Trade Talk | Markets In A Narrow Range, What Next?
-Markets in narrow range, what's next?
-Key levels and stocks to keep on radar
All this and more on Trade Talk with Alex and Hiral. #BQLive
-Key levels and stocks to keep on radar
All this and more on Trade Talk with Alex and Hiral. #BQLive
Transcript
00:00 Good morning and thanks so much for tuning in.
00:03 You are watching Trade Talk on BQ Prime.
00:05 My name is Alex Mathieu and with me is Heeral Dadia.
00:07 Good morning, Heeral.
00:08 Good morning, Alex.
00:09 We have seen a lot of sideways movement for the benchmark index and in fact, today will
00:13 be interesting from the perspective of the Bank Nifty expiry and we will get Agam in
00:18 just a bit to talk about that.
00:20 But you were looking at the closer market very closely yesterday and there was quite
00:25 a bit of selling in the Bank Nifty towards the end of the session.
00:28 In the last hour of trade or probably in the last 30 minutes of trade is when we saw the
00:33 selling that actually intensified as well in terms of Bank Nifty.
00:38 It's interesting to see how we are now below the 20,000 mark.
00:43 We ended at 19,665 and as Agam was pointing out, 20,000 is far-fetched overall, at least
00:50 from what the numbers are pointing out.
00:52 Clearly, if you go to see a three-tenths of a percent lower is what Bank Nifty ended at.
00:57 It's interesting from a tech perspective as well because if you see the technology counters,
01:02 US markets are seeing a sell-off in terms of technology stocks and that is having some
01:07 bit of a rub-off effect on India as well.
01:09 No, certainly.
01:10 And you saw the equity markets in the US lose all three benchmarks, in fact, losing over
01:15 1% each and that rub-off has already been seen in the Asia-Pacific region so far.
01:20 But let's go back to Agam because I think today and tomorrow will be very key from the
01:25 perspective of the end of the series and the cues heading into the next one.
01:29 Agam, good morning.
01:31 Today Bank Nifty expiry.
01:33 What can we look at?
01:34 Good morning, Alex.
01:35 So I want to point out to all our viewers not to make the mistake assuming that today
01:40 is the Bank Nifty expiry.
01:42 Why?
01:43 Because this is the monthly expiry and the monthly expiries, both the Bank Nifty and
01:48 the Nifty expire on the same day.
01:51 So well, for all the traders out there, that's the first thing that they do have to bear
01:55 in mind.
01:56 But don't blame yourself because this is the first time something like this is going to
01:59 happen in Indian markets.
02:01 That said, how are things standing out for our markets and as far as the F&O space is
02:08 concerned?
02:09 Coming now to the Nifty futures where we are looking at a little more addition, but well,
02:15 naturally, rollovers have picked up and currently standing out around 48%.
02:20 What about Bank Nifty?
02:21 Once again, this is where we are actually looking at further unwinding and across series
02:26 we've seen shedding around 3.7%.
02:29 Bank Nifty futures rollovers at around 48% once again, not unlike the Nifty.
02:35 In terms of the Nifty, what levels are you watching out for?
02:39 There's been more and more writing around the 19,800 mark.
02:42 That's where we are looking at maximum open interest.
02:45 And on the lower end, we've seen a slight shift of max OI from 1,500 to 1,600.
02:52 That said, in terms of the most active options, naturally, a little more along the lines of
02:57 1,700 call and the 1,650 put.
03:01 So a little more consolidation happening as Hedal suggested earlier.
03:05 And coming down to the Bank Nifty too, the range that we are keeping an eye on is the
03:09 500-point range with 45,000 being a very, very firm sort of resistance, if you want
03:16 to call it.
03:17 That will be the pinstripe everyone will be watching out for, in fact, and that will also
03:21 be the pivot going forward.
03:23 Of course, on the lower end, watching out for 44, 500.
03:26 But on the whole, largely, we are expecting further consolidation at least over the next
03:31 couple of sessions.
03:32 Absolutely.
03:33 This consolidation is something which really tests the patience of investors as well.
03:38 Thanks, Adam, for getting us the details.
03:40 So that's the overall market picture.
03:42 But the next thing that we're looking out for is the way crude has been panning out,
03:48 right?
03:49 $94 per barrel is what we've already seen.
03:52 Now, the impact in terms of various sectors is going to be interesting because obviously,
03:57 you don't see the immediate impact in terms of financials.
04:00 It does come down over the next quarter or something.
04:03 Industry management.
04:04 Exactly.
04:05 So, tell us here to give us more in terms of what's the direct correlation, what are
04:09 the various sectors and companies that could see the impact?
04:12 Good morning.
04:13 So, Brent crude prices have been on a rise.
04:15 Now, they currently trade at $94.4 per barrel and they've raised 10% this month and around
04:21 24% since July 1st.
04:23 Now, this escalation has a significant price impact in the realm of two derivatives.
04:28 We've identified five key important two derivatives that are key inputs in different sectors.
04:33 So let's see how the prices are paired.
04:34 The first one is aviation turbine fuel, which has seen a 24% price hike since July with
04:39 monthly price increase by OMCs every month.
04:42 ATFs are very commonly used in airlines as fuel and account for 40% of operating costs.
04:47 At an average, airlines bulk buy their fuels for six months.
04:51 And the last time crude traded about the $90 range, EBITDA margins for airlines like SpiceJet
04:56 and Indigo declined by 20% and 7% respectively.
04:59 In the last month, Jet Airways has fallen 22% and Indigo by 3% while SpiceJet increased
05:06 by 18%.
05:07 Next is carbon black, which has surged 22.22% since July began.
05:10 It plays a pivotal role in the tire manufacturing sector, serving as a crucial input for both
05:16 rubber production and the tire manufacturing process.
05:18 Rubber alone constitutes around 30% of the raw material expenses and tire companies typically
05:24 engage in a six-month bulk purchase of raw materials.
05:27 Additionally, carbon black also finds applications in plastics, pipes, wires, and cable manufacturing
05:31 sectors.
05:32 It's a mixed stock performance this month.
05:34 The Polo Tire has seen a 6% rise, whereas Seat has suffered a 5% decline.
05:40 Next we have petcoke, which has seen an 8.31% price hike since July.
05:43 The cement industry currently uses an 80% mix of petcoke as fuel to run the kin, as
05:50 it has lower CO2 implications.
05:52 Power and fuel account for nearly 30% of the total cost for cement companies and firms
05:57 bulk buy this for an average 6 months.
05:59 Wintrute traded above the $90-a-day last fiscal margins for companies like Sri Cements, Ramco
06:04 Cements, and Ultratec Cement declined by 4%, 6%, and 7% respectively.
06:09 Then we have titanium dioxide, which has a 2.82% price hike.
06:13 It's a key raw material in the paint industry and uses white pigment.
06:16 Paint companies bulk buy raw materials for a period of 3 months and around 40% of the
06:21 raw material costs in the paint industry come from crude derivatives.
06:24 Derivatives like kerosene, amphetalic, and anhydride have also increased 34.10% since
06:29 July.
06:30 The last time crude traded at this range, the EBITDA margins for paint companies declined
06:35 in the range of 1.7% to 4% for companies like Berger Paints, Tansai Narolac, and Asian Paints.
06:41 And lastly we have HDP, which is high-density polyethylene, which has seen a 2% price hike.
06:48 HDP is commonly used for packaging in the FMCG sector for food and beverage containers,
06:53 and packaging accounts for around 15-20% of the total costs for FMCG companies.
06:58 Whether packaging is in-house or outsourced by the companies, raw materials are bought
07:02 on an average of 3-6 months.
07:04 So to conclude, while companies do currently enjoy a cost or margin stability due to their
07:08 bulk purchasing strategies, if the prices continue to rise, the subsequent increases
07:14 in these and other crude derivatives could also pose challenges to the overall costs
07:18 and margins in the latter part of this fiscal.
07:21 However, the extent of this impact will be heavily influenced by purchasing practices
07:26 and the timeframes that are adopted by the respective companies.
07:31 That makes a lot of sense.
07:32 Thanks so much, Mihika, for joining in.
07:34 3-6 months is what Mihika was pointing out for a variety of sectors.
07:40 And I guess we will see the impact in both the next quarter, that is, the December quarter,
07:46 as well as the fourth quarter.
07:47 Absolutely.
07:48 And clearly, the margin impact is something what we need to actually look at from this
07:53 perspective as well, because clearly, it's the higher cost that will…
07:58 In fact, the last time I remember when I was talking to Mihika as well, when we were looking
08:01 at Berger Bains, the last time when crude was above these $90-$92-$94 in that kind of
08:07 range, Berger had already seen margins dip into single digits, right, from a double-digit
08:12 margin.
08:13 So that kind of an impact is going to be interesting to watch out for all of these companies.
08:17 And interestingly, I think also from the perspective of FMCG companies, to the extent that they
08:22 use certain derivatives of crude, it will be important to see whether they can pass
08:28 on that in pricing measures, which they haven't been able to do so far because consumption
08:34 is a bit of a question mark.
08:35 They have been speaking about that HUL has gone on record to say consumption is a question
08:39 mark in what they call Bharat, which is rural India.
08:44 But then let's see how that pans out.
08:45 For now, let's turn to individual stocks and see which ones are in the news.
08:50 We've got a whole host of stocks to talk about.
08:52 Let's start with Varsha, who's joining us to give us what is on her list.
08:56 Morning, Varsha.
08:57 What are you picking up?
08:58 So, Alex, we always, we are gone in four hours, you know, gone in 10 hours.
09:01 So I'm starting off with a company, with one of the companies that is Birla Estates, which
09:06 is a wholly owned subsidiary of Century Textiles and Industries, has sold phase one of Birla
09:12 Tramaya within 36 hours of its launch.
09:15 Now, the 556 units booked account for approximately Rs. 500 crore booking value.
09:20 Birla Estates has entered into a joint venture agreement with MS Ramaya Reality LLP to develop
09:26 this project.
09:27 Now, the company aims for an estimated revenue potential of Rs. 3000 crore from the entire
09:32 project.
09:33 The next we have DCM Sriram, where a UPVC extrusion unit of Finista Building System
09:39 at Kota has installed two extrusion lines and one blending line, and the same has commenced
09:43 operation on 26th September.
09:45 Now, the said expansion will increase the annual production capacity of Finista UPVC
09:51 profiles from 8,600 metric tons to 12,284 metric tons.
09:56 Then we have Pratap Snacks, where GST Authority conducted search and seizure operations at
10:01 the company's Bangalore manufacturing unit.
10:03 According to company, the operations of the aforesaid manufacturing unit were not impacted
10:08 and continued as usual.
10:10 Then we have Raj Randhani Metal, where the company received orders of Rs. 206 crores
10:15 from 12 clients.
10:16 Couple of names include KEI Industries Limited, which gave order of 83 crores.
10:21 Then you have Orient Cables India Private Limited, the order of Rs. 25 crores and Paramount
10:27 Communication with the order of Rs. 23 crores.
10:30 Now, the next company that I'm talking about, we hear many PE companies try to exceed once
10:37 they achieve the target.
10:38 So, well, the same can happen with Healthcare Global Enterprises, where the CVC Capital
10:43 Partners is exploring selling its controlling stake in Indian cancer hospital chain, Healthcare
10:49 Global Enterprises Limited.
10:50 Now, this is according to Bloomberg.
10:52 Now, the private equity firm is looking to identify buyers for its 60.4% in the company.
11:00 CVC's stake is worth about US$345 million, according to data compiled by Bloomberg.
11:05 Now, considerations are at early stage and there's no certainty that this deal will happen.
11:10 Lastly, we have Suvlon Energy, where Dilip Sanghvi, an associate, decided to terminate
11:15 the amended and restated shareholders agreement that was signed in Feb 2020.
11:20 With the termination of the agreement, the investors group nominee director on Suvlon
11:24 board, Hiten Tembaria, has also resigned with effect from September 26.
11:29 However, the wind turbine manufacturers have clarified that the termination of the agreement
11:33 will not impact the company's operations.
11:36 Suvlon promoters held 13.29% stake in the company as on August 14, while the Sanghvi
11:42 family and corporate bodies held 12.72%.
11:45 Also on Tuesday, Crisil Rating upgraded Suvlon's long-term and short-term debt facilities with
11:51 a positive outlook.
11:53 Last one was interesting because you've seen a turnaround.
11:56 And the kind of run-up that you've seen on the stock is also pretty interesting to watch.
12:00 Thanks Varsha for getting us the details.
12:02 So watch out for these names.
12:04 But a lot apart from this that continue to remain in focus in today's session.
12:09 In fact, Rishi is standing by to give us more in terms of which are the other stocks he's
12:13 tracking.
12:14 Good morning, Rishi.
12:15 Good morning.
12:16 So firstly, there's Adani Ports, which has announced that it is offering to buy back
12:19 about $195 million of its bonds.
12:22 So these bonds hit an all-time high with regards to their price since, and this is the most
12:27 since not an all-time high, sorry, this is the most since April, after the company said
12:32 that it will be buying back at a price of $975 for every $1,000 of debt up till October
12:38 11th and then the price would fall further to $965.
12:41 Now the purpose is partly to repay its near-term debt maturities.
12:47 And this announcement also marks the second tender offer for its 2024 notes.
12:52 And this is just in a few months.
12:54 This stock may therefore react positively.
12:57 Then we have Vedanta where Moody's has downgraded Vedanta resources to CAA2 from CAA1.
13:02 And it has maintained a negative outlook on the company.
13:04 This is particularly with regards to the key overhand with respect to the elevated risks
13:11 that the company is facing with its debt restructuring progress.
13:17 And it is also not making any significant progress on refinancing up its $1 billion
13:22 worth of bonds that are going to be maturing in Jan 2024 as well as August 2024.
13:28 The stock has been hitting the 52-week low for quite some time.
13:31 So the stock may continue to react negatively after this news.
13:34 And there's also Hindustan Zinc that you may need to look out for which is a subsidiary
13:38 of Vedanta.
13:39 Then there's Shyam Metallics which has said that it is going to make aluminium foil for
13:43 lithium ion cell manufacturing.
13:45 It has currently a capacity of 20,000 tonnes for aluminium foils.
13:52 The company is exporting about 60% of its overall output.
13:56 But this proportion may change because the company is looking to target the in-house
14:03 manufacturing facility for lithium ion cells that the government of India is pushing for.
14:08 So the stock may react positively.
14:09 Then there's REC and PNB who have signed an MOU to co-finance projects worth 55,000 crores
14:15 over a period of three years.
14:16 This is particularly for funding infrastructure, logistics, as well as in the power sector.
14:22 The PSUs have been rallying quite a bit over the past few weeks and PNB in fact hit a 52-week
14:27 high yesterday.
14:28 So it may continue to set new highs today as well after this news.
14:32 Then there's IndusInd Bank which has announced a multi-year global partnership with the ICC
14:36 and this partnership will begin with the upcoming World Cup.
14:39 The bank is looking to have access to both branding as well as content assets as the
14:45 World Cup begins and for future editions of ICC's tournaments as well.
14:48 Alright.
14:49 Thanks so much, Rishi, for bringing us those details.
14:51 There are a few stocks in fact to pay attention to.
14:54 Let's take a check also in the banking space where we've got updates on credit card usage
15:01 as well as credit card market share.
15:04 That space, as you know, has in fact seen tremendous competition.
15:09 Let's bring in Hemansh to give you the latest there.
15:12 Hemansh, who's gaining ground?
15:14 So SBI cards has been gaining ground and sequentially as well as well as on a year-on-year basis.
15:18 All of this comes from analysts' views on RBI releasing their monthly update on bank-wise
15:24 ATM point of sale and credit card transactions.
15:27 But these credit card transactions are the key focus here where total merchant spending
15:32 in August 23 crossed over 6 lakh crores.
15:36 And the cards in force, which are essentially the active cards that are outstanding with
15:40 customers, have crossed over 9 crores.
15:43 And SBI cards has again gained market share on a sequential basis by almost 60 basis points
15:49 and now stands at 18.4%.
15:51 American Express and smaller issuers have also gained market share in terms of spending.
15:56 HDFC Bank and Axis Bank saw market share losses to the tune of almost 26 to 73 basis points
16:03 respectively.
16:04 The gradual loss in overall credit card spending is also due to a pickup in UPI peer-to-merchant,
16:11 which is essentially where customers pay the merchant directly at the point of sale through
16:15 a QR code transaction.
16:17 Daily spending data from the RBI also suggests that marginal slowdown in September versus
16:22 August on a sequential basis and on a year-on-year basis is due to a high base year last year
16:29 where much of the festive season was spread between September and October.
16:34 Lastly, Morgan Stanley remains overweight on SBI cards and maintains its target price
16:39 for Rs. 1,115.
16:42 So SBI cards will remain in focus.
16:43 It's going to be interesting to see how the stock moves in trade today.
16:47 But moving on, you've been tracking the primary markets also pretty closely.
16:51 Who are most of them which will close today, some open today and some list today?
16:56 Give us a quick update on all of them.
16:59 Generally, Wednesday has been the focal point of the week's action in primary markets and
17:03 today updater services and JSW infrastructure, both of their bids close in today.
17:09 Updater services, the subscription data looks as follows where 16% of the offer is subscribed
17:13 on day 2.
17:14 Updater services had a slow start with about 6% on day 1.
17:18 Retail investors are leading the subscription push with almost 68% of the reservation subscribed.
17:24 JSW infrastructure, the offer is subscribed almost over 2 times already as of day 2 and
17:30 retail investors have subscribed by 4.5 times.
17:34 Non-institutional investors have subscribed 3.7 times.
17:37 So JSW infrastructure, one could say it has perhaps overshadowed updater services because
17:42 both of the issues have been on up on the same time.
17:45 But today we also have Valiant Laboratories, which is opening their issue today.
17:50 The pharmaceutical and bulk drug manufacturing company, it mainly focuses on paracetamol
17:56 and other APIs as well.
17:58 The bid will be closing on October 3rd and it's a fresh issue of 1.08 crore shares.
18:04 The price band puts the overall fund raise at about 151.2 crores and it has as of yesterday
18:11 raised 45.6 crores from anchor investors, around 4 of them.
18:16 And the proceeds of the issue are going to be used for organic expansion as well as funding
18:20 the working capital requirements of the company.
18:24 Lastly, it has a subsidiary which is interesting to note, Valiant Advanced Sciences Pvt. Ltd.
18:31 which is going to be undertaking this expansion practices.
18:35 And coming on to the two listings today, we have Signature Global India, where the stock
18:39 will be listed at the upper price band of 385 apiece.
18:42 And then Sysilx, which is going to be listed at an issue price of 222 today.
18:46 So clearly a lot of action in the primary markets also to pay attention to.
18:51 Thanks so much for bringing us those details, Hemant.
18:54 And by the way, in case you want to read more on any of the new issues, there are copies
18:59 called or stories called All You Need To Know that you will be able to find on the website
19:03 bqprime.com.
19:04 That brings us to the end of this edition of Trade Talk.
19:08 And of course, we've got action from the live markets lined up in just a few minutes.
19:12 So do stay tuned for that.
19:14 This is BQ Prime.
19:15 Thanks for your time.
19:23 [END]