockets of choice. And within
11:37 that, obviously, the individual stocks might be correcting a little more and that might
11:41 become attractive enough for you know, some of these FIs and long only mutual funds or
11:46 you know, funds to buy it into. So I think yes, the answer to that question would be
11:51 yes. I would be able to go stock specific because of compliance reasons. But let me
11:57 just highlight pockets of themes that we like. So financialization of savings is one big
12:02 pocket, the per capita moving up from $2,300 to, you know, almost doubling over the next
12:12 couple of years that that would be that would be the second one. The manufacturing team
12:16 or the China plus one plus PLI would be would be another one. And last one I want to leave
12:23 what I want to highlight here is, is that pocket of platform companies stroke, you know,
12:30 digital companies. I think I think that can clearly be a dark horse there. We've been
12:36 selectively biting into that space in the last couple of months. And I think that's
12:41 going to give a reasonable surprise. We don't have any favorites there. I think a basket
12:45 approach may turn out to be reasonably reasonably OK there if one looks at that as an approach.
12:52 But I can give you a quick sense. You know, the cash flows are improving, the profitability
12:56 is improving. The companies are almost at a bit of positive profitability almost there
13:01 or or they have already announced a net profit number. They are coming out with the very
13:08 important disclosures, full transparency. The ease of quantum is going down quarter
13:13 on quarter. And lastly, the environment when, you know, let's say October to December 21,
13:19 when interest rates were at low and the only way it was up. Now it's the other way around
13:23 where it's only you know, the only way it's going to be down. It's only a matter of quarters,
13:28 you know, by when it starts. So, you know, all these all these forces, I would say, combined
13:34 put together would put this space, the digital platform companies. Obviously, the disclaimer
13:39 here it is meant for only high risk investors. It should be meant by risk investors and who
13:44 can take a two to three year view and obviously can stagger their buying. Otherwise, for people
13:49 who are looking at or for, you know, viewers who are looking at monthly outperformance,
13:55 it's going to give bouts of volatility and maybe the best pocket to buy into.
14:00 Certainly. Thank you so much, Esprit, especially for that last answer, because I think a lot
14:04 of our viewers will benefit from a conversation about that. Thanks, as always, for taking
14:10 the time.
14:11 Pleasure. Thanks for having us.
14:13 Now, one of the stocks and we mentioned this at the start, we were talking about Geo Financial
14:18 Services and the fact that it had a bit of a muted listing, perhaps to a certain extent
14:24 that had to do with the value that was ascribed to it. And the fact that investors are perhaps
14:30 not clear about what this company is going to be doing. There are opportunities in the
14:35 space. And we spoke about some of those yesterday, the BlackRock joint venture, certain other
14:41 aspects in terms of lending. But that hasn't panned out yet.
14:44 Absolutely. I mean, you did see the stock, right? I mean, the moment it listed, the stock
14:49 was locked in a 5% lower circuited yesterday session. And it's interesting to see that
14:54 probably for the initial few days, what analysts are saying is that this pressure could continue
14:59 till the time the stock actually finds its fair value as well. In fact, there's a lot
15:03 of chatter on the street as well right now saying that it's mainly index funds, specifically
15:08 passive funds, who have actually sold out their position in yesterday's session, Alex.
15:12 So from here on, the key that we are asking is, you know, as to what is the reason why
15:17 you know, we've seen this kind of a muted listing with regards to GFS. Secondly, there
15:22 have been no buyers in terms of GFS in yesterday's session, because during the day when we kept
15:27 checking NSE and BSE, the number of sellers were exactly little, I think 1.25 was the
15:34 last number that I saw those were the number of sellers in terms of GFS vis-a-vis no buyers
15:39 that were coming in on that front. So that was an interesting aspect to watch out for.
15:43 Apart from that, the key aspect that we're considering from here on is that what is the
15:49 reason why there are no buyers now? Is it because it's a business without capital, I
15:54 mean, a capital without business, and it cannot command such high premium, the point that
15:58 you just made, that it's already given a valuation, and the analysts are really not able to understand
16:04 as to this valuation has to be subscribed to what part of the business, right? So there
16:09 are concerns around it right now. But till the time you know, clarity emerges from it
16:14 from the company's perspective, as to what is it that they are going to do? Because opportunities
16:20 are immense, but which are the ones that they are grabbing where they will be able to create
16:24 value for shareholders is what we need to wait and watch.
16:28 Certainly. All right. So let's see whether that lower circuit gets hit in trade today
16:32 as well. It's not a very large number that is there, but that lower circuit is in fact
16:37 only 5%. So it could very well, very easily be hit today as well. But let's focus in on
16:43 a few stocks that are going to be in focus on account of being in the news and there
16:47 are quite a few of them. We've got Varsha first that is joining in to tell us some of
16:52 what she's got. Varsha, good morning. What's on your list today?
16:55 So a bunch of companies that one should look out for. The first is Rites. Actually, this
17:00 is a project management consultant to railways. Now, the company has signed an MOU with state-owned
17:06 hydropower giant NHPC. Now, leveraging its core strength, Rites as a project management
17:11 consultant will provide comprehensive and efficient solution for developing rail infrastructure
17:17 and allied facilities for NHPC. Then we have Lemon Tree Hotels. Now, this hotel chain has
17:22 signed license agreement for two properties in Bhubaneswar and Kasauli under the brand
17:28 Lemon Tree Hotel and Lemon Tree Mountain Resort respectively. Now, the hotel in Bhubaneswar
17:33 is expected to be operational by Q4 FY25, while Kasauli will be operational by Q3 FY26.
17:41 Then we have BLS International, wherein the company's subsidiary, BLS International FZE
17:46 is in process to subscribe 100% share capital of Saudi Arabia-based BLS International Travel
17:52 and Tourism. Then we have Tata Power. Now, Tata Power has been in focus because of the
17:58 EVs and the infrastructure related to EVs. Now, the Tata Power Renewable Energy Limited,
18:05 a firm that delves into renewable energy sector and a subsidiary of Tata Power, has signed
18:11 a power purchase agreement for 9 MW peak on campus solar power plant with Tata Motors,
18:17 Pantnagar plant in Uttarakhand. Now, this solar plant will be the largest on campus
18:21 solar facility in the state. Also, the solar installation includes an effective approach
18:26 towards Tata Motors sustainable future goals with an estimated carbon emission reduction
18:31 of CO2 per kilowatt power. Now, 25 tonnes of CO2 per kilowatt power. Now, in an earlier
18:40 partnership Tata Power Renewable Energy Limited and Tata Motors successfully established a
18:45 7 MW peak solar project at Pantnagar manufacturing facility. As a result, Tata Motors, Pantnagar
18:52 plants combined solar capacity now stands impressive at 16 MW peak. The last one that
18:58 we have is Glenmark Pharmaceuticals. Now, there was this case against Glenmark Pharmaceuticals
19:04 USA wherein charges involving historical pricing practices of a generic drug, Provestatin,
19:11 between 2013 and 2015. Now, for this company has entered into 3 year agreement with Department
19:16 of Justice to resolve all of its court proceedings. If it adheres to the terms of the agreement,
19:23 including the payment of 30 million US dollars payable in 6 installments, the DOJ will dismiss
19:28 the pending superseding indictment. And that could be leading to some, I mean, it is positive,
19:35 but let's see how the outflow because it will almost come up to a little over 200 crores,
19:40 right? So what that impact on the balance sheet and the P&L will be is what we need
19:45 to wait and see. Thank you, Varsha, for getting us all the other details. But apart from this,
19:49 you had Adani group of companies that were in focus from Friday, Monday and today as
19:54 well. In fact, there has been that positive momentum that we've been seeing. Himansh is
19:59 standing by to give us more updates in terms of what's brewing and what are the other stocks
20:03 that he's been tracking. Good morning, Himansh. Good morning, Heeral. So, despite the relative
20:06 quiet from the earnings season gone by, there are some key developments the viewer should
20:10 watch out for. So, with Adani, like you mentioned, the campus trade and investment, which belongs
20:15 to the promoter entity, has bought 2.5 crore shares, which represents a little over 2%
20:20 of the Adani enterprises. Now, this purchase was made from August 7th to August 18th. And
20:25 as a result, the promoter shareholding will rise to about 70% in the company. Then Adani
20:31 Power in their investor presentation published yesterday, it illustrated plans for growth.
20:36 Now, notably, the Adani Power has a target of 21,000 megawatts by FY29. Now, this includes
20:44 proposed inorganic capacity, which is targeted at around 1100 megawatts. And the current
20:50 capacity currently stands at 15,200 megawatts. And as far as their brownfield expansion projects
20:56 are concerned, around 3,200 megawatts of capacity is proposed, while 1600 megawatts of capacity
21:02 has been committed to already. The net senior debt, which is the net debt of the company,
21:10 has risen from 24,350 crore in the previous year to 27,000 odd crores this year. But notably,
21:19 their debt to equity ratio has come down significantly from 6.51 in the fiscal year 2020 to 1.18
21:28 in the last fiscal. Then Ambuja Cements and Sanghi Industries have another development
21:33 to watch out for. Ambuja Cements has made an open offer to acquire 6.7 crores of Sanghi
21:39 Industries, 6.7 crore shares. Now, the offer price is set at 114 rupees per share. And
21:46 this aggregates the total offer size at 767 odd crores. This represents 26% stake of Sanghi
21:54 Industries and the offer opens on September 29 and is expected to close on October 13.
22:00 Now, assuming complete acceptance of the offer, the shareholding of Ambuja Cements and Sanghi
22:05 Industries will increase up to 83%, almost. Wellspun Industries has acquired 50.1% stake
22:14 in Michigan Engineers. Now, the stake purchase was done from Ortham Investment and Infrastructure
22:21 and Sansar Housing Finance. And the consideration for this acquisition came up to about 137
22:28 odd crores. The acquisition aligns with the Wellspun strategy to expand into the high
22:32 margin water infrastructure business, which also has promising growth down the line. The
22:38 current order book for the segment of the company in this stands at around 6,000 crores.
22:44 Brigade Enterprises also has entered into a sealed deed for acquiring 6.5 acres of land
22:50 parcel in Chennai, which is to be used for a residential project. And lastly, there's
22:55 Union Bank of India, where the committee of directors have approved a QIP, where they
23:00 are expected to raise funds of up to 5,000 crores through issue of equity shares and
23:05 the approved flow price is set at Rs. 91.1.
23:08 All right. Thanks so much, Hemant, for all of those updates. Adani Group of Companies,
23:14 as you were pointing out, was buzzing yesterday. Particularly, Adani Ports was up over 4% at
23:20 one point, if I'm not mistaken. We've got Rishi joining in to talk about the latest
23:25 development of the primary markets. Aeroflex is the company we're talking about today.
23:29 What can you tell us about it today?
23:31 So Aeroflex's IPO is opening today and it's an IPO with a size of Rs. 350 crores. And
23:38 the issue is coming at a price band of Rs. 102 to Rs. 108 apiece. And the offer closes
23:43 on August 24th, which is the day after. Now, of the Rs. 350 crores, Rs. 162 crores is a
23:48 fresh issue, while Rs. 189 crores is an offer for sale done by its promoters, which is Sat
23:54 Industries. Now, Aeroflex is in the business of manufacturing stainless steel corrugated
23:59 flexible hoses, both with as well as without braiding, interlock hoses, as well as other
24:04 related end fittings that come. So together, they term this entire product as flexible
24:10 flow solutions. Now, its revenues are primarily driven by exports, which account for about
24:15 80% of its overall revenues. Particularly, if you look at US, which is its largest market,
24:20 accounting for about 30% of its revenues. The company also plans to use its fresh issue
24:26 primarily for funding its working capital requirements to the tune of Rs. 84 crores
24:30 and another Rs. 32 crores for repayment of outstanding borrowings. The rest will be used
24:36 for general corporate purposes as well as for pursuing some unidentified inorganic
24:42 opportunities. Now, if you look at its previous fiscal financials, it had a margin of 20%
24:49 and a PAT of Rs. 30 crores at a revenue of Rs. 270 crores approximately. But among other
24:55 data, the interesting aspect is the interest that is shown by marquee investors like Ashish
25:00 Kaushalya, who have picked up stake even prior to the IPO. As well as yesterday in the anchor
25:05 investor segment, the company raised about Rs. 103 crores with participation from funds
25:10 like Nippon Mutual Fund, Invesco Mutual Fund, as well as SOC Gen that participated in the
25:16 anchor investor segment. This is going to be interesting as well with interesting names,
25:20 as you mentioned like Ashish Kaushalya, Jagdish Master, all of these names who have entered
25:25 the company as well ahead of the IPO. The anchor book also looks pretty strong. So,
25:29 I think listing is going to be interesting to watch out for. So, I think a whole host
25:33 of things that we are watching out for. Thank you, Rishi, for getting us the details. But
25:36 clearly, from a gift nifty perspective as well right now, a slightly muted start, Alex,
25:41 is what we are anticipating so far. And clearly, if you go to see, it is a day where we will
25:47 see heavy stock specific action as well. In fact, that's a wrap from Alex and myself.
25:52 Lots more lined up on BQ Prime. Please stay tuned.
25:56 Thanks, Rishi.
25:57 Thanks, Rishi.
25:58 Thanks, Rishi.
25:59 Thanks, Rishi.
26:00 Thanks, Rishi.
26:02 Thanks, Rishi.
26:04 Thanks, Rishi.
26:05 [BLANK_AUDIO]