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Samina Nalwala and Agam Vakil bring you all this and more as we head towards the 'India Market Open'. #NDTVProfitLive

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00:01:01 - Hello and welcome to India Market Open.
00:01:19 It's a bright day, but of course it looks like
00:01:22 there could be some more pressure coming on the street.
00:01:25 Good morning, Agam.
00:01:26 Very unexpected, the big, big fall.
00:01:28 We were expecting HDFC to open week yesterday,
00:01:31 but this fall was exasperated.
00:01:34 The markets declined 2%.
00:01:36 This morning as well implied Nifty indicating
00:01:38 to another gap down opening for us.
00:01:40 - So it always does happen, right?
00:01:41 Whenever markets are at life highs,
00:01:43 well, a lot of traders and perhaps participants
00:01:45 need a trigger and HDFC perhaps provided one,
00:01:48 even though the numbers from FAC were not as bad
00:01:51 as we were expecting them to be, Samina.
00:01:53 - In fact, interesting,
00:01:54 the brokerages don't seem very disappointed.
00:01:55 Most have said that, in fact,
00:01:57 the likes of the CLS have actually upgraded
00:01:59 the target price on HDFC Bank.
00:02:01 But we'll talk about that very shortly.
00:02:03 It's a quick up, first up, if I can get GIF Nifty,
00:02:06 the implied open that we're expecting in trade this morning.
00:02:09 It's another gap down morning.
00:02:10 200 point cut is what the Nifty implied open is.
00:02:15 Unlikely we will see such a massive gap down,
00:02:17 but nevertheless, that is what the street
00:02:20 is picking up on this morning.
00:02:21 In terms of global cues,
00:02:24 very, very mixed Asian markets are trading mixed.
00:02:27 China trades at a five year low.
00:02:29 Wall Street as well, and it flat to slightly lower.
00:02:32 Data points that came in from the US,
00:02:34 retail sale numbers is what we had,
00:02:36 came in slightly better than expected
00:02:37 at 0.6% for the month,
00:02:39 was the 0.4% expectation.
00:02:42 Remember, this reiterates the sentiment
00:02:44 of consumers on the street is very resilient.
00:02:47 Once again, putting doubts on the fact
00:02:49 that the Fed may not cut rates as aggressively
00:02:52 as the markets have priced it.
00:02:53 On back of that, what you're seeing
00:02:55 is Wall Street taking a bit of a breather
00:02:57 and Asian markets also trading subdued.
00:02:59 Worth the mention is that Europe saw a big fall
00:03:02 along with us in yesterday's day of trade.
00:03:04 So all your markets across the Eurozone,
00:03:06 including the UK had a big fall
00:03:08 with cuts of about a percent and a half to 2% in trade.
00:03:11 Well, that's the global picture,
00:03:13 but it's all about local cues this morning.
00:03:15 We'll quickly set you up for what we're expecting in trade,
00:03:18 and then the government will take you through
00:03:19 all the activity that we've seen
00:03:21 in the future side and technical levels as well.
00:03:23 That will be crucial in today's day of trade.
00:03:26 Well, just a quick recap of what happened yesterday.
00:03:29 We started the day off weak around levels of 21,700,
00:03:33 sustained around 21,800 for most part of the morning,
00:03:36 but finally ended the day with a huge cut
00:03:38 in trade at 21,571, a 2% decline
00:03:41 is what we picked up on D Street.
00:03:44 Well, Nifty is expected to see a gap down
00:03:46 as indicated on the GIFT Nifty trade this morning.
00:03:49 We also expect selling to continue for the broader markets,
00:03:53 which have been expensive,
00:03:54 and there has been talk about how that valuation
00:03:57 actually needs to ease off.
00:03:59 Bank Nifty could again be in a bit of a spot.
00:04:01 HDFC ADR ended the day with a cut of 9% in overnight trade.
00:04:06 If that's going to play out,
00:04:08 you are expecting another 4% to 5% chop on HDFC Bank
00:04:12 in the first few minutes of trade this morning.
00:04:14 Metas as well may see some more selling
00:04:16 on back of a stronger dollar index.
00:04:19 FRIs have sold record figures.
00:04:21 In fact, the highest amount of record selling
00:04:23 by FRIs in the day has been seen since 2017.
00:04:27 So, every Q that we're getting in this morning is weak.
00:04:31 FRIs have been selling, HDFC ADR is lower,
00:04:34 global Qs are looking weak,
00:04:36 implied Nifty is looking off to low start.
00:04:39 I don't know what bulls are going to hold on to this morning
00:04:42 and let's not forget a much anticipated correction.
00:04:45 And we talked about this at the start of Jan,
00:04:47 how Jan usually is a tough month for the bulls on this trade.
00:04:51 Right, Samina, in the morning we were talking about
00:04:52 whether or not the markets will rise,
00:04:54 would they fall, would they consolidate?
00:04:56 That's the answer no one can give you at the moment.
00:04:59 But what you can get from what we've seen in the past
00:05:02 is firstly, when you actually do see another gap up,
00:05:05 that's usually followed by a little more selling
00:05:08 because a lot of the older positions will also get cut.
00:05:11 Remember, we saw that sell figure of around 10,500 crores
00:05:14 and with that, well, on a net basis,
00:05:17 January has become an FPI net sell month
00:05:20 and this is the first time we've seen something like that
00:05:23 since the month of October.
00:05:24 Moreover, in terms of the levels that we're watching out for
00:05:27 as far as the Nifty is concerned,
00:05:29 currently there is a complete shift in that range.
00:05:34 So earlier we were in fact looking and building a base
00:05:36 around 22,000 on the Nifty
00:05:38 and this was literally one session ago.
00:05:41 That has completely changed and now 21,800, 21,900
00:05:44 becomes an upper end for the Nifty.
00:05:47 Remember, today is the Nifty weekly options expiry
00:05:50 so things are not going to be any simpler.
00:05:52 There will be further cuts in positions
00:05:55 and if we do see that weekly options expiry play out,
00:06:00 there could perhaps be a lot more volatility.
00:06:03 That said, in terms of support,
00:06:05 we're still keeping an eye on 21,000, 21,100
00:06:09 but the India volatility index has risen to the mark of 15,
00:06:12 highest since mid-December
00:06:14 and the Nifty put call ratio has now moved
00:06:17 below the mark of one at 0.7.
00:06:19 Is it completely oversold?
00:06:21 Not really because there have been instances in the past
00:06:24 where we have seen that number go all the way to 0.5 as well
00:06:28 and of course in terms of FII index futures too,
00:06:31 they're still on a net basis long.
00:06:33 So 54% longs against 46% shorts.
00:06:37 Finally, a very quick look at the Nifty valuations.
00:06:40 They still haven't come off substantially.
00:06:42 Of course, with a 2% correction,
00:06:44 you're not gonna see that big move in any case
00:06:47 but for FII 25, the number has gone below the mark of 20.
00:06:49 Remember, the last five-year average is 24 times.
00:06:53 So it's not like we're anywhere close to the average either.
00:06:56 Does that mean that we're gonna see an upside on the Nifty?
00:06:58 Well, that's a hard one to tell
00:07:00 but for now, this is how things are stacked up
00:07:02 as far as technicals are concerned.
00:07:04 - Just very quickly to add to those technicals, Agam,
00:07:07 we've broken the 20-day moving average
00:07:09 and closed below that in trade.
00:07:11 The last time this happened was on the 23rd of October, 2022
00:07:14 and historically from what we believe,
00:07:16 a close below your 20-day moving average,
00:07:19 at least in the past, has led to the Nifty declining
00:07:21 anywhere in the range of 5% to 10%.
00:07:23 So that's another number you wanna watch out for.
00:07:26 21448 is an important level of support.
00:07:29 If that gets taken out,
00:07:31 you will head all the way to the 50-day moving average
00:07:34 which stands at 21,167.
00:07:36 So two important levels to watch out for.
00:07:38 21448 which may get taken out in the early hours of trade
00:07:43 but if you sustain around those levels
00:07:46 for a longer period of time,
00:07:47 you may be heading all the way down to 21,167.
00:07:51 Bank Nifty, I think that requires
00:07:53 a little more of a conversation.
00:07:55 HDFC Bank, a heavyweight, led the decline on Bank Nifty.
00:08:00 The contingent spread from HDFC Bank
00:08:02 to the other private sector banks as well.
00:08:04 So your ICSCA Bank, Kortag Bank
00:08:07 also saw selling pressure emerging.
00:08:08 Of course, nowhere to the extent of a 9% fall that we saw
00:08:12 but IBAN, Kortag were also down
00:08:14 anywhere in the range of 2% to 4% each.
00:08:17 As we set ourselves up for trade this morning,
00:08:19 Bank Nifty also could be testing critical levels
00:08:22 which Agam will take you through.
00:08:24 But worth the mention is that yield curves
00:08:26 in the debt market, Agam, have inverted
00:08:28 which means that short-term yields are higher
00:08:32 than the long-term ones,
00:08:33 simply indicating that liquidity really
00:08:36 is tight in the system.
00:08:37 Historically, of course, this number would freak people out
00:08:40 because it didn't happen as often
00:08:41 and it could be a sign of a recession.
00:08:43 We're not going that far to call it a recession.
00:08:45 It's a tighter liquidity in the system.
00:08:47 But definitely worth the mention.
00:08:48 The rupee as well has been on the sell side.
00:08:51 That's one more thing that you want to watch out for.
00:08:52 But largely speaking, bears in control.
00:08:55 The street will be driven by lots of queues
00:08:58 coming in from earnings
00:08:59 and that will be stock-specific action.
00:09:01 I'll quickly highlight a few stocks beyond HDFC Bank
00:09:04 and of course, Agam will jump in on all the other ones
00:09:07 as well that we're watching out for.
00:09:09 Happiest Minds, numbers reported largely in line.
00:09:13 Nothing really to write home about.
00:09:15 The margins were flat, net profit came in flat.
00:09:18 That's, they've of course talked about
00:09:20 investing heavily into technology.
00:09:22 That's what Happiest Minds is about.
00:09:24 Oracle Financial Services, they've posted numbers
00:09:27 that have surprised the street.
00:09:29 Margins have come up substantially
00:09:30 on back of lower employee benefits
00:09:33 that took place in this quarter.
00:09:34 So from 85% last quarter, it was down to close to 70%.
00:09:38 Higher revenue base, lower employee benefits
00:09:40 have led to improved margins
00:09:42 and operational efficiency for Oracle Financial.
00:09:45 The stock could see some bit of a gain
00:09:46 in early hours of trade.
00:09:48 LTM Mindtree as well, no surprises,
00:09:51 largely flat numbers in line with expectations.
00:09:54 IFL Finance, they've seen a big jump
00:09:56 in fee, income and commission.
00:09:58 We will understand from the management
00:10:00 and they address us later today at around midday
00:10:03 to get a sense of what led to such a spike
00:10:06 in interest, income and fees and commission.
00:10:09 But that's largely IFL Finance,
00:10:10 ALOK numbers in line.
00:10:12 Sun Pharma and Nazara, two other counters to watch out for,
00:10:15 but I'll let you take those and then move on to HDFC Bank.
00:10:18 - Right, absolutely.
00:10:19 So as far as Sun Pharma's concerned,
00:10:20 we understand that they are going to buy
00:10:22 the remaining 21% stake in Taro,
00:10:26 which is their subsidiary.
00:10:27 This also means that Taro will be completely
00:10:30 be taken privately and it will no longer
00:10:32 will trade on the New York Stock Exchange.
00:10:35 And they are going to acquire this particular
00:10:37 additional stake for about a little less than 2,900 crores.
00:10:41 We have Adani Enterprises, which will also be in focus
00:10:43 as it signs a memorandum of understanding
00:10:45 with the Maharashtra government
00:10:47 to set up a one gigawatt hyperscale data center.
00:10:51 And they will invest up to 50,000 crores
00:10:53 over the next 10 years.
00:10:55 Standard disclaimer, the channel that you are watching
00:10:57 is well, Adani Group entity.
00:11:01 Moving on, we also have NHPC government to sell
00:11:04 as much as 3.5% stake in an OFS today and tomorrow.
00:11:09 And this will be at a near 10% discount
00:11:12 to yesterday's closing market price.
00:11:14 And finally, we have Nazara, which will also be in focus
00:11:17 even as it raises up to 250 odd crores
00:11:20 via a preferential issue.
00:11:22 So that perhaps could see some amount of traction
00:11:25 going in today's day of trades, Amina.
00:11:27 - I just wanna quickly mention Polycab as well.
00:11:30 They will be reporting earnings today.
00:11:32 So keep that on your radar.
00:11:34 They remember posted a spectacular quarter in quarter two.
00:11:38 The numbers were on record levels.
00:11:40 The stock for the seventh consecutive trading day
00:11:43 has ended positive.
00:11:44 It went home with gains of 2.5%,
00:11:46 even on a day when the markets have actually seen
00:11:49 a very, very sharp fall.
00:11:50 But keep Polycab on the radar.
00:11:52 Numbers are expected.
00:11:54 I'll give you a quick expectation.
00:11:55 So revenues are expected at 4,376 crores.
00:11:59 EBITDA is expected at 600 odd crores.
00:12:01 Margins are expected to improve at 13.8%.
00:12:04 And PAT is expected close to 417 crores.
00:12:08 I'd be interesting to see if the management talks to us
00:12:10 and gives us any sorts of indication
00:12:12 of everything else that's been happening,
00:12:13 event-based for Polycab.
00:12:15 But the big story is beyond stocks.
00:12:18 It's about the markets, about the fall,
00:12:20 about why HDFC is leading the way down
00:12:23 and may continue to do so today as well.
00:12:26 We, of course, got a conversation going
00:12:29 with Kotak Mahindra's AMC head, Nilesh Shah,
00:12:33 when we asked him about HDFC Bank's sharp fall
00:12:35 in the market post its third quarter earnings announcement
00:12:38 and effectively dragging the bank nifty.
00:12:40 This is what he had to say.
00:12:42 In the stock market,
00:12:47 over promise and under delivery invariably gets punished.
00:12:53 Under promise and over delivery invariably gets rewarded.
00:12:59 For stocks as well as the market,
00:13:02 we'll have to remember that we are trading
00:13:05 at premium valuation to most peer group.
00:13:09 There is expectations that our earnings growth
00:13:12 will be superior and will deliver somewhere
00:13:17 between 15 to 20% compounded profit growth as a market.
00:13:22 Any under delivery over there,
00:13:25 low delivery over there will have its consequences.
00:13:29 That's Nilesh Shah sharing his views
00:13:34 about what he made of those earnings from HDFC Bank
00:13:36 and what, of course, he made about that big impact
00:13:39 it had on Bank Nifty and the contingent fall
00:13:42 that we saw across the markets.
00:13:43 Vishy, I believe you have a little more dope on this one.
00:13:47 The stocks got trashed yesterday.
00:13:49 It continued to get trashed in overnight trade.
00:13:52 This morning, the gift nifty is indicating to a gap down.
00:13:56 Bank nifty is going to look weak
00:13:57 and HDFC Bank may follow suit.
00:13:59 But what is going on?
00:14:01 Because brokerages don't seem disappointed too much.
00:14:04 But the market is either getting ahead of itself
00:14:07 or they're hugely disappointed
00:14:08 and they don't see too much of an end to this.
00:14:11 I don't want to comment on the brokerages,
00:14:13 but the way the numbers have come out,
00:14:16 so there's a clear difference between the deposits
00:14:20 and the advances on the portfolio.
00:14:23 The loan deposit ratio at 110%.
00:14:24 Now, what most people don't seem to realize
00:14:27 is the gap between the deposits and the loans.
00:14:29 Currently, loans are about 2.5 lakh crore
00:14:33 higher than the deposits.
00:14:35 And of course, you need deposits to fund
00:14:37 any kind of loan growth at the bank.
00:14:40 Accordingly, the liquidity coverage ratio
00:14:42 for the bank is about 110%.
00:14:43 The regulatory minimum is 100%.
00:14:45 So it's not like there's a lot of free liquidity
00:14:48 available on the balance sheet to continue
00:14:50 that kind of lending.
00:14:52 On the deposit front, the bank says,
00:14:54 and this is something that the CFO,
00:14:56 Srinivasan Maitendrathan, said during the conference call,
00:14:58 is that deposit growth needs to outpace credit growth
00:15:01 by about 300 and 400 basis points.
00:15:03 That is the only way that you can achieve
00:15:06 a loan deposit ratio that is slightly more respectable
00:15:09 at about 80, 85%.
00:15:11 For that to happen, you need to see
00:15:14 significantly higher deposit accretion,
00:15:15 which in the current environment is highly difficult
00:15:17 because every other bank out there is looking for deposits.
00:15:20 There's a liquidity shortage in the banking system.
00:15:22 So everybody's chasing that deposit pie.
00:15:24 In that framework, in that situation,
00:15:27 all you can do is reduce the advances growth enough
00:15:32 so that your deposit growth starts picking up
00:15:34 about 300 to 400 basis points higher.
00:15:37 Currently, the difference is over 200 bps.
00:15:41 If you look at it sequentially,
00:15:42 advances grew about 4.9%,
00:15:46 while deposits rose about 1.9%.
00:15:49 There's a straight up 300 bps difference
00:15:51 between the advances growth and deposit growth.
00:15:52 So that needs to be reversed.
00:15:54 And that's not looking like a definitive possibility
00:15:57 or a short-term story.
00:15:59 This looks like something that is going to pan out over time
00:16:02 because remember that the bank also has to replace
00:16:05 the borrowings on its balance sheet with deposits
00:16:08 so that it can bring down the cost of funds that it has.
00:16:11 So that's where this entire situation
00:16:13 is lying right now, Saminak.
00:16:14 - Very quickly, Vishy, is this also the case
00:16:17 of going in with high expectations of the management?
00:16:21 Of course, Sajid also has more on that.
00:16:23 And if you can tell us about that, is that what it is?
00:16:30 Is that about the fact that post this merger,
00:16:33 the commentary was such the markets are feeling disappointed
00:16:35 because of under-delivering maybe?
00:16:38 - Well, slightly there was an over-promise problem.
00:16:41 That is for sure, because from the beginning
00:16:43 of this entire conversation, from the merger,
00:16:46 the bank has been repeatedly saying
00:16:47 that this is going to be an accretive sort of merger.
00:16:51 They're capable of replacing high-cost borrowings
00:16:54 with lower-cost deposits.
00:16:56 They will open 1,500 branches every year
00:16:59 so that they can get that deposit by in.
00:17:02 Those things, while they worked for the first year,
00:17:04 the second year, those things have started to slow down,
00:17:06 which is natural because it's a humongous merger
00:17:10 and the financials that we're talking about,
00:17:12 the numbers that we're talking about are large.
00:17:14 So while the market was expecting
00:17:16 that the management can execute it,
00:17:18 clearly there is a gap between that expectation
00:17:21 and the reality that exists on the HDFC Bank book
00:17:24 and that's what's playing out in the stock markets.
00:17:26 - Talking about HDFC Bank,
00:17:27 there was an announcement that they're looking
00:17:29 to open their first branch in Singapore.
00:17:30 So I guess keeping up with their global plans,
00:17:32 if not local expansion plans.
00:17:34 Sajid, I believe you've got some in-depth on HDFC Bank.
00:17:38 - Before that, I have a question for Vishy.
00:17:42 Vishy, the bank has been talking about
00:17:44 that they don't want to go into wholesale deposits
00:17:47 and the reason being that the interest rate cycle
00:17:49 is about to turn.
00:17:51 We heard yesterday, Dinesh Khaira talking about
00:17:54 that the first cut may happen between October, December.
00:17:57 That means that they're going to go slow
00:18:00 for the entire fiscal FY25.
00:18:03 And that also means that either they have to go
00:18:06 for an equity raise or shore up their capital
00:18:08 so that they can meet the guidance of the growth, right?
00:18:11 - Yeah, I mean, ideally, yes,
00:18:12 because the only way to fund that kind of growth, Sajid,
00:18:17 is either through equity or through actual liquidity
00:18:20 that is there in the banking system.
00:18:22 Now, if the liquidity is going to be tight
00:18:24 for the time being, we don't, by the way,
00:18:27 do not know what is going to happen
00:18:29 before the financial year ends
00:18:30 because the budget is coming up next month.
00:18:32 We may see higher government spending
00:18:34 because this is being an election year.
00:18:35 You may see slightly higher government spending,
00:18:37 which basically means that the system
00:18:39 may get a liquidity boost.
00:18:41 But that at this point in time is an uncertain future.
00:18:44 The way the bank has been guiding to the future,
00:18:49 it does seem that it's going to be a tough challenge
00:18:52 to manage that liquidity base.
00:18:54 And if that is going to be a question,
00:18:55 then to fund that growth,
00:18:57 you need the capital to come into the bank.
00:18:59 - Right.
00:19:03 That, of course, is largely what Vishen and Sajid
00:19:06 have been discussing.
00:19:07 Sajid, back to you on more on HDFC Bank.
00:19:11 What are the positions?
00:19:12 Why FPI is selling this one?
00:19:14 I guess you've got some more details
00:19:16 of what's happening on the stock.
00:19:16 - So let's take a look at the intensity of sale
00:19:19 that happened yesterday, right, on HDFC Bank counter.
00:19:23 The average traded volume or traded value
00:19:26 was somewhere around 2,600 crores
00:19:29 on a daily basis for the last one year.
00:19:32 Now, on Jan 17, we saw a total turnover of 13,000 crores,
00:19:37 which is nearly five times the average daily traded turnover.
00:19:42 Delivery was nearly 60%.
00:19:44 If you put it into context for the entire Nifty Bank,
00:19:47 because we saw good action coming in Nifty Bank there,
00:19:51 Nifty Bank turn delivery total was nearly 10%
00:19:54 of the total turnover of the market.
00:19:57 Total turnover of the market between NSE and BSE
00:19:59 was 1.4 lakh crores,
00:20:00 and Nifty Bank itself had 14,800 crores of delivery
00:20:06 across 12 banking stocks.
00:20:09 That brings us to the big question
00:20:11 of what was the kind of total delivery happening
00:20:14 in some of the key stocks there.
00:20:16 8,400 crores of delivery happening on HDFC Bank alone,
00:20:19 nearly 1,800 in SSE Bank, and Axis had 1,200.
00:20:24 All of them with high delivery percentages,
00:20:27 and that's what we saw in the FI numbers
00:20:30 that came in yesterday, provisional numbers,
00:20:32 where the net sale was more than 10,000 odd crores.
00:20:34 A large chunk of that coming from HDFC Bank,
00:20:38 where 8,400 crores of delivery happened there.
00:20:42 So why are FI's selling?
00:20:44 The first thing is that the bank, it seems,
00:20:47 has failed to guide the state on growth
00:20:50 and the merger complications, basically,
00:20:52 or the challenges which are coming in.
00:20:54 It's not been clear in its communication to the state
00:20:58 or to the brokerages or to the fund managers
00:21:00 or to the institutions,
00:21:01 and that is now playing out
00:21:03 for the last couple of quarters.
00:21:05 There is a sacrifice on growth and margin,
00:21:08 which bank is talking about,
00:21:10 which basically means that this bank
00:21:11 is going to be derated from here on,
00:21:14 and because the institutions are holding onto HDFC Bank,
00:21:19 despite the fact that there is a negative news
00:21:22 or underperformance coming in
00:21:24 in the last couple of quarters.
00:21:25 In the last one year, it has fallen by 6 odd percent
00:21:28 compared to the index.
00:21:30 It is basically primarily because they had consistent growth
00:21:35 in terms of top line and bottom line and good margins.
00:21:37 Now, that is going to be a question mark
00:21:40 for all the institutions going forward.
00:21:41 Also, the final thing which I want to talk about
00:21:45 is the HDFC Bank in the model portfolios of all funds.
00:21:50 Whether or not it was performing or not, it was part of it.
00:21:54 Now that there is issue in it,
00:21:56 it's dragging the entire returns for the funds,
00:21:59 and that's the reason why we saw some selling happening.
00:22:02 You look at the ADR premium, how it moved yesterday.
00:22:06 It's come down, it become flat.
00:22:08 It's almost, if you look at here, it's almost at 0.2%,
00:22:13 which basically means that there has been a lot of selling
00:22:15 in the ADR market.
00:22:17 The premium was always because there was a scarcity
00:22:20 and liquidity in the US market.
00:22:24 13.5% of HDFC Bank's equity is in the form of ADRs
00:22:28 in the US market, and there the premium
00:22:30 has always been higher.
00:22:32 Now it has fallen down to 0.2%,
00:22:34 which is at par with the local share price.
00:22:37 So there is going to be some pressure
00:22:39 on HDFC Bank today itself,
00:22:41 but whether it's going to be to the extent
00:22:43 that we saw yesterday is going to be,
00:22:45 it's a question mark here.
00:22:46 The bank will see some kind of correction
00:22:51 as we see in trade today because of the Nifty expiry there,
00:22:55 but I don't think it's going to be to the extent
00:22:58 that we saw yesterday.
00:23:00 - Okay, Sanjeev, thanks so much for getting us
00:23:02 those updates on HDFC Bank.
00:23:03 Of course, a lot of details out there are unprecedented,
00:23:06 as Sanjeev has already pointed out.
00:23:08 The question really is what do we do with this bank
00:23:11 at the moment, providing in anticipation
00:23:14 of perhaps a little more weakness
00:23:15 in today's day of trade as well?
00:23:16 We have Pranav Gundalapale,
00:23:19 the Senior Research Analyst at Bernstein is joining us.
00:23:21 Pranav, good morning and thanks for joining in.
00:23:23 Well, firstly, your assessment of the numbers.
00:23:26 We have gone through your note and well,
00:23:29 you weren't very, very pleased with the earnings.
00:23:32 We understand that, but after the kind of correction
00:23:34 that we saw yesterday, some more correction
00:23:37 perhaps in store today as well.
00:23:40 Where do you stand on this one?
00:23:41 And well, what do you do with this?
00:23:43 - So I think, stepping back,
00:23:46 if you look at the reason for disappointment,
00:23:48 I think when the headline numbers came out
00:23:50 a couple of weeks ago, I think the disappointment
00:23:52 were that the deposit numbers were not very healthy,
00:23:55 growth numbers were not healthy,
00:23:56 but the expectation then was that this should ideally lead
00:24:00 to an improvement in margins.
00:24:02 And going into the quarter, the expectation was that
00:24:06 the previous quarter was the bottom in terms of margin
00:24:09 and the NIM should gradually improve from here on
00:24:12 over the next several quarters.
00:24:14 Now, when the results came out a few days ago,
00:24:19 you had a flat NIM despite the weak deposit growth,
00:24:24 the excess liquidity being trimmed
00:24:28 and the ICRR drag also going away.
00:24:30 So all the near-term drivers for NIM improvement
00:24:33 were all consumed, but the NIM didn't move.
00:24:36 So that was the biggest disappointment, number one.
00:24:38 And number two, I think what was also not clear
00:24:42 was the reason for the weak deposit growth.
00:24:47 And if that was simply a reason or a way to maintain margins
00:24:52 or if it was being driven by other pressures,
00:24:56 such as the need to maintain LCR ratios at certain levels
00:24:59 or in order to optimize for PSL requirements next year.
00:25:04 So I think both a disappointment this quarter
00:25:07 and not knowing the reason for it
00:25:09 and a lack of a clear trajectory to go on
00:25:12 for NIM improvement from here on
00:25:15 would be the key reasons for disappointment.
00:25:17 Now, what would the worst case look like?
00:25:22 See, the worst case here is where the deposit growth
00:25:26 is constrained and that leads to a slower loan growth
00:25:29 and therefore the earnings growth.
00:25:30 But for the reaction that we saw yesterday,
00:25:32 almost a 8%, 9% decline,
00:25:35 that almost factors in a year, year and a half
00:25:38 of absolutely no earnings growth,
00:25:41 which I think is quite extreme.
00:25:43 So after the correction, I think it's probably overdone.
00:25:48 And even for the worst case scenarios,
00:25:51 I think it looks pretty attractively valued
00:25:54 at this point in time.
00:25:55 - Right, Pranav, this is Vishwanath here.
00:25:57 I just wanted to get a sense from you.
00:25:59 So they've guided 300 to 400 basis points
00:26:03 of deposit growth higher than your advances growth.
00:26:06 That's the only way to bring that LDR
00:26:08 into a respectable range.
00:26:12 Currently, the gap is already 300 bps.
00:26:14 And if you want to outpace it by another 300 bps,
00:26:16 that's an additional 600 basis points of deposit growth.
00:26:19 What is a realistic number that you're looking at
00:26:23 on the deposit growth front?
00:26:24 Because you said that the stock correction yesterday
00:26:28 assumed a year, year and a half of no earnings growth.
00:26:31 So has that been factored in fully
00:26:34 or do you think it may take even longer than that?
00:26:36 - Okay, see, I think on the deposit,
00:26:40 there are two parts to this, Vishwanath.
00:26:42 I think one is there is the core retail deposit growth,
00:26:46 which I think they are delivering,
00:26:48 let's say three to four percentage points
00:26:50 easily over the system.
00:26:52 They're getting incremental markets of 80, 20%.
00:26:54 Now, the second part is the wholesale deposits,
00:26:57 which they actually trimmed down last quarter.
00:27:00 And I think the challenge is if they are able
00:27:02 to raise wholesale deposits,
00:27:05 then they could get to easily about four to five
00:27:08 percentage points over the system growth rates.
00:27:10 So I think the question is what is the constraint
00:27:14 on raising more wholesale deposits?
00:27:15 Is it simply the cost of funds
00:27:17 or is it actually the LCR constraints?
00:27:20 Now, therefore for a reversal of the LDR
00:27:25 or the improvement in LDR,
00:27:29 what now becomes important is the system deposit growth rate.
00:27:32 So if the retail deposits are only going to grow
00:27:35 at three to four percentage points over the system growth
00:27:37 and if unless the system comes back to,
00:27:40 let's say 13, 14% growth in deposits,
00:27:44 it's going to be hard for them to get to something
00:27:47 in the 20% range of deposit growth,
00:27:50 which is required for that 17 odd percent of loan growth.
00:27:53 So where we stand today,
00:27:55 it is going to be a scenario where loan growth
00:27:59 will be almost three percentage points lower
00:28:01 than the deposit growth.
00:28:03 And HDFC's deposit growth now appears to be a lot more
00:28:06 dependent on the system deposit growth coming back
00:28:09 rather than any self-help story that they have.
00:28:12 - So then what does that do for the margins?
00:28:13 Because that's the bigger question, right?
00:28:15 I mean, 3.4% they remain flat,
00:28:18 but how much longer can they maintain that 3.4
00:28:22 if they're going to slow down on the loans
00:28:23 and push up deposits or whatever,
00:28:25 as the system pushes up deposits?
00:28:27 - See, one of the two will happen.
00:28:30 I don't think it's a case where both happen, right?
00:28:32 So if you have a slowdown in loan growth,
00:28:35 let's say 10%, right?
00:28:36 And the deposits are going to grow at 30%,
00:28:39 then what you will have is the margins will stay
00:28:41 where they are, with in fact, a slight improvement
00:28:44 in margins, because you have more deposits coming in
00:28:47 and replacing borrowings, right?
00:28:50 So in that first case scenario of loans slowing down
00:28:54 to extremely low levels, you will have margin improvement.
00:28:58 The other way around would be where they continue
00:29:01 to push on loan growth, but then they increase
00:29:03 the share of borrowings even further,
00:29:05 push up LDR even higher, but that's probably going to lead
00:29:09 to a hit on margins, which is probably not the route
00:29:13 they will take.
00:29:14 The more likely route is where they slow down
00:29:16 the loan growth to the extent where it catches up,
00:29:19 it matches deposit growth minus 3%.
00:29:23 And that will lead to automatic margin improvement,
00:29:27 if not at least a stabilization.
00:29:28 - Right, the last question from my front,
00:29:30 and I wanted to ask you one point that the management
00:29:35 had mentioned and caught my attention where they said
00:29:37 that the infrastructure bonds that they've taken
00:29:41 on their book, about 7,500 crore during the quarter,
00:29:44 that is slightly better than fixed deposits
00:29:47 in terms of its nature, but then the cost question
00:29:49 still remains, so I'm just trying to figure out
00:29:51 what the logic behind that is.
00:29:52 - So I think the infrastructure bonds will be
00:29:56 a tad more expensive than term deposits,
00:29:58 so going that route will hit the net interest margins
00:30:02 for sure, but where it helps is that it reduces
00:30:06 the PSL requirements in the following year,
00:30:08 and therefore the cost of meeting a potential shortfall
00:30:12 next year will start to come off.
00:30:13 So it's going to be worse off in the current period,
00:30:17 but hopefully benefit the bank in the outer years.
00:30:21 So I think that's the trade off, and that's one reason.
00:30:27 The second reason is also that the infrastructure bonds
00:30:30 will be more favorable to the LCR ratios than raising,
00:30:34 let's say, a wholesale deposits,
00:30:36 which would have a greater runoff.
00:30:38 So I think both these factors were probably the reasons
00:30:42 why there was a preference for the infrastructure bonds,
00:30:45 but it doesn't help NIM in any way in the near term.
00:30:48 - Pranav, completely take your point.
00:30:50 The company has, the bank rather, has concerns,
00:30:54 there is disappointment.
00:30:56 We've seen market cap erosion as well yesterday,
00:30:59 might see some today.
00:31:01 At what price does HDFC Bank become valuable?
00:31:05 Because at some stage, I'm assuming the risk reward
00:31:08 will be in favor of HDFC Bank.
00:31:10 - See, I think it's a very attractively valued event today.
00:31:14 I think the debate is simply that how long does it take
00:31:17 for that whole rewriting story to play out,
00:31:19 or that improvement to play out?
00:31:21 I think what's changed with the results
00:31:23 is that what was supposed to be a gradual journey
00:31:26 starting from this quarter,
00:31:28 seems to be a pushed out by several quarters,
00:31:31 and two, appears to be less in the hands of the bank
00:31:35 and more in the hands of what happens
00:31:36 to the system deposit growth.
00:31:37 So I don't think the longer term thesis has really changed,
00:31:40 and therefore, for someone with a much longer outlook,
00:31:43 I don't think this should have changed,
00:31:46 should change a lot of things,
00:31:47 but it does change the timelines
00:31:50 for that whole improvement story to play out.
00:31:54 - Pranav, taking a cue from HDFC Bank's earnings,
00:31:57 the disappointment, the reaction,
00:31:59 we did see the sell-off spread across
00:32:01 other private sector banks as well yesterday.
00:32:03 Of course, nowhere close to the fall
00:32:05 kind of fall HDFC Bank witnessed,
00:32:08 but as we are gonna see earnings rolling out
00:32:10 from the other private bank majors,
00:32:12 are you going back and moderating your expectations
00:32:15 of what to expect from maybe a quota
00:32:17 can access in ICICI Bank in that regard?
00:32:21 - So I think the big question would be on the NIMS, right?
00:32:26 So I think with HDFC,
00:32:28 there were two factors playing on the NIMS.
00:32:30 One was the higher pricing of liquidity
00:32:34 and the tightness of liquidity
00:32:35 translating to higher price of deposits
00:32:38 and general cost of funds.
00:32:40 The second was HDFC's own issues
00:32:42 in terms of LCR and PSN, et cetera.
00:32:45 So I think the key question going into the weekend
00:32:47 would be to see how much of an impact
00:32:50 this type of liquidity has had on ICICI.
00:32:52 I think it would be hard to make a read across
00:32:56 into ICICI or access simply based on HDFC
00:32:58 because it has two different factors at work.
00:33:01 And if we have a much sharper compression in NIMS,
00:33:05 then yes, I mean, I think that will lead to a further
00:33:09 lowering of expectations on NIMS.
00:33:13 I think the street already expects a decline in NIMS,
00:33:16 but more gradual and more marginal,
00:33:19 but a sharper decline will lead to lowering of expectation,
00:33:23 especially with a potential rate cut at the end of the year.
00:33:27 I think the expectations will start to temper down a bit.
00:33:30 - Pranav, it was fantastic chatting with you
00:33:33 and understanding from you, your view on HDFC Bank
00:33:35 and the rest of the banking space.
00:33:37 We'll hopefully catch you soon again.
00:33:39 In the meantime, a quick check on GIFNifty
00:33:42 and what are we expecting in today's opening.
00:33:45 The last we checked, there was a 200 point cut
00:33:47 that's narrowed down to 170 points for now.
00:33:49 So opening closer to levels of 21,420 cannot be ruled out.
00:33:54 HDFC Bank will again be in focus.
00:33:58 The ADR was down another 9%.
00:34:00 So some pressure in early trade is what we're expecting.
00:34:03 We'll take a break, but we'll come back.
00:34:04 We'll put the focus on technicals, so stay tuned.
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00:37:07 - Welcome back to India Market Open.
00:37:19 And we now take stock of how things have panned out yesterday
00:37:22 in the futures and options space,
00:37:24 and potentially what we can expect
00:37:26 going into today's day of trade.
00:37:28 Let's start off by taking a look at
00:37:29 what's happened in the index futures.
00:37:31 Let's take a look at the Nifty.
00:37:33 Now a 2% cut coming through
00:37:35 and a substantially deep gash
00:37:37 as far as the index is concerned,
00:37:39 but we saw unwinding in the index futures
00:37:42 to the tune of around 9%.
00:37:44 A lot of positions being taken off,
00:37:46 potentially a lot of longs unwound yesterday.
00:37:50 But when it comes to the bank Nifty futures,
00:37:52 the picture was completely different.
00:37:55 Taking a knock of four and a quarter percent yesterday,
00:37:58 it was the biggest percentage fall since March of 2020
00:38:03 on the index, even as we saw a 20% increase
00:38:08 in open interest towards fresh shorts.
00:38:11 Does that mean we are likely to see
00:38:14 some amount of profit taking in early trade?
00:38:17 Well, that's a wait and watch,
00:38:18 and we have no guarantees whatsoever
00:38:21 as to where and what direction can this index go,
00:38:25 considering we are already expecting
00:38:27 further weakness to come through.
00:38:29 That said, in terms of the options market,
00:38:31 coming down to what happened yesterday,
00:38:33 and this of course was not surprising.
00:38:35 We saw a lot more writing around the higher level calls,
00:38:39 and while the 22,000 is completely out of the picture,
00:38:43 the 22,000 strike, where we're now starting to see
00:38:46 a little more writing, return to 21,700,
00:38:49 21,800, 21,900 calls.
00:38:52 And on the put side, as you can see,
00:38:54 well, traders at the moment are not really,
00:38:57 you know, enthused about selling any of that,
00:38:59 so we don't have much traction there.
00:39:02 Let's talk about the open interest distribution then,
00:39:05 and for now, that OI max distribution for the call
00:39:09 has shifted back from 22,000 to 21,800,
00:39:13 and that perhaps could provide us
00:39:14 with a little bit of support, pardon me,
00:39:16 resistance on the higher end, at least momentarily.
00:39:19 And on the lower end, 21,500 has max OI.
00:39:23 For today's day of trade, but that's a weak one.
00:39:26 And considering we are going to see the Nifty
00:39:27 open below that mark anyway,
00:39:29 well, that clearly is going to be taken out
00:39:31 of the picture once again.
00:39:33 Let's talk about the handful of stocks which were in focus.
00:39:37 So we did have a whole load of private sector banks
00:39:40 which saw declines.
00:39:42 HDFC Bank, notwithstanding, which did see
00:39:44 about 20% increase in open interest towards shorts.
00:39:47 Kotag Mandir Bank also falling,
00:39:49 and we saw shorts building up in Asian Pains as well.
00:39:53 Perhaps a little bit of reaction to earnings.
00:39:55 Longs in ICICI, Lombard, and Oracle Financial Services,
00:39:58 and among stocks which are unwinding in trade,
00:40:00 well, we took a look at short covering
00:40:03 in L&T Technologies and Metropolis.
00:40:06 SAIL, Chamel Fertilizers, and Jindal Steel saw unwinding.
00:40:10 But that said, what do we do with these benchmarks
00:40:12 at the moment on what could potentially be
00:40:15 another very challenging day?
00:40:17 Well, we have Kunal Rambia, who is joining us
00:40:20 on the show right now to perhaps take us through
00:40:22 what he makes of these markets and cues.
00:40:26 Kunal, good morning and thank you so much for joining in.
00:40:28 Let's start with your assessment on the benchmarks.
00:40:31 What would you do with the Nifty and the Bank Nifty
00:40:33 considering we are going to look at a big gap down?
00:40:37 Do you think that some shorts could potentially,
00:40:40 could be covered, or can we expect more weakness
00:40:42 through the course of the day?
00:40:44 - Hi, morning, Agam.
00:40:45 Thank you for having me on the show
00:40:46 and morning to all our viewers also.
00:40:48 So if you look at the Nifty per se,
00:40:49 see, it's been almost 15 trading sessions.
00:40:52 Nifty made a bottom, a sustainable bottom rather,
00:40:54 I would say at 21,450 mark,
00:40:56 and that was almost tested three to four times.
00:40:59 Certainly we are witnessing a massive correction right now,
00:41:01 which has been a very short and a speedy correction.
00:41:03 But at the same time, I think till the time 21,450
00:41:07 is not taken out decisively on the Nifty,
00:41:09 the trend remains intact and one should definitely
00:41:12 capture this correction as a buying opportunity.
00:41:15 If I come to Bank Nifty, certainly the trend is intact
00:41:18 since October, 2022, and it's clearly making higher top,
00:41:22 higher bottom formation.
00:41:23 But now we are heading for that particular gap,
00:41:25 which we saw during the beginning of December
00:41:28 due to state elections.
00:41:29 I think the good support is placed at around 44,800 mark,
00:41:32 where that gap actually emerged.
00:41:35 So 44,800 is something to watch out as the support level.
00:41:39 Till the time the indices are near to,
00:41:40 or about those particular two levels which we discussed,
00:41:43 I think buy on dip can be a good strategy
00:41:45 from long-term point of view.
00:41:46 - Okay, a buy on dip from the long-term point of view.
00:41:51 But let's talk about a handful of stock ideas,
00:41:53 Zankunal, what's the first one on your radar?
00:41:56 - So Agam, first let's speak about Maharuti.
00:41:58 Now this counter is in, what we have seen is,
00:42:01 it's been a laggard in the entire market journey so far,
00:42:04 and it's been 93 days this counter has been
00:42:06 in the sideways consolidation,
00:42:07 and now a bit of selling pressure is also building up.
00:42:10 So the strategy which I'm suggesting here
00:42:12 is a simple bear put spread strategy.
00:42:15 It's a debit spread strategy.
00:42:17 What are we supposed to do is to buy 10,000 strike put
00:42:20 at the rate of 122.5, which is yesterday's closing.
00:42:23 And if you look at the 9,700 strike price put,
00:42:27 I think that's trading at around 48.
00:42:29 So if we buy 10,000 put and we sell 9,700 put,
00:42:34 the total cost of this strategy
00:42:35 is gonna be around 74 and a half.
00:42:37 And the max profit which we're expecting
00:42:39 is around 225.5 if this selling pressure
00:42:42 builds up really big.
00:42:44 But here, one need not to miss out on the whole cost,
00:42:47 which is a strategy which is at around 74.5.
00:42:50 I think one can keep the stop loss of around 50 points
00:42:53 on the debit spread.
00:42:54 So the max loss in this can be managed till 24.5,
00:42:57 with a huge potential on the upside to say 225.5.
00:43:01 - So an interesting spread coming here
00:43:03 when it comes to, well, Maruti Suzuki.
00:43:06 What we are looking at is a spread in which
00:43:09 your max loss is a rupee,
00:43:12 and well, your maximum profit stands at around two rupees.
00:43:15 Of course, this is on an expectation
00:43:19 that we could see an improvement in stock.
00:43:21 But Kunal, coming down to TCS,
00:43:23 I believe you have another strategy here as well.
00:43:25 - Yeah, so I'm going a little aggressive on the TCS.
00:43:28 Now, this strategy is gonna be kind of a straddle,
00:43:31 short straddle with a long futures,
00:43:32 because we have seen a massive uptrend.
00:43:34 And if you look at the chart,
00:43:35 it's clearly making higher top, higher bottom,
00:43:37 even post the result announcement, right?
00:43:39 So going long on the future, that 3860,
00:43:42 and with a short straddle with a strike price of 3880.
00:43:45 Now the combined call and put premium
00:43:47 of this is approximately 102.
00:43:49 So what we do is we put a stop loss of the strategy
00:43:52 if the futures fall below 3820.
00:43:55 So now the max loss in case of futures getting triggered out
00:43:58 is 40 points, and by then, I think put might just increase,
00:44:02 call might decrease, and approximate loss on that can be 20.
00:44:05 So the max loss on this can be around 60 points.
00:44:08 And if the strategy turns out to be perfect,
00:44:11 and if the counter remains either sideways or positive,
00:44:14 we can expect 3% returns in the next,
00:44:17 remaining two weeks of the expiry.
00:44:19 So I think this can be a good strategy
00:44:21 from long point of view,
00:44:22 but yeah, it's an aggressive strategy.
00:44:24 - Very, very interesting strategy there,
00:44:25 combining futures along with a short straddle on the TCS,
00:44:30 looking to play for an upside of as much as 3%
00:44:34 as far as this specific,
00:44:36 well, play on futures and options is concerned,
00:44:40 involving both in fact.
00:44:42 Well, on that note, Kunal, I would take a moment to thank you
00:44:44 for taking us through your views,
00:44:46 as well as providing us with a handful of trading ideas.
00:44:50 And with that, it's over to you, Samina.
00:44:52 - Thank you for that, Agam.
00:44:53 Those are, of course, trading ideas for our viewers
00:44:56 and all the F&O activity that we bring to you
00:44:58 every single day by Agam.
00:45:00 Well, we'll take a quick break,
00:45:02 but just before that, a quick, you know,
00:45:05 some market opinion really coming in from Nilesh Shah
00:45:07 of Kotak Mahindra AMC,
00:45:09 who talks about what brought the bull run to a halt,
00:45:12 what the correction signifies,
00:45:14 and what sectoral action is saying.
00:45:15 Here's a slice of that conversation.
00:45:17 - (speaking in foreign language)
00:45:23 We had a fantastic bull run in last few months,
00:45:28 and clearly market was running
00:45:31 little bit ahead of its fair value.
00:45:34 The large caps, the mid caps, and the small caps
00:45:38 all were trading above their historical averages.
00:45:42 This is some sort of reality check.
00:45:44 A silver lining among the dark cloud today.
00:45:48 The mid cap index has actually fallen
00:45:52 less than the large cap index.
00:45:55 It shows that in select counter,
00:45:59 people are still looking to buy on correction.
00:46:02 (silence)
00:46:04 Yeah.
00:46:07 Okay, so let me, before I go to the broader question,
00:46:12 the trigger came from HDFC Bank.
00:46:15 I know you may not be able to talk about specific,
00:46:17 but that was a key trigger after the results.
00:46:20 After the analyst call yesterday,
00:46:23 there is this concern in the markets
00:46:25 that HDFC Bank may not be able to keep up pace,
00:46:29 but we all thought initially that,
00:46:31 okay, that's part of the reaction, it's priced in,
00:46:34 but suddenly the wave of selling that started in HDFC Bank,
00:46:38 and it spread to the rest of the bank index,
00:46:41 especially Nifty Bank, and by the end of the day,
00:46:43 we saw that almost 9% down
00:46:47 as far as HDFC Bank is concerned.
00:46:48 How do you look at this?
00:46:50 So, Murali, as you mentioned correctly,
00:46:54 we can't make stock-specific comment,
00:46:57 but clearly, if you are Virat Kohli or Rohit Sharma,
00:47:01 there is expectations that you will be hitting centuries.
00:47:06 There is expectations that you will dominate the ball.
00:47:08 In the stock market,
00:47:12 over-promise and under-delivery invariably gets punished.
00:47:18 Under-promise and over-delivery invariably gets rewarded.
00:47:25 For stocks, as well as the market,
00:47:28 we'll have to remember that we are trading
00:47:31 at premium valuation to most peer group.
00:47:35 There is expectations that our earnings growth
00:47:38 will be superior and will deliver
00:47:42 somewhere between 15 to 20% compounded profit growth
00:47:46 as a market.
00:47:47 Any under-delivery over there, low-delivery over there,
00:47:53 will have its consequences.
00:47:55 Right.
00:47:57 So, what happened today looks like the World Cup final.
00:48:00 We all built up a lot of expectations
00:48:02 and we know what happened at the World Cup final.
00:48:05 Now, apart from cricket analogy,
00:48:07 I want to look at what else is happening
00:48:11 in the financial system, financial markets.
00:48:14 Somewhere, I also get the sense that there is lot of money.
00:48:20 There are excesses in the system that have taken place.
00:48:23 The kind of oversubscription in the IPOs,
00:48:25 the kind of leveraging that has happened,
00:48:28 and the RBI had to step in and tighten.
00:48:31 Now, do you think that the market is coming to terms
00:48:35 with the measures that the RBI has taken
00:48:37 and the SEBI's watchful eyes,
00:48:39 that the leverage is becoming expensive
00:48:42 and therefore people are cutting back?
00:48:44 So, undoubtedly, without cart rail,
00:48:49 it's difficult to play a bowling game.
00:48:52 Your ball will go into any lane.
00:48:55 It is the regulator's cart rail
00:48:58 which keeps economy and market on the right track.
00:49:01 And we have seen SEBI has taken several steps
00:49:06 to ensure that our markets become fairly solid
00:49:11 from a margin and settlement point of view.
00:49:15 Despite large volumes in options and futures,
00:49:19 the margining system by and large
00:49:21 has worked fantastically well.
00:49:23 There's no reason for disappointment.
00:49:26 The leverage for the system is now coming more and more
00:49:31 through derivatives.
00:49:33 Some of it is inherent and may not be even acknowledged
00:49:37 by people who are using that.
00:49:39 But a large part of derivative position
00:49:42 is used by informed investors,
00:49:46 albeit driven more by non-institutional investors.
00:49:51 So, I will say that the correction in the market
00:49:55 is probably a function of the run-up
00:49:59 which we witnessed in last few months.
00:50:01 From a payment margin leverage point of view,
00:50:04 market looks fairly solid.
00:50:07 The systems are working.
00:50:09 Well, that's Nilesh sharing his view
00:50:11 on the big fall of HDFC Bank
00:50:14 and of course what that signifies for the markets as a whole.
00:50:17 A quick check on GIFNifty
00:50:19 before we move on to our conversation with our guest.
00:50:21 Remember, it was looking far worse actually.
00:50:24 Literally 45 minutes ago,
00:50:26 the gap down was 200 points, now at about 167.
00:50:29 So, as we get closer to pre-open trade,
00:50:32 GIFNifty's fall is looking slightly better
00:50:36 than it did about an hour ago.
00:50:38 Well, Shrikant Shohan, Executive VP and Head Equity Research
00:50:42 at Kotak Securities joins in as well.
00:50:44 Shrikant, good morning.
00:50:46 How do you feel about the markets?
00:50:48 I mean, we talked about a fall yesterday.
00:50:49 There was anticipation,
00:50:51 at least in the first few hours of trade,
00:50:52 that if 21,850 would be held out.
00:50:55 Now, that's not happened.
00:50:57 It's the very first time since the 23rd of October
00:50:59 we've closed below our 20-day moving average.
00:51:02 And historically, whenever that happens,
00:51:04 the markets have fallen in the range of 5% to 10%.
00:51:07 If we get a start around 21,500,
00:51:10 would you be brave enough to go short on the index?
00:51:14 Yeah, good morning.
00:51:18 I think, see, what you're saying is right,
00:51:19 that whenever the market breaks the important level,
00:51:21 it comes down further.
00:51:24 But the way the market has fallen in just last two days,
00:51:27 and if we go through with the option statistics
00:51:29 and the fall in a very short period of time,
00:51:33 I think between 21,500 to 400,
00:51:37 we should look for adding some long position.
00:51:39 In fact, we should look for taking some contra bets
00:51:41 close to 21,400.
00:51:43 The reason is because the overall,
00:51:44 the broader trend of the market is still very strong.
00:51:47 Until the markets are not closing
00:51:49 below the swing lowest level of 21,400,
00:51:53 we are expecting market to remain in a broader range
00:51:57 of 21,400 and maybe 22,000 on the higher side.
00:52:01 So based on the put-call ratio,
00:52:02 based on the option statistics and retracement,
00:52:05 we are of the view that we should look for adding
00:52:07 or taking some contra bets close to 21,400.
00:52:10 We can expect some rebound,
00:52:11 maybe up to 21,700 or 800,
00:52:14 which is decent in the current environment.
00:52:18 Also, if we go through with the private banks,
00:52:20 then they will also turn oversold in the near term,
00:52:23 along with Bank Nifty.
00:52:24 So the strategy should be to look for adding position
00:52:28 instead of going short below 21,500.
00:52:32 Right, below 21,500,
00:52:34 but Shrikant betting and hoping that there could be a rebound,
00:52:37 a small rebound at least at these levels.
00:52:39 Sunny Agarwal, Head of Fundamental Equity Research
00:52:42 at SBI CAB Securities joins in.
00:52:44 Sunny, I'll talk to you about the broader markets in a minute,
00:52:47 but what's the view on HDFC Bank?
00:52:50 It fell 9%.
00:52:51 Yesterday in overnight trade on Wall Street as well,
00:52:54 there was a sharp fall.
00:52:55 Selling is expected to continue.
00:52:58 At what price would you be a braveheart and buy HDFC Bank?
00:53:02 How much more from here?
00:53:05 Yeah, good morning.
00:53:06 Thanks for having me on the show.
00:53:07 So, first of all, I would like to highlight one point
00:53:11 that the price at which yesterday HDFC ADR has closed,
00:53:14 and if you convert that into Indian rupee,
00:53:17 right now that clearly shows that the premium
00:53:20 which ADR was commanding, that may shrink a bit.
00:53:26 And if I convert that into Indian rupee,
00:53:28 I feel ideally the stock should open kind of flattish
00:53:32 as far as HDFC Bank is concerned.
00:53:34 So, there are two possibilities.
00:53:37 Either premium vanishes completely,
00:53:39 and we may see kind of flattish opening today,
00:53:42 or there may be a shrinkage of premium of HDFC ADR
00:53:46 as compared to HDFC Bank share.
00:53:49 So, to that extent, the gap down opening may not be
00:53:52 to the tune of 8% to 9% in HDFC Bank.
00:53:54 Maybe 2%, 3% is a gap down we may see.
00:53:58 So, let us see where does it settle.
00:53:59 However, in terms of valuation,
00:54:01 definitely I'll pose this correction.
00:54:03 If somebody has got a slightly longer horizon,
00:54:06 medium to long term horizon,
00:54:08 then it's a good opportunity to accumulate HDFC Bank
00:54:11 in a long term portfolio.
00:54:13 The approach can be obviously a gradual deployment
00:54:16 of the capital rather than deploying entire capital
00:54:18 at one go.
00:54:19 SIP route is the best way where one can deploy
00:54:22 his or her capital over the period of next three
00:54:24 to six months in HDFC Bank.
00:54:26 - All right, Sunny.
00:54:28 Well, that's the street view as far as HDFC Bank's concerned.
00:54:31 But we have some exclusive details from our sources,
00:54:34 and we get to understand, get more insight
00:54:37 as to what could potentially could have gone wrong
00:54:40 with the bank.
00:54:41 And we have a colleague, Muralidhar Swaminathan,
00:54:43 who's also joining us to give us more insights in there.
00:54:46 Murali, thanks for joining in.
00:54:47 What else do we have?
00:54:49 - Okay, I spoke to some very senior sources in the industry.
00:54:56 The most important problem now is not with the bank,
00:55:00 but with the communication.
00:55:02 So the guidance given by the bank management
00:55:05 has not addressed the investor expectations.
00:55:08 So there is a big gap between the two.
00:55:11 So what's happened, they focused,
00:55:14 in fact, the market has been focusing
00:55:15 on the net interest margin.
00:55:17 NIMS is the focus of the market.
00:55:19 But the bank should have clearly addressed this issue
00:55:23 and said that this is a short term problem.
00:55:25 And the focus should be on return on equity.
00:55:29 Now, what went wrong?
00:55:30 Over the last one and a half to two years,
00:55:32 we all know that the cost of funds
00:55:34 have been going up dramatically.
00:55:37 Liquidity is tightened,
00:55:39 depositors are moving in and out of the banking system
00:55:42 because they find returns much better elsewhere.
00:55:46 So now this is a transition.
00:55:48 It's actually a transitionary phase.
00:55:50 For a bank like HDFC Bank,
00:55:52 they should clearly articulate to the investors.
00:55:55 They should come out and talk to the investors even today.
00:55:59 In fact, the source also pointed out
00:56:01 that the management should immediately come out
00:56:04 and talk to the investors,
00:56:06 allay their fears and say that the focus is not on NIMS.
00:56:11 Because if you focus on NIMS,
00:56:12 then the long term stability of the bank will be hit.
00:56:15 Because we are coming to the end
00:56:17 of the interest rate hike cycle.
00:56:20 It's a matter of few quarters,
00:56:21 maybe mid June or maybe October,
00:56:24 the rate cycle could turn,
00:56:26 not only globally, but in India too.
00:56:28 So that is the biggest problem of communication.
00:56:32 Management should have very clearly guided
00:56:34 and said that, look, this is a short term problem.
00:56:38 And that they should have built in
00:56:39 over the last few quarters and navigate.
00:56:41 So fair to say, Murali,
00:56:43 that after the merger, expectations had,
00:56:47 were anyway muted.
00:56:48 Management, of course, in some ways
00:56:50 had over committed, maybe talked about a timeline
00:56:53 that was a little far fetched, A.
00:56:55 And B, so would we then say that the problem is
00:56:58 the management as opposed to the business itself?
00:57:01 Because the business, what it's going through,
00:57:03 may be an industry phenomenon at this point.
00:57:07 - Yeah, no, so there are two factors to this.
00:57:09 One is, as you said, the merger.
00:57:11 The merger itself, there is a certain timeline to it,
00:57:14 but the timeline is a process.
00:57:16 What's happening in the rest of the economy
00:57:18 is something that has not been factored in,
00:57:21 which is the cost of funds.
00:57:22 When your cost of funds goes for haywire,
00:57:25 there is a certain level of overconfidence.
00:57:27 I will not say over promise,
00:57:28 that overconfidence was there,
00:57:30 and that was built in, see,
00:57:32 HTC Bank, we all know, we trust the bank
00:57:35 over the last 15, 20 years.
00:57:38 Everybody knows that every year they will deliver.
00:57:41 - It was called the 30% bank for the longest time.
00:57:43 - 30% bank for the longest time.
00:57:44 So even now, what my source told me
00:57:47 is that there is no problem with the bank itself.
00:57:50 The growth is fine, but it's a short term.
00:57:53 It's a transition.
00:57:54 Now that communication has to go,
00:57:56 and he suggested that the bank should come out
00:57:59 immediately and address this to stem the decline.
00:58:03 - In fact, that's what we've been talking about as well.
00:58:06 At some price, HDFC does become valuable, right?
00:58:09 The risk reward will be in favor of the bank.
00:58:12 At what point is anybody's guess.
00:58:15 But thank you, Mulyadharan, for that.
00:58:16 We'll take a quick break.
00:58:17 We'll come back.
00:58:18 We're expecting a weak start,
00:58:20 but not as weak as we thought it would be
00:58:22 at 8 a.m. this morning, so stay tuned.
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01:00:08 - Welcome back.
01:00:12 You're watching India Market Open.
01:00:13 It's expected to be a negative start,
01:00:15 150, you want the 160 point gap down
01:00:17 is what we're expecting on the Nifty.
01:00:19 As we gear up for trade this morning,
01:00:21 Asian cues are negative,
01:00:22 the dollar rupee as well is expected to see some weakness
01:00:26 from the get go at 9 a.m.
01:00:27 Well, Shikant, we talked to you about Nifty.
01:00:30 What's the trade on Bank Nifty?
01:00:32 What is the trading range?
01:00:33 What would you do if you get a gap down
01:00:35 on Bank Nifty this morning?
01:00:36 - Yeah, I think, see like for Bank Nifty,
01:00:41 if we see the overall pattern,
01:00:44 then it has broken the crucial important support level,
01:00:48 which was around 46,900 and it closed below the same.
01:00:53 But at the same time,
01:00:54 if we see the entire pattern of the Bank Nifty,
01:00:58 then based on its current setup,
01:01:02 it is heading to the extreme oversold conditions.
01:01:04 At the same time, it is heading towards
01:01:06 the 50% retracement of the entire rally,
01:01:09 which most of the time acts as major support
01:01:11 for the market for that particular index
01:01:14 as well as reversal point.
01:01:16 So the strategy should be to look for adding positions
01:01:19 close to 45,300, 400 levels.
01:01:21 We can again expect rebound
01:01:24 because it is down deeply from the highs of 48,000
01:01:27 to almost 45,000.
01:01:28 So close to 45,300 levels,
01:01:30 we should look for adding positions
01:01:32 with a stop loss close to 45,000.
01:01:34 And specifically for HDFC Bank,
01:01:37 I think it is into that corrective pattern
01:01:40 and 1430, 1440 should be the level
01:01:43 where we should look for adding some positions
01:01:45 because again, here also we will see
01:01:48 some oversold activity.
01:01:50 And I think 1400 is the area
01:01:52 where we should look for adding
01:01:54 if there is a medium to long term.
01:01:55 We've got 39 seconds to go
01:01:58 as we're gearing up this morning.
01:01:59 It's looking rough
01:02:00 and that's probably the most polite way
01:02:02 of putting it out there.
01:02:03 Sunny, we'll come to you in a minute
01:02:05 to get a broader view on the markets
01:02:07 and the largest earning season at whole.
01:02:10 But in the interim,
01:02:11 the Nifty is expected to see a gap down.
01:02:13 Remember, we sold off over 2%
01:02:15 in trade yesterday.
01:02:16 Highest level of selling seen by the FII.
01:02:19 We closed for the very first time
01:02:20 below our 20-day moving average
01:02:21 since the 23rd of October.
01:02:23 HDFC Bank let the losses,
01:02:25 lost about 1 lakh crores of market cap
01:02:28 in one single trading day.
01:02:30 Well, it is what we're gearing up for,
01:02:32 21,571 is where we closed trade.
01:02:36 This morning as well,
01:02:37 it looks like 21,000,
01:02:40 actually, this is all over the place.
01:02:42 It's indicating to a positive start.
01:02:44 It's not going to play out like that.
01:02:46 Well, 100 point up move on the Nifty
01:02:48 is not an option this morning.
01:02:50 A quick check on HDFC Bank
01:02:52 before I let go over to Sunny and Shikant
01:02:55 to continue our conversation.
01:02:57 There you go. The Nifty is settling.
01:02:58 If I can just get HDFC Bank,
01:03:00 it'd be useful to see what we're expecting
01:03:02 on the bank in early trade.
01:03:05 That's the story. Actually, you know what?
01:03:06 It's not looking as bad as the ADR was indicating.
01:03:09 The 1% cut is what we have.
01:03:12 Sunny, is this an option?
01:03:14 A view on the markets very quickly
01:03:16 before I take a technical check from Shikant.
01:03:18 But how do you feel about the markets at these levels?
01:03:20 Would you advise investors to participate
01:03:22 or staying on the sidelines
01:03:24 as we go through the earning season
01:03:25 is probably a better thing to do at this stage?
01:03:29 Yeah, what I feel is that right now markets
01:03:33 and opportunities are definitely there
01:03:34 in terms of wealth creation.
01:03:36 So one need to be stock specific
01:03:38 and be on the right side of market.
01:03:41 So obviously in terms of fraud,
01:03:43 there are few pockets of the market
01:03:46 like small cap, micro cap
01:03:47 where the valuations have gone through roof.
01:03:50 So it's better to stick to the large cap
01:03:53 or decent sized, mid-sized companies.
01:03:56 And we focus on the companies
01:03:58 where there is a bottom-up growth story.
01:04:00 So a few sectors which we like
01:04:02 from a short to medium-term perspective
01:04:04 are auto, auto and serial sector.
01:04:06 That is a sector where we feel that
01:04:08 the earning growth will continue
01:04:10 and still there is a money-making opportunity
01:04:12 in some of the underperformers
01:04:13 like name like Maruti or for that matter Ashok Leyland
01:04:18 as far as commercial vehicle space is concerned.
01:04:20 Or for that matter, force motors
01:04:22 where we are seeing a decent volume growth number.
01:04:26 Then moving on to the CAPEX
01:04:28 where government is right now focusing on
01:04:30 so few sectors like defense, railways, infrastructure.
01:04:35 There are certain companies
01:04:36 where there is still a money-making opportunity.
01:04:39 So on infrastructure side,
01:04:40 companies like Nagarjuna Construction,
01:04:42 ITD Cementation, J. Kumar, Vishnu Prakash.
01:04:46 All these companies can be looked upon
01:04:48 from a short to medium-term perspective.
01:04:50 In terms of railway,
01:04:52 we like both private as well as public sector companies.
01:04:56 Among the private companies,
01:04:57 one can look at Texail, Tata Rail, Jupiter Wagon.
01:05:02 And on the public sector side,
01:05:03 RVNL is a company where we see a decent earning visibility
01:05:08 in terms of growth.
01:05:09 On defense side, shipping is a space to be in.
01:05:12 What I feel is that companies like Macau,
01:05:15 sorry, Cochin, GRF, and Beyond Radar.
01:05:18 Obviously, we have seen a decent rally in Cochin,
01:05:22 should be out during the last three, four training session.
01:05:25 So buy-on-deep is advised in shipping counters also.
01:05:29 In addition to that, a few MVFCs
01:05:32 which are reporting a decent set of numbers.
01:05:34 So for our case in point,
01:05:35 yesterday, IFL Finance reported a strong set of numbers.
01:05:38 And also MVFCs which are focusing on housing finance
01:05:42 and board loan can be on radar.
01:05:45 So companies like IFL Finance, Mannapuram, Muthud
01:05:47 can also be looked upon from short to medium-term perspective.
01:05:50 - Shrikant.
01:05:52 - All right.
01:05:53 Well, Shrikant, coming back to you on some of the other pockets
01:05:57 which are also buzzing in trade off late,
01:05:59 and this is the oil and gas space.
01:06:01 Maybe if you can take a look at something like a BPCL,
01:06:03 an IOC or something like that.
01:06:07 How are you seeing trends and do you think that
01:06:09 this particular pocket could perhaps buck the trend
01:06:12 over the course of the next few days?
01:06:14 - Yeah, I think this particular space is
01:06:23 turning more and more interesting.
01:06:26 The way there is a price pattern
01:06:28 and the way they are sustaining
01:06:30 whenever there is a weakness in the market
01:06:32 or sell-off in the market,
01:06:33 we see some specific buying interest
01:06:35 in this particular sector
01:06:36 and most of the stocks.
01:06:38 So while looking at the technical pattern of BPCL and IOC,
01:06:43 I am of the view that in the near term,
01:06:45 we are going to see at least 5% to 7%
01:06:48 sort of rally from current levels.
01:06:50 BPCL, especially around 470, 75,
01:06:53 IOC, which is around 140 levels,
01:06:56 also looks attractive if it comes back to the levels of 135.
01:07:01 But I think the specific trend is definitely there
01:07:05 in these companies.
01:07:06 And if there is any correction,
01:07:07 then we should be buyer.
01:07:08 We also like Gas Authority, which is around 160 levels.
01:07:12 And it is trading above its all-important levels.
01:07:16 So the technical pattern is indicating us
01:07:18 that it is heading for at least 190, 195.
01:07:21 So broadly, I think this particular space
01:07:23 should be on the watch list.
01:07:26 - Shrikant, any other stocks you want to add
01:07:29 to your list of top trades this morning?
01:07:34 - Yeah, we like BHEL Bharat Heavy Electricals
01:07:37 based on its technical formation.
01:07:39 It is consistently holding above the levels of 200,
01:07:43 which is positive.
01:07:44 And even if you go through with the volume
01:07:46 and delivery pattern of last 15, 20 days,
01:07:49 then we are seeing good amount of surge in volume
01:07:52 as well as deliveries.
01:07:54 Based on its technical formation,
01:07:56 we are expecting stock to move towards at least 215
01:07:59 and maybe 225, 230 in the near term.
01:08:03 We also like ICICI Bank, and it was down yesterday.
01:08:07 But again, if we see any further more correction
01:08:10 in today's date, and if it falls to 960, 955 levels,
01:08:16 then it will be a very attractive bet
01:08:18 with a short-term as well as medium-term view.
01:08:20 So close to 950, 960 levels, ICICI Bank looks good to buy.
01:08:25 And BHEL is also a stock to buy and hold.
01:08:28 - All right.
01:08:29 Well, we also had earnings
01:08:31 from the general insurance companies.
01:08:33 Of course, in this case, I'm talking about ICICI Lombard.
01:08:36 There are some hits and misses, more misses than hits.
01:08:38 Sunny, how are you evaluating this sector?
01:08:41 And whether or not you, in fact,
01:08:43 have a view on ICICI Lombard as well?
01:08:47 - Yeah, so what I feel is that overall commentary
01:08:49 from ICICI Lombard post results were positive.
01:08:52 And one of the key important parameters
01:08:54 which we track is combined ratio,
01:08:57 where the company is very confident
01:08:58 of improving the combined ratio
01:09:00 over the next four to eight quarters.
01:09:02 So we continue to remain bullish
01:09:04 as far as general insurance space is concerned.
01:09:06 And ICICI Lombard being the market leader
01:09:08 in the private sector space.
01:09:11 So overall, the opportunity is pretty large
01:09:16 as far as penetration
01:09:17 of general insurance business is concerned.
01:09:19 Especially post-COVID, I think the general awareness
01:09:23 of having a health insurance is something
01:09:26 which is supporting this general insurance business.
01:09:29 And at the same time, the compulsion from a regulator
01:09:32 to have an insurance as far as motor business is concerned.
01:09:35 So whether it is two-wheeler or four-wheeler
01:09:37 or any vehicle, one need to have an insurance third party
01:09:40 as well as own insurance.
01:09:41 And that is leading to, that is adding,
01:09:44 that is a kind of tailwind
01:09:45 which is acting for the motor business also.
01:09:47 So we continue to remain bullish
01:09:48 on general insurance business
01:09:49 and ICICI Lombard from a medium to long term.
01:09:53 - A quick check on how pre-open is playing out.
01:09:56 It's now sort of settling
01:09:57 and indicating to a gap down start.
01:09:59 21,400 is what we are working with.
01:10:04 Not as bad as what the GIFNIFTY was indicating too,
01:10:08 but still a negative start is what we're looking at.
01:10:11 Good chance that we will see a sharp cut
01:10:13 in early hours of trade, spend some time consolidating
01:10:16 and hopefully may see some buying emerging
01:10:19 in the second half of trade.
01:10:20 Remember brokers have consistently maintained
01:10:23 and brokerages have maintained
01:10:24 that India continues to be a buy on dips market.
01:10:27 Now, how you quantify the dip is of course, anybody's guess.
01:10:31 Shrikant, quick take on metal stocks after banks,
01:10:35 metals were the other big losing space in trade yesterday.
01:10:39 This morning as well, those stocks aren't looking
01:10:42 as disturbed if I may say.
01:10:44 Any metal names that you would trade on today?
01:10:47 - Yeah, because of this Salkish statement,
01:10:51 I think yesterday we saw sell off in global markets
01:10:56 as well as on the metal index.
01:10:58 And because of that, we are seeing some sell off
01:11:00 in our markets also.
01:11:02 But otherwise, if we see this particular space,
01:11:07 then if there is any correction, then we should be buying.
01:11:10 In fact, Tata Steel, which was around 137, 138 levels
01:11:13 is now around 130.
01:11:15 But if there's a very short term view,
01:11:17 then stay away because we can see further more correction.
01:11:19 But if there is a medium to long term view,
01:11:21 then we should look for adding stocks like Tata Steel
01:11:24 as well as Hindalco to our positional portfolio.
01:11:28 But apart from that, I think these metals and mining stocks
01:11:31 should also be on the watch list,
01:11:33 but on correction on dips.
01:11:35 - All right, Sunny, a couple of earnings
01:11:37 from the information technology space as well.
01:11:39 LTI Minetree, at least in the large cap,
01:11:42 slightly better earnings, but I reckon there's some
01:11:45 disappointment when it comes to margins.
01:11:48 And Happiest Mine, on the other hand,
01:11:50 subdued quarter, but in line with expectations.
01:11:53 Your analysis on both these counters?
01:11:56 - So yeah, first LTI Minetree,
01:11:59 post result phone call, so there was a negative surprise
01:12:03 in terms of commentary from LTI Minetree,
01:12:05 which was totally opposite of the commentary
01:12:08 what we are listening from Infosys or TCS or large cap peers.
01:12:13 So LTI Minetree has went on record to say that
01:12:16 the demand environment is still not very healthy
01:12:19 and they are not confident of any significant deal wins
01:12:23 or maybe the environment is not so good.
01:12:27 And to that extent, despite of having
01:12:30 a slightly muted number, we may see adverse reaction
01:12:32 as far as stock price is concerned.
01:12:35 So maybe a gap down opening on LTI Minetree.
01:12:38 And as far as Happiest Mine is concerned,
01:12:40 what I feel is that the company has reported
01:12:42 in line set of number.
01:12:44 And again, in terms of stock price,
01:12:47 the stock is trading close to its fair value band.
01:12:49 However, having said that, since they're focusing
01:12:52 on new age businesses, whether it is AI or cloud
01:12:57 or any new age businesses,
01:13:01 Happiest Mine has got a majority share over there.
01:13:04 So if somebody has got a slightly longer investment
01:13:06 horizon, then Happiest Mine or mid-size IT companies
01:13:09 are either place to be in.
01:13:11 - Prashant, have you been tracking Polycab
01:13:13 after big fall, clarification from the management,
01:13:16 the stock has crawled its way back up in the last few days.
01:13:21 Today, of course, we've also got earnings
01:13:22 that they'll be reporting.
01:13:24 At 4,460, what is the trade on Polycab?
01:13:27 It is expected to see actually a positive start
01:13:29 this morning too.
01:13:30 - Yeah, see like for Polycab, we are of the view
01:13:36 that it is rebounding after hitting the oversold levels.
01:13:42 In fact, when there was specific news flow,
01:13:44 the stock was down with a gap.
01:13:46 And today, or maybe even I can say on Wednesday,
01:13:50 when there was recovery, it closed above the level
01:13:52 of 4,400, which is positive with a very short-term view.
01:13:56 So we may see further more pullback in the stock.
01:13:59 We are not expecting any major rally from current levels,
01:14:02 but yes, we can see some pullback, at least up to 4,600
01:14:06 or 4,650, which is still 4, 5% from current levels.
01:14:10 At the same time, if you go through with the volume pattern,
01:14:12 then on the day of news flow, the huge volume were there,
01:14:17 which indicates that till the stock is not breaking back
01:14:21 the level of 3,800, we are going to see some consolidation
01:14:25 between the range of maybe 4,500, 4,600 on the higher side
01:14:28 and 4,000, 4,100 on the downside.
01:14:31 So today, if we see any rebound close to 4,600 levels,
01:14:34 we should look for reducing some positions
01:14:36 with a view that the stock may consolidate
01:14:38 and it will again come back to the levels of 4,000.
01:14:42 - Sunny, do you track Polycab?
01:14:44 I mean, they've had a fantastic second quarter.
01:14:47 Of course, a few weeks ago, there was event-based news
01:14:49 about the IT rates.
01:14:51 Management has provided some clarification,
01:14:53 but I think that overhang will stay with the company
01:14:56 for a while to come.
01:14:58 At this juncture, again, expectations running high
01:15:00 on earnings, the stock has been seeing some buying.
01:15:03 Do you think Polycab is a stock you would add
01:15:06 to your portfolio from more of a medium
01:15:08 to long-term time horizon?
01:15:11 - Yeah, definitely. I mean, if I keep that IT case aside,
01:15:14 I think the company is on very strong footing.
01:15:17 So right now, the company is doing a turnover
01:15:21 of 16,000 crores.
01:15:23 And prior to this IT case,
01:15:25 the company has clearly given guidance
01:15:27 that they will hit a 20,000 crore top line by 2026.
01:15:30 So that's a pretty robust growth visibility
01:15:34 and the plan with the company has laid out.
01:15:36 And in terms of valuation, also at 4,000 rupees
01:15:39 where the stock has bottomed out,
01:15:41 the company was trading at a decent price
01:15:44 to earning multiple of 30 times.
01:15:46 And that has shrunk from highs of maybe 40, 45 times,
01:15:51 north of 40 price to earning multiple.
01:15:53 So in terms of valuation, definitely there is a comfort.
01:15:58 But obviously, post this result,
01:16:00 I mean, the state will be focusing on communicating
01:16:04 with management that what is happening on IT case
01:16:06 and how much is the liability which the company need to bear.
01:16:10 And at the same time, whether the premium pertaining
01:16:13 to the corporate governance, whether that will shrink
01:16:16 or there is no tax liability.
01:16:17 Because there is still Polycap is under denial mode
01:16:20 that we have not received any notice from IT department.
01:16:23 And so we are waiting for action from IT department.
01:16:27 So I think there is still clarity
01:16:30 which is just to emerge on IT front.
01:16:32 But if somebody is a medium to long-term investor,
01:16:35 we can gradually accumulate Polycap.
01:16:37 Maybe our portfolio allocation can be slightly lesser,
01:16:41 one or two percent as of now.
01:16:42 And as and when the clarity emerge,
01:16:44 then one can accordingly act.
01:16:46 Once there is a clarity, one can increase his
01:16:48 or her allocation in the Polycap.
01:16:51 Or in case there is no clarity,
01:16:53 or if you feel that the impact of IT
01:16:58 can be adverse on Polycap,
01:17:00 then one can exit the position and take some action.
01:17:02 Sunny, stay with us and Shrikant will come right back to you.
01:17:06 Pre-open indicates to a negative start on D Street.
01:17:08 But the big loser which we are expecting
01:17:10 is not going to be HDFC Bank from the look of it in pre-open.
01:17:13 It's LTI Minetree.
01:17:15 Pre-open indicating to a massive gap down.
01:17:17 HDFC also expected to open below levels of 1500.
01:17:21 But the index itself will be watching up a key levels
01:17:24 on the downside 21,400 is what you want to watch out for.
01:17:28 Upside of course, the resistance is extensive there as well.
01:17:32 Bank Nifty will be in focus and a whole bunch of other earnings
01:17:35 is something that the street will be keenly watching out for
01:17:38 and any sort of commentary that will be coming in for the players.
01:17:41 It's not as bad as we were pricing in early this morning.
01:17:46 21,440 is what we've opened up at, 127 points lower.
01:17:51 There's a very good chance that we will consolidate around these levels
01:17:54 and see some buying emerging as we go along the day.
01:17:57 After a 2% cut yesterday,
01:17:59 the Nifty itself trading comfortably about 21,400 for now at least.
01:18:04 Bank Nifty is still leading the way up.
01:18:06 I shudder to think what's happening to HDFC Bank.
01:18:08 But 45,525, a massive cut on Bank Nifty,
01:18:12 a 520, 512 point cut on Nifty Bank is what we are seeing.
01:18:17 Broader markets looking fairly well placed.
01:18:19 It's actually a very, very corollary of sorts.
01:18:23 Your mid-cap is not doing as badly
01:18:25 and we've seen our performance in the broader markets.
01:18:27 Even though there are valuation concerns of the broader market,
01:18:30 it is the broader market that's actually doing better
01:18:32 than the frontline names in trade this morning.
01:18:34 Let's take a look at the breadth
01:18:36 and take a look at the big movers and shakers in the Nifty 50.
01:18:39 The breadth of the market very likely is bad.
01:18:42 Your biggest loser, like I said, was LTI Maintree
01:18:45 and that stock is seeing a huge cut on back of numbers
01:18:48 that were largely in line with what the street was expecting.
01:18:52 The stock is off by 10%.
01:18:54 HDFC Bank, as we indicated to you earlier,
01:18:57 is not doing as badly as the ADR.
01:18:59 It is sub-1500.
01:19:01 There is some level of buying that could potentially emerge
01:19:04 as it trades around levels of 1500.
01:19:06 Remember, that is a level that's been sacrosanct for HDFC for quite some time.
01:19:11 We haven't seen a run-up on that counter.
01:19:13 So, the sell-off for now is looking overdone.
01:19:15 3% low on HDFC Bank,
01:19:17 nowhere close to the kind of fall the ADR witnessed in overnight trade.
01:19:20 LTI Maintree is looking bad, 9.5% cut.
01:19:24 Power Grid is seeing a 4% cut.
01:19:26 Asian Paints numbers, the street doesn't seem pleased.
01:19:30 Let's just put it like that.
01:19:31 Numbers weren't too bad.
01:19:33 Brokerages aren't too disappointed.
01:19:35 The stock reported before market closed yesterday was lower
01:19:39 and it continues to see selling pressure today as well.
01:19:41 A big cut there, 5.5% being knocked out of a Nifty heavyweight
01:19:45 is worrisome to say the least.
01:19:47 Well, you've got the other financial names that are doing badly.
01:19:50 But, I mean, the losses, the 150-point cut that you're seeing on the index
01:19:54 is largely being driven by HDFC Bank, Asian Paints, Power Grid and LTI Maintree.
01:19:59 On the upside, I could mention a few names.
01:20:02 You've got a little bit of defensive play happening.
01:20:04 So, Polo Hospital is not looking too bad.
01:20:06 Metals are seeing a little bit of a recovery, but nothing really to write home about.
01:20:09 RIL looks okay.
01:20:10 Tata Motors and OMCs generally are looking comfortable this morning.
01:20:14 Agam, it's interesting, broader markets, there are valuation concerns.
01:20:18 It's still continuing to do better than the benchmark.
01:20:20 HDFC is not the one leading the losses this morning.
01:20:23 It is LTI Maintree.
01:20:25 Inline numbers, no big disappointment, but the street seems very disappointed for some reason.
01:20:29 Yeah, certainly.
01:20:30 And it's a little bit of a contagion effect as far as your information technology space is concerned.
01:20:36 But I'm going to very quickly address what's happening in the broader markets.
01:20:39 Let's start off with the earnings.
01:20:41 We have happiest minds as well, where we have seen some weakness.
01:20:44 Now, while the earnings were largely in line with expectations,
01:20:48 well, you know, we're looking at that kind of reaction.
01:20:52 But all the financial services, on the other hand, looking at a whopping 10% up move.
01:20:56 Locked in an upper circuit immediately on open.
01:21:00 So, that's as far as earnings around those technology companies are concerned.
01:21:05 We move on and address what's happening with something like an IFL finance,
01:21:09 which is down by around 2, 2.5%, but ICICI Prudential.
01:21:13 A lot of misses when it comes to the VNB aspect, you know, the new business aspect perhaps,
01:21:20 is where it's weighing down on the business, considering we saw such a sharp drop on a year-on-year basis.
01:21:25 And, well, that's also, in fact, nearly locked in a 10% lower circuit.
01:21:29 We're going to have to wait and watch whether or not there could be some selling more,
01:21:32 some more selling coming through, potentially some more in store there as well.
01:21:36 Let's move on and talk about things which are beyond earnings.
01:21:39 So, we have Nazara Tech, where we have a preferential issue.
01:21:43 That's up around 1.3%.
01:21:45 NHPC, on the other hand, is declined by around 4.9%.
01:21:49 But remember, this is on account of an OFS, where the OFS is happening at around 66 rupees per share,
01:21:57 where the government is looking to sell about 3.5% stake.
01:22:00 So, still not there, but of course, because of the fact that it's at a 10% discount,
01:22:04 we're naturally expecting the stock to also come off to a certain extent.
01:22:08 And Zagalo, on the other hand, of course, this is a news update here on expansion in business.
01:22:13 So, we have an up move around 3% there as well.
01:22:17 This is as far as some of the other stocks in news are concerned.
01:22:20 And ahead of earnings, we're keeping an eye on Polycab.
01:22:23 The short covering continues and now it has moved above the mark of 4500 rupees per share.
01:22:29 Poonawalla Fincorp, on the other hand, under a tad bit of pressure, not as nervous as a whole list of other companies from the NBFC space,
01:22:38 but a decline all the same.
01:22:40 And besides these two, we're also watching out for Metro Brands, which is also nervous ahead of its earnings.
01:22:46 And of course, India Mart Intermesh, which is actually flattish at the moment ahead of quarterly earnings.
01:22:51 So, a lot of companies from the mid-cap space as well announcing earnings and a lot to keep an eye on Samina.
01:22:58 It is and it's interesting. Some of the reactions are just looking like they're overdone.
01:23:03 But like Agam highlighted, ICICI Prudential, now those numbers were a disappointment.
01:23:07 The stock is getting beaten down pretty badly.
01:23:10 If we just quickly take you through what went wrong for ICICI Prudential, the numbers were weak.
01:23:15 They missed on all parameters.
01:23:17 AP growth is only coming at 5%.
01:23:20 Value of new business is down 29% year on year.
01:23:23 There's been very big margin erosion.
01:23:25 Margin erosion could be due to increase in ULIP share and V&V margins are also down to 22.8%.
01:23:32 This is what we've seen and because of that, the stock is getting beaten down 10% current ICICI Pro.
01:23:39 Alok Industries, disappointing numbers, I guess.
01:23:43 We don't have too much in terms of commentary, but the counter is reacting negatively.
01:23:47 It's down 6.5%.
01:23:49 But let's not forget that the early part of this month, Alok Industries was your top gainer.
01:23:53 So it's ran up so substantially and what you're now seeing is probably some profits getting taken off the table.
01:23:59 NHBC is looking weak on back of news around the OFC.
01:24:04 You've also got IPCA lapsed down to 1.5%.
01:24:08 Fertilizer counters are weak.
01:24:10 Asian paints numbers have seemed to have disappointed the street.
01:24:14 But on back of that, even the other paint companies are doing badly.
01:24:17 So the likes of Berger paint are trading with a cut of 2 to 2.5%.
01:24:21 On the gaining side, Agam is already mentioned how well Oracle is doing.
01:24:25 It's up 10%.
01:24:26 Aarti Industries on back of that auto win is up 7.5%.
01:24:29 Cochin Shipyard, now this is again a big, big auto win.
01:24:33 The stock was up yesterday, continues to do very well today as well, about 3.5% to 4% higher.
01:24:38 You've also got Webof, Global interestingly doing quite well today.
01:24:41 Remember, you've got Markey investors like Malabar Investments who are actually quite optimistic on this one for since a few years now.
01:24:48 That counter playing catch up.
01:24:50 But largely speaking, it's not a great looking market.
01:24:54 But the fact remains it's not as bad.
01:24:57 There is some sanity returning to the street.
01:24:59 It's down, but it's only down half a percent, and I'm taking half from that.
01:25:03 Shikant, would you agree, do you think we've opened negative, we might spend some time deciding the fate, consolidate,
01:25:11 and the second half of trade could actually turn out to be positive?
01:25:14 I mean, at 21,455, we are pretty much at the day's high point.
01:25:20 Yeah, absolutely.
01:25:24 I think the way the market opened and now it is like rebounding from the lows.
01:25:30 See, these are the crucial levels.
01:25:32 And we like most of the time we see some consolidation or some sideways sort of activity whenever the market falls to the important levels.
01:25:42 But eventually, the way there is oversold activity, we are expecting market to rebound furthermore.
01:25:48 At the same time, Bank Nifty, which was around some 45,400 levels, 350 levels from there, now it is at 45,750, 700.
01:25:57 So yes, what you're saying is right.
01:25:59 I think even though there is like a sluggish sort of opening, we are now consolidating at important levels.
01:26:05 And in the second half, we are expecting rebound from lower levels.
01:26:09 Sunny, a quick view on the paint companies.
01:26:12 We had earnings from Asian paints, but it seems like the reaction is a little more stronger today.
01:26:17 With respect to, keeping in mind, Berger paints, how are you placed on both these counters?
01:26:26 What I feel is that, I mean, Asian paint number where, I mean, pretty decent number.
01:26:32 I mean, 12% volume growth, benefit on margin because of correction in the throughput prices, input prices.
01:26:40 Only the issue is on valuation front.
01:26:43 What I feel is that, as in, what I can see from Asian paint is that the industry is likely to do well.
01:26:51 And at the same time, the company has went on record to say that the momentum will sustain in the fourth quarter also.
01:26:56 So volume growth is something which company is seeing and being an industry leader, I feel that the same will continue for other players also.
01:27:03 And obviously, in terms of valuation, yes, we like the Berger paints and Kansai Nerolac,
01:27:09 both these businesses where relatively valuations are subdued.
01:27:14 And one can look at those businesses also.
01:27:17 Right. Thank you, Shrikant. Thank you, Sunny.
01:27:20 It's great having both of you today talking us through the markets.
01:27:24 It's looking weak on the street, but not as weak as expected.
01:27:27 HDFC Bank, if I can quickly pull that up and I want to see if it's finding support around levels of 1500.
01:27:32 And it is what a relief for retail investors who participated in the stock buying, clearly emerging at that level.
01:27:41 In fact, Agam, Tony, I think it's not looking too bad.
01:27:44 I think 1500 was sacrosanct for HDFC Bank.
01:27:46 And it's pulling back quite well.
01:27:48 It's a 25 point cut on the stock.
01:27:51 And again, with this one too, you cannot rule out the stock going home with a little bit of gains towards close.
01:27:57 Of course, like I said, there's a chance of that happening.
01:28:00 We can't be sticking our neck out yet and saying that.
01:28:03 Well, thank you, gentlemen. But we have with us a special guest now,
01:28:06 Nitin Raheja, Executive Director and Head of Discretionary Equities at Julius Bear India, joining.
01:28:12 Morning, Nitin. Thanks a ton for joining in.
01:28:15 Nitin, you know, it's interesting. We went into last year with such low expectations.
01:28:20 You know, the world was all gloom. There was geopolitical stress, a recession in the US, you know, to make things worse.
01:28:27 China was a problem. But we came out with shining numbers, to say the least.
01:28:32 Our markets rallied up, made new record highs.
01:28:35 It's quite a corollary from what we're entering 2024 with.
01:28:39 Now we have good earnings, good flows, DIR participation, political stability.
01:28:45 In that context, we've also seen the markets fall very sharply yesterday.
01:28:51 What are you making of it? Do you think it's going to be a little tricky at this stage, given how stretched valuations are?
01:28:57 I mean, look, I think clearly when you look at all the parameters from a fundamental perspective,
01:29:04 it seems to be looking good from an India story perspective.
01:29:08 You have liquidity flows being very strong. You have GDP growth numbers looking good.
01:29:15 The twin balance sheet problem has been addressed.
01:29:17 But I think the only headwind, and that's something which has been a concern in our conversations with global investors, has been Indian market valuations.
01:29:27 The valuations actually today, in the short term, leave very little margin of safety as far as stock prices are concerned.
01:29:38 More so the mid and the small caps.
01:29:40 The large caps are, as yet, especially within the banking pack, the valuations are yet within a reasonable benchmark.
01:29:50 But I think overall, when you look at the markets, the broader markets, clearly valuations is one of the main concerns.
01:29:56 And then when you get into an earnings season where you have a little bit of disappointment, you clearly see this as a reaction to that.
01:30:05 So I just think that any sort of correction is welcome, because I think there is enough liquidity on the sidelines,
01:30:15 which is looking to invest into India, waiting for any sort of correction.
01:30:19 So I think we will get these bull market corrections from time to time reflecting fundamentals and reflecting earnings disappointment.
01:30:28 It's not unusual. But I think I don't see this turning into a very substantial correction.
01:30:36 Even if the correction is anywhere around 5 to 6 percent, it's very much par for the course and is welcome.
01:30:44 Nitin, you partially addressed my question. I'm looking at FY25 price to earnings ratio for the Nifty with the way it stands.
01:30:53 It's a little shy of the 20 times mark. Now, we're looking at a previous five year average, and that's at around 25 times as well.
01:31:01 You did mention to a certain extent that there could potentially be more value in large caps as compared to mid caps and small caps.
01:31:08 And you also partially addressed there could be value in banks beyond banks. Where else do you see a potential upside from here on?
01:31:17 So I think when you look beyond banks, an area is consumer discretionary, especially the auto sector,
01:31:24 considering the kind of strong growth numbers that we're seeing.
01:31:28 So whether it's autos, auto banks, whether it's health care and pharma,
01:31:34 I think those are some of the areas where the comfort is a lot more higher.
01:31:39 In terms of the industrials, I think clearly the kind of valuations that the industrials are trading at is sort of reflecting their numbers many years out.
01:31:51 So, you know, and even a slight disappointment can result in sharp cuts.
01:31:55 But I think for us, the sectors which look quite attractive is clearly financials, consumer discretionary back and pharma.
01:32:08 Then at this stage, your approach to the markets would be sector specific or market cap focused?
01:32:13 Because what we've really heard and seen is that the risk reward is far greater now in the large cap space.
01:32:19 So, you know, you're right out there, but it would be more, I would say, when we look at the market,
01:32:26 we look at it more from a sector perspective and a bottom up perspective.
01:32:30 And when we are creating portfolios, and it just coincidentally happens, just to address your questions further,
01:32:37 that a lot of that is today visible in the large cap space more than the mid and small cap space.
01:32:45 However, you know, we do not really start with the capitalization and go downwards.
01:32:49 It's rather capitalization is emerging as a result of the growth value matrix actually falling in their favor.
01:32:57 So, Nitin, if I had to ask you, your base case returns in the Nifty, what would the expectation be for 2024 calendar year?
01:33:08 So, when you look at calendar year 2024, we were looking at a number anywhere around 22,400, you know, on the Nifty.
01:33:20 So, and, you know, so basically you're talking of roughly around 900,000 points from here.
01:33:27 So that's about 4 or 5 percent in a base case.
01:33:32 Right, Nitin. So you did suggest that, you know, when it comes to the broader markets, there isn't as much value.
01:33:38 However, a substantial amount of your returns are also made through that.
01:33:43 I want to talk about pockets where there could potentially be some value going ahead.
01:33:48 Where do you see opportunities here?
01:33:52 So, just as I alluded to earlier, I think, you know, we just discussed that in terms of when you look at pockets,
01:33:58 financials is one clear pocket, which should do well.
01:34:02 I think as we start seeing rate cuts, we will start seeing the larger banks starting to benefit out there.
01:34:10 We do see the auto consumption discretionary run continuing, and you will see real estate as a part of that also doing well.
01:34:20 Then, you know, bottom up, there will be selected opportunities in sectors such as cement,
01:34:26 which will be proxies and are better quality businesses to play out the whole infrastructure theme.
01:34:35 And pharma.
01:34:37 Right. Nitin, what are you doing with portfolios at this stage?
01:34:42 You know, I know September, October, we were telling, I mean, people were talking about an investor's war sitting on the sidelines,
01:34:48 anticipating a correction. None of that happened.
01:34:51 There potentially could have been some dry powder lying around for investors as whole.
01:34:55 At this stage, would you be taking a cash call at all or fully invested?
01:35:01 So we have a bit of cash in our portfolios and for new investors coming in,
01:35:06 we are asking them to stagger their investments over a four or five month period.
01:35:13 In fact, in our recent AIF that we launched, we are taking money in three tranches,
01:35:20 you know, to sort of meet the challenge that could be posed possibly by the elections and the volatility that could accompany that time period.
01:35:31 So we are asking a staggering.
01:35:33 The other thing that we're doing is we're looking at companies and businesses where we see a huge amount of visibility as far as their earnings growth is concerned.
01:35:42 So, for example, if you take the travel sector, right, aviation, travel and hotels,
01:35:49 you see a huge amount of visibility because supply will take some time to fill up.
01:35:54 And therein, the risk to earnings is far lower than a lot of other sectors.
01:36:01 And I think post this correction that we've seen in financials, I think, again, at least as far as the larger banks are concerned,
01:36:10 you know, there is this whole correction that has taken place post yesterday's result of the bellwether,
01:36:17 which is making them also look very attractive and their earnings visibility also is pretty high.
01:36:22 So, you know, what typically happens in these markets is that even if you have a correction,
01:36:28 where stocks have very high earnings visibility, they tend to bounce back far faster.
01:36:33 In fact, Nitin, that brings me to my next question.
01:36:36 HDFC Bank, I mean, it's gotten those numbers, sure, weren't very impressive,
01:36:41 but they were not as disappointing either to deserve the kind of sell-off the stocks saw on the ADR, then locally.
01:36:49 Let's also not forget that 50 percent of the bank is owned by foreign institutions, right, or FBIs in that sense.
01:36:55 This morning, it is being able to find its feet, a little bit of support coming in at 1500.
01:37:00 Do you think at this stage, at this juncture, the risk reward is very clearly in favor of HDFC Bank?
01:37:06 And, you know, the stock, it's only a matter of time, I'd imagine, right?
01:37:11 So I think, you know, you're right. And if you see this whole banking pact, you know,
01:37:17 there have been various analysts who have put out reports talking about the fact that how banking has never been cheaper
01:37:25 over its history than it is today, especially considering how clean the bank balance sheets have become
01:37:33 from an NPA perspective, from a capital adequacy perspective, how healthy they are.
01:37:38 But because of over-ownership on part of FBIs and who generally been in a risk-off mode most of last year,
01:37:45 given global developments, and the fact that bond yields in the U.S. have been very attractive
01:37:51 and have sort of been an alternative to moving to emerging markets, you have seen this sell off.
01:37:58 So I think the over-ownership issue has plagued the Indian banking sector while fundamentals have got better.
01:38:06 And I think, you know, post yesterday's correction, obviously, you know, the valuations are looking even more attractive.
01:38:14 I just think from a long-term perspective, if you look at how the sector is poised,
01:38:21 and it's one of the key elements of growth in the economy, if you're betting on growth in other sectors,
01:38:27 you cannot not be betting on growth in the banking sector, which is a proxy for that.
01:38:31 So I just think that, you know, once you see this, and look, this is the most liquid sector.
01:38:37 So hence, you know, when you have sell offs, it's the first place which faces pressure.
01:38:42 And so I just think that, and that's one of the reasons if you look at it, even last year,
01:38:46 I'm sorry for the long answer to your question, but you will see the second tier and third tier banks
01:38:51 have actually done better than the top tier banks, because they are not as heavily owned
01:38:55 by foreign institutional investors as the top tier banks.
01:38:59 But I just think that the valuation case is becoming more and more pronounced in their favor.
01:39:04 And I think if someone wants to take a longer term view, I think there is clearly money,
01:39:10 attractive valuation sitting there today.
01:39:13 You know what, moving beyond just the banks, a quiet mover in terms of sectorals has been pharma as well
01:39:20 over the course of the last few quarters.
01:39:23 Nitin, what is your thesis here? And why are you positive on this particular sector?
01:39:29 So look, I think if you look at the pharma sector, there are two plays here.
01:39:33 One is the domestic play, which is again a play on consumption,
01:39:37 wherein you've seen a big rally in hospitals.
01:39:40 I think it's, you know, we are clearly yet a long way to go as far as hospital growth is concerned
01:39:47 and quality hospital growth is concerned.
01:39:50 So you will continue to see the sector remaining buoyant.
01:39:53 And you know, these earnings have a great amount of visibility.
01:39:56 We've seen that sector see a first round of run up.
01:40:01 You've seen domestic pharma do very well and trade at valuations.
01:40:06 So, you know, there's actually been an inversion.
01:40:09 There was a point of time where generic pharma and, you know,
01:40:13 companies with US exposure used to trade at premium to domestic pharma.
01:40:17 Now it's sort of turned around.
01:40:18 You're seeing domestic pharma doing well because visibility of business and pricing pressures are much lesser out here.
01:40:26 And hence, you know, you're seeing them enjoy higher return profiles.
01:40:30 However, the interesting thing now is that generic pharma also is starting to pick up on that
01:40:35 because there is a belief that the prices in the US have bottomed out.
01:40:40 There was a period of time where there was immense pricing pressure out there
01:40:44 and led by the fact that the distributors out there were more powerful and were able to dictate terms.
01:40:51 But I think that bottoming out has happened.
01:40:53 There is a shortage of a few drugs.
01:40:56 And so you are starting to see generic pharma come back.
01:40:58 And valuations are, again, not very, very expensive.
01:41:03 And given the kind of companies and high quality businesses that exist out there.
01:41:08 I've been talking about, and I'm so glad you brought this up, right,
01:41:11 because domestic play in the pharma space is clearly or should be demanding a premium
01:41:15 as opposed to the export focused pharma companies, even though the pricing pressure is off in the US.
01:41:20 Talking about exports, talk to me about IT.
01:41:23 If you were a tech investor last week, you'd be laughing your way to the bank.
01:41:27 Flat to weak numbers, in my opinion, you know, margins should have improved,
01:41:32 but that could be on the back of operational efficiency, which usually happens in a slowdown economy.
01:41:36 Go down the calendar year 2022, when IT was doing well, margins were actually shrinking.
01:41:41 Attrition was rising.
01:41:43 So when we look at what's happening currently, it makes me a little concerned.
01:41:47 But the market was quite pleased from whatever they saw.
01:41:50 How do you feel about IT? Do you feel like we are getting ahead of ourselves?
01:41:54 There is still no clarity, no trajectory of growth coming back to historical levels?
01:42:01 So, you know, you're absolutely right.
01:42:04 If you look at the commentary that emanates from all the IT companies,
01:42:08 in the short term, at least, there doesn't seem to be great visibility.
01:42:14 And, you know, and we really don't know what is going to happen to the US economy,
01:42:19 whether it's going to be a soft landing, hard landing.
01:42:21 You know, I think all the wise men in the world have projected different scenarios
01:42:26 and have been proved wrong at different points of time.
01:42:28 But clearly, you know, the important thing is not that IT spending is not going to come.
01:42:34 It's just that it's getting deferred.
01:42:36 And, you know, most companies, if you're not sure of the visibility on your business,
01:42:41 a few quarters down the road would rather tend to hold this.
01:42:45 So given that scenario and the fact that actually, you know, in some companies,
01:42:50 the earnings growth was tepid, most people guided margins down.
01:42:54 I think, again, there is a premature expectation being built that, you know,
01:43:01 the worst is over and, you know, things will pick up six months down the road
01:43:05 in the IT companies, leaving actually virtually no scope for disappointment.
01:43:10 So I would be a little wary, at least in the near term,
01:43:13 as far as investing in the IT companies is concerned.
01:43:17 I also want your view on the real estate pact, because we have seen that one
01:43:22 as potentially one of the biggest movers over the course of the last 12 months.
01:43:26 That said, valuations at this point of time are factoring in some staggering numbers,
01:43:30 even going ahead, leaving aside the fact that they don't have inventory right now
01:43:34 and they still have upcoming projects.
01:43:37 And also the way things are panning out on ground.
01:43:40 What is your view on real estate space?
01:43:43 You also made a mention of ancillaries around real estate.
01:43:47 If you could take us through your view here.
01:43:50 Sure. So, you know, real estate is seeing a sort of consolidation
01:43:57 where you're seeing the organized players actually gaining market share
01:44:01 at the cost of unorganized players.
01:44:03 And that trend is going to continue, especially post-implementation of RERA.
01:44:07 That has happened.
01:44:09 Also, the building of some of these players into brands.
01:44:13 So, you know, once an announcement is made by a branded real estate player,
01:44:18 there is a degree of comfort which comes to investors
01:44:24 who are sort of investing in property.
01:44:27 It's also building a big premium for some of these companies.
01:44:31 So I think given the fact that inventory is low, as you alluded to earlier,
01:44:37 the balance sheet position of a lot of these people is far more healthier
01:44:41 than it has ever been.
01:44:43 And don't forget, we are at peak of interest rate cycles in terms of mortgages.
01:44:47 So if interest rates start coming off, as is the expectation,
01:44:51 maybe six months down the road,
01:44:53 you will see mortgage rates becoming even more attractive.
01:44:56 So I think real estate has yet legs to go.
01:44:59 It's coming off.
01:45:00 It's just about two or three years into a cycle which has just emanated
01:45:05 after a very long, almost a decadal down cycle.
01:45:09 So it yet has legs to go and should continue to do well.
01:45:13 In terms of the ancillaries that feed onto the real estate companies,
01:45:17 so whether it's cement, whether it's building materials,
01:45:21 such as ceramics, tiles, plywood, or even structural steel,
01:45:27 I think all of them will do well.
01:45:30 In some of these sectors, valuations have run up quite a bit, in fact,
01:45:35 and they trade at the late '20s type of valuation
01:45:41 if one looks at it on a FY '26, '25 basis.
01:45:47 And so I think the comfort out there is a little lesser,
01:45:53 and one has to be very stock specific when playing that.
01:45:58 Lastly, Nitin, you talked about how you're looking to identify good quality companies.
01:46:03 How much of your portfolio stocks are dependent on government orders?
01:46:10 So I want to talk to you about sectors like railway, defense.
01:46:14 These have been the theme all through 2023,
01:46:17 and all these counters have run up on order wins, not on execution.
01:46:20 And given the expectation of policy continuity,
01:46:24 would this space still be something that would find a way to your portfolio?
01:46:28 So honestly, our approach is a little more focused on cash flows
01:46:35 and working capital and profitability.
01:46:40 So while we believe that in the short term, in the next quarter or so,
01:46:47 we'll see a cooling off of order flows because of election restrictions that would come.
01:46:53 But I think if we see the present dispensation coming back to power,
01:46:58 you will see some amount of continuation as far as the order book is concerned.
01:47:05 There is a hope that the private sector also starts jumping into the party
01:47:10 because most private sector companies are running at 75% plus capacity utilization,
01:47:17 and there is an expectation post-elections for them to start announcing their investment plans.
01:47:24 For us, this is always a very tricky situation.
01:47:29 So while there is a lot of momentum today that is being played out in some of these companies,
01:47:34 we don't see valuations coming through.
01:47:38 We see valuations are elevated relative to the profitability.
01:47:42 So I think we are paying a price for earnings way out in almost three or four years
01:47:49 just because we have order book visibility.
01:47:52 But we have seen that execution can be a challenge.
01:47:55 There can be delays. There could be, in some cases, land acquisition issues, payment issues.
01:48:03 So we are not very comfortable with some of the valuations that these companies are trading at.
01:48:07 And we would rather err on the side of caution.
01:48:09 While we continue to remain positive on the whole CapEx infrastructure story,
01:48:14 we think valuations are something which don't give us too much comfort.
01:48:18 Cautiously optimistic. Well, thank you, Nitin. I'd love to talk to you longer,
01:48:22 but we are completely out of time. Hopefully, we will catch you for a longer conversation sometime soon.
01:48:26 Thank you.
01:48:27 In the meantime, there is a little bit of recovery on the street.
01:48:30 The Nifty is showing some signs of recovery. Bank Nifty also not doing too badly.
01:48:37 In fact, HDFC Bank, if I can quickly pull that up, should give me a sense of what's happening on the stock itself.
01:48:44 But the biggest loser this morning is LTI Mindtree. 1500 odd is what we have HDFC Bank at.
01:48:48 We will take a break. We will come back. We will talk about a relatively small company,
01:48:52 but very exciting prospects. It's Ganesh Benzoplast, Rishi Ramesh Balani will join us
01:48:57 and tell us about what they plan to do with all the money that they are raising through Markey Investors.
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01:54:03 Welcome back. The markets are looking weak in the red.
01:54:07 Bank Nifty is also looking bad. LTI Minetree is the top loser on the index.
01:54:11 We have with us a company that joins us in conversation.
01:54:15 Exciting prospects. Rishi Ramesh Balani, Chairman and Managing Director of Ganesh Benzoplaz joins us today.
01:54:21 Hi Rishi, good morning. Thanks for joining us.
01:54:23 Rishi, of course, there has been a little bit of news flow with Ganesh Benzoplaz.
01:54:28 You have also had Sumit, in fact, Malabar Investments come in and get on the company
01:54:34 and of course, infusing about 27 odd crores is what I believe.
01:54:38 The latest news flow is your joint venture, where you are looking to develop LPG on show import terminal at JNPT.
01:54:47 Talk us through this. What does it entail? When will it become revenue creative?
01:54:53 What are the timelines, the investments? Just bring us up to speed.
01:54:58 Yes. So BWLPG, which is an Oslo listed company and they are headquartered also in Singapore.
01:55:07 They are one of the world's largest carriers of LPG in the world and also the largest carrier of LPG into India.
01:55:15 So we have tied up with them and Confidence Petroleum, which is the largest private distributor of LPG in India,
01:55:22 to, you know, sort of have this synergy of supply chain storage and distribution of LPG,
01:55:29 which is a unique concept which we have introduced for the first time.
01:55:34 The advantage that we are trying to get out of this terminal that anyhow, JNPT is one of the best locations to work with in India.
01:55:42 And we want to create a terminal of a size that can handle the biggest ships, which are known as BFGCs at a go.
01:55:51 So it will not only add cost benefit savings for the entire supply chain,
01:55:58 but it will also help to penetrate the Indian LPG market faster.
01:56:05 The total investment envisaged in this is approximately anywhere between 600 to 700 crores.
01:56:12 It will be a mix of debt and equity, and we are already committed with our share of the equity along with our partners.
01:56:22 A few infusions have started and we are in the process of closing the debt and the final approvals.
01:56:28 Rishi, break this down for me. What is your commitment in terms of funds that you're going to contribute to JV?
01:56:35 Is it a 50-50 split?
01:56:37 In terms of voting shares, yes, the voting shares are split 50-50,
01:56:42 but the economic interest is split 45 for Ganesh Benzo Plus through its subsidiary and 55 for the other two partners together.
01:56:53 And the project is expected to start into full construction mode,
01:57:00 though partly the fire systems are now already being installed.
01:57:07 LPG tank construction and pipeline construction is expected to start in the second quarter of the calendar year of this year
01:57:17 and about two to two and a half years of finish time.
01:57:22 Rishi, the economics you said is about 45 odd percent. I know Malabar is coming in 27 odd crores.
01:57:30 Promoters, you have contributed or committed about 3 odd crores. That brings us to about 30 odd crores.
01:57:37 The balance, what is that amount? A and B, is that going to be completely done through debt or some more equity infusion can be expected?
01:57:46 Like see, if you take a typical project cost of 600 crores for right now,
01:57:53 so you would be as partners would infuse about 30 percent of the equity and 70 percent would be through a debt financing.
01:58:03 But the unique part about the project is that our partners have also given us an assured revenue
01:58:13 for the next 15 years in this project, which sort of really makes this a very, very low risk venture for GBL.
01:58:27 Rishi, this is very exciting and of course, we don't have too much time,
01:58:30 but I want to quickly get into small questions wrapped into one.
01:58:33 You said your partner has given you assurance of revenue for the next 15 years.
01:58:38 What is the quantum of that minimum guarantee of sorts and also margins?
01:58:42 Now, this is a very high margin business. When will they start contributing to your blended margins?
01:58:48 And what can we expect from you? You know, let's talk calendar year, right?
01:58:52 Because I know there's also earnings down the corner, but over the next couple of quarters,
01:58:56 what can we expect on your margins and what is the assurance of revenue from your partners for the next 15 years?
01:59:02 So what's the visibility there?
01:59:04 So the assurance of revenue from our partners is close to about 1200 crores over the next 15 years in this project.
01:59:15 And we expect that sometime in the second, first or second quarter of FY 26, 27 is when we will start seeing the revenues coming out of this project.
01:59:30 And you're right, this typically we would expect anywhere between 70 to 80 percent EBITDA margins out of a LPG project.
01:59:41 Very exciting, Rishi. I'll try and connect with you offline to get a better understanding of Benzoplast.
01:59:45 It's interesting. The markets are having a down day, but your stock is actually still looking pretty good in positive territory.
01:59:51 I know you don't probably track all this, but still exciting for the viewers.
01:59:54 With that, that's all the time we have. Rishi, thanks for joining.
01:59:58 And with that, it's also a wrap on India Market Open. Thanks for watching.
02:00:01 I caught up with Unmesh Sharma, Head of Institutional Equities at HTFC Securities.
02:00:06 Listening to what he has to say as he talks about the market showing signs of topping up.
02:00:10 And I'll see you in the next segment.

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