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Dec 23, 2022
Wall St Week Ahead-Signs of market strength cheer U.S. stocks bulls

U.S. stock bulls are taking heart from a range of market signals pointing to an upbeat year for Wall Street, as equities sit on impressive gains despite worries that the Federal Reserve’s monetary policy tightening may plunge the economy into a recession.Among these are equities’ positive January performance, a “golden cross” chart pattern on the S&P 500 and more stocks making new highs rather than new lows.Such signals are far from the only indicators market participants use to make investment decisions, and they are not foolproof.

Weak outlooks for corporate heavyweights such as Amazon and Microsoft and a blowout employment number that heightened expectations for Fed hawkishness injected a fresh note of uncertainty into markets on Friday, though the S&P 500 remains up 7.7% year-to-date.

JANUARY JUMP

The S&P 500 rose 6.2% in January, driven in part by hopes that the Fed will be able to contain surging inflation without badly damaging the economy.

When the S&P 500 has advanced in January, the market has gone on to rise in the subsequent February-December period 83% of the time, with an average 11-month gain of over 11%, according to an analysis of data going back to World War II by CFRA Research.An up January after a down year, however, was followed by a gain of 23.1% from February to December with a 92% success rate.Despite a recent rally that may have made stocks comparatively expensive, “the track record implies that maybe we do have some upside potential,” said Sam Stovall, chief investment strategist at CFRA Research.

GOLDEN CROSS

Meanwhile, chart watchers noted that the S&P 500’s 50-day moving average rose above its 200-day moving average on Thursday, a pattern known as a golden cross. Since 1950, the S&P 500 has produced an average 12-month return of 10.5% after a golden cross formed, while the overall average annual return since 1950 is 9.1%, according to Adam Turnquist, chief technical strategist at LPL Research.However, when a golden cross has appeared as the 200-day moving average is declining – as it is now – the average 12-month return for the S&P 500 jumps to 16.8%.”The recent golden cross adds to the growing technical evidence of a trend change for the S&P 500 and further raises the probabilities of the bear market low being set in October,” Turnquist said in a post.

IMPROVING INTERNALS

Willie Delwiche, an investment strategist at All Star Charts, said all five indicators on his bull market checklist were fulfilled in January, including upside volume and risk appetite metrics, something that did not occur once in 2022.One of those indicators showed more stocks on the New York Stock Exchange and Nasdaq making new 52-week highs than lows — — a sign that the rally is being led by a broad range of stocks, rather than a cluster of heavyweights. That happened as many times in January as it did during all of 2022, Delwiche said.

However, some investors believe stocks may have gotten ahead of themselves.Friday’s data showing U.S. employment growth accelerating sharply in January renewed the inflation concerns that hammered stocks last year and ignited bets on a more hawkish Fed.”The January employment report was unambiguously strong and should be the start of a series of data points showing stronger activity and inflation in early 2023,” analysts at Citi wrote. “We expect this emerging trend should push back on too-dovish market pricing.”

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Dec 22, 2022
Adani Power, TCS, Adani Total Gas, LIC, Zomato, L&T, Cummins, HAL, Page Industries, IRCTC stocks in focus

Indian share market is likely to open mildly in green on weekly F&O expiry, hinted SGX Nifty on Thursday. On the Singapore Exchange, Nifty futures were trading marginally higher at 17893 level. In the previous session, BSE Sensex jumped 378 pts to 60,664, while NSE Nifty 50 rose 150 pts to 17,872. “With all the major events behind us, the performance of the global indices combined with earnings will dictate the trend ahead. This rebound has certainly eased pressure but a decisive close above 17900 in Nifty is critical for any sustained recovery. Meanwhile, we reiterate our preference for IT, FMCG and select banking and auto pack and suggest focusing on identifying opportunities from these sectors,” said Ajit Mishra, VP – Technical Research, Religare Broking Ltd.

Stocks in focus on 9 February, Thursday

Q3 results today: Hindalco Industries, Hindustan Petroleum Corporation (HPCL), Life Insurance Corporation of India (LIC), Lupin, Zomato, Adani Total Gas, Aurobindo Pharma, Bajaj Consumer Care, Bombay Dyeing & Manufacturing Company, Devyani International, Force Motors, General Insurance Corporation of India, Greaves Cotton, Hindustan Aeronautics (HAL), Indian Railway Catering and Tourism Corporation, Jet Airways, Kalpataru Power Transmission, MRF, Natco Pharma, Page Industries, Pfizer, Sapphire Foods India, Suzlon Energy, United Breweries, Ujjivan Financial Services, and Voltas will be in focus ahead of quarterly earnings on 9 February.

RBL Bank: The Reserve Bank of India has approved the re-appointment of Rajeev Ahuja as Executive Director for three years effective from 21 February this year. Rajeev Ahuja will be designated as key managerial personnel of the bank.

Tata Consultancy Services: TCS has won an over £600-million (about $723-million) contract with Phoenix Group, UK’s largest long-term savings and retirements provider, to digitally transform the latter’s ReAssure business using the TCS BaNCS-based platform. Phoenix Group acquired ReAssure, a UK-based life insurance provider, in 2020, and has now engaged with TCS to drive synergies and enhance customer experience for ReAssure’s policyholders.

Larsen & Toubro: Ministry of Defence has signed a contract with L&T for the procurement of 41 indigenous modular bridges, worth over Rs 2,585 crore, for the Corps of Engineers of Indian Army. A modular bridge is fabricated in modules that can be installed quickly in the field.

Trent: The retail company has reported nearly 20% on-year growth in consolidated profit at Rs 167 crore for three-month period ended December FY23. It registered the highest ever quarterly revenues at Rs 2,303.4 crore, up 54% on-year. At the operating level, EBITDA grew by 18.5% on-year to Rs 323.2 crore but margin fell by 415 bps on-year to 14.03% for the quarter given the higher expenses. Numbers are not comparable on-year as Q3FY22 had accounting for rent waivers and reversals relating to inventory provisioning.

Oberoi Realty: The Mumbai-based real estate company registered a 50.3% on-year growth in consolidated profit at Rs 702.6 crore for quarter ended December FY23 on healthy topline and operating performance. Consolidated revenue surged 96% on-year to Rs 1,630 crore for the quarter. On the operating front, EBITDA jumped 184% on-year to Rs 940.4 crore with margin expansion of 1,786 bps compared to year-ago period.

Cummins India: The diesel and natural gas engines manufacturer has recorded better than expected earnings on all fronts for Q3FY23 as profit grew by 49% on-year to Rs 360.14 crore and revenue increased by 25.7% to Rs 2,181 crore for the quarter. At the operating level, EBITDA jumped 52.4% on-year to Rs 412.2 crore with margin expansion of 331 bps compared to year-ago period. The company announced an interim dividend of Rs 12 per share for FY23.

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Dec 18, 2022
Adani stocks lose Rs 11 lakh cr in market cap in a month, more than govt’s capex spend plan in full year FY24

Adani Group shares have lost in just 30 days more than what the Indian government plans to spend on capital expenditure over the full financial year 2023-24. Adani Enterprises, Adani Green Energy, Adani Ports, Adani Power, Adani Total Gas, Adani Transmission, Adani Wilmar, Ambuja Cements and ACC Ltd stocks have together lost over Rs 11 lakh crore in market cap in the last one month. For comparison, the Centre’s capital expenditure outlay for FY24 is at Rs 10 lakh crore. The stocks of Gautam Adani-led companies have been falling since the US-based short-seller Hindenburg Research LLC accused the Adani family of stock manipulation and money laundering.

On January 24, Hindenburg published a report named “Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History,” following the publication, the market capitalisation of Adani Group companies tanked nearly 58% in one month, till February 21. The short-seller said it holds a short position in Adani Group Companies through US-traded bonds and non-Indian-traded derivative instruments. The report further noted that Adani Group’s 7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations.

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Dec 17, 2022
Nifty support at 16950-16888, Bank Nifty needs to hold 36000; watch ACC, TVS Motor, MRF stocks for action

By Shivangi Sarda

Nifty index opened negative on Wednesday and moved with weakness in the first half of the session. However, it took support at 16950 zones and recovered from intraday lows but finally closed with losses of around 160 points. It failed to hold above 17100 zones but held on and respected its crucial support levels. It formed a small-bodied Bearish candle with longer lower shadow on daily scale indicating emergence of buying interest at lower zones even after weakness due to Global market. 

Bank Nifty needs to hold above 36000

Bank Nifty opened gap down and moved in a consolidative manner. It showed recovery from lower levels in the second half of the day and closed with losses of around 380 points. It formed a small-bodied Bearish candle on daily scale with long longer shadow. 

For weekly Bank Nifty, Maximum Put OI is at 36000 then 35000 strike and maximum Call OI is placed at 36500 then 38000 strike. We have seen significant Call writing in 36000 while Put writing is witnessed at 36000 with unwinding at 36500 strike. Now it has to hold above 36000 for an up move towards 36250 and 36500 zones whereas supports are placed at 35750 and 35500 zones.

On the sectoral front, apart from Media space, all the sectors are traded in the negative territory out of which Banking, Financial Services, IT and Pharma space witnessed the most weakness. 

Now it has to hold above 17000 zones with some follow up buying interest to extend the move towards 17171 and 17250 zones whereas supports are placed at 16950 and 16888 zones. Traders are advised to be with stock specific action in Hero MotoCorp, MGL, ACC, M&M Finance, MRF, Voltas, Colpal, TVS Motor Company, Bajaj Auto, Biocon, and Eicher Motor while weakness in Bajaj Finance, Mindtree, Indigo, Bajaj Finserv, Muthootfin, Hindpetro, IEX, SBI Life, Coal India, Wipro, Nationalum, UPL, ONGC and BPCL.

(Shivangi Sarda is an Analyst – Equity Derivatives & Technicals, Broking & Distribution at Motilal Oswal Financial Services Ltd. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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Dec 17, 2022
Markets Wrap – Wed, 22 Feb ‘23: Nifty, Sensex crash, rupee falls; Asia, US markets, Gold, Crude updates

Domestic indices suffered huge losses on Wednesday dragging Nifty 50 below 17,560 and Sensex below 59,750. Bank Nifty breached the crucial level and closed below 40,000 as the negative global market sentiments triggered bloodbath on Dalal street. The only gainers on the Nifty 50 were ITC (up 0.50%) and Bajaj Auto (up 0.26%) while Adani Enterprises (down 11.05%), Adani Ports (down 7.24%), Grasim (down 3.44%), Bajaj Finance (down 2.94%) and JSW Steel (down 2.79%) were the losers.

US Markets

The US markets ended Tuesday’s session broadly lower with Dow Jones Industrial Average tanking 697.01 pts or 2.06% to 33,129.59, tech-heavy Nasdaq sank 294.97 pts or 2.50% to 11,492.30 and S&P 500 plunged 81.75 pts or 2% to 3,997.34.

Asian Markets

Asian markets closed in the red territory on Wednesday. China’s Shanghai Composite Index fell 0.47%, South Korea’s KOSPI tanked 1.68%, Japan’s Nikkei 225 was down 1.34%, and Hong Kong’s Hang Seng tumbled 0.51%.

Rupee movement

The Indian rupee fell marginally by 0.05% to 82.85 against the US dollar at 3:52 PM (IST).

Gold, Silver

Gold futures on the multi-commodity exchange for April delivery were trading at Rs 56,140.00, down 28 points or 0.05% while Silver futures for March delivery fell 305 points or 0.46% to Rs 65,747.00.

Crude oil

WTI Crude futures for March delivery were down 1.75% at $75.02 while Brent Crude futures for March delivery were trading 1.43% lower at $81.86 at 3:55 PM (IST).

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Dec 17, 2022
Asian shares track Wall Street lower amid chorus of Federal Reserve speakers

Asian shares tracked Wall Street lower on Thursday, as a number of Federal Reserve speakers echoed Chair Jerome Powell in saying that interest rates are set to go higher, capping risk sentiment, while the dollar hovered near one-month highs. MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.3%.

China’s blue chips eased 0.1%, while Hong Kong’s Hang Seng Index was down 0.2%, weighed by a larger fall of 0.7% in tech stocks. On Wednesday, Alphabet Inc shares fell 7.7% after its new AI chatbot Bard delivered an incorrect answer in a promotional video, dragging the S&P 500 and Nasdaq lower by more than 1%.

On Wednesday, New York Fed President John Williams said moving to a federal funds rate of between 5.00% and 5.25% “seems a very reasonable view of what we’ll need to do this year in order to get the supply and demand imbalances down.”Governor Christopher Waller said the battle to reach the Fed’s 2% inflation target “might be a long fight”. But Governor Lisa Cook said the big job gains in January with moderating wage growth increased hopes of a “soft landing”.

U.S. Treasury Secretary Janet Yellen said that while inflation remained elevated, there were encouraging signs that supply-demand mismatches were easing in many sectors of the economy.The bond market rallied a little after being caught wrongfooted by the January blockbuster U.S. jobs report, forcing many to reposition for a higher peak in the Fed funds rate.

The two-year Treasury yield, which rises with traders’ expectations of higher Fed fund rates, eased 2 basis points to 4.4375% on Thursday, while the yield on benchmark 10-year Treasury notes slid 5 basis points to 3.6012%.Futures are pricing in the Fed’s target rate to peak at 5.132% in July, about 25 basis points higher than last week, and that by December it will have declined to 4.813%, a jump of about 40 basis points since a week ago.

In the currency markets, movements were rather muted. The dollar index held close to a 1-month high at 103.45 against major peers, after last week’s stunning jobs and services data.In the oil market, Brent crude futures eased 0.2% to $84.90 while U.S. West Texas Intermediate (WTI) crude also settled 0.1% lower at $78.36.Gold was slightly lower. Spot gold traded at $1,872.48 per ounce.

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Dec 17, 2022
Mahindra & Mahindra, Reliance Industries, MPS, SBI, HCL Tech, BEL stocks in focus

Indian benchmark indices are likely to open on a mildly negative note, hinted SGX Nifty. On the Singapore Exchange, Nifty futures were in the red at the 17,792 level. In the previous session, Sensex closed flat at 60,673, down 0.03% and the Nifty extended losses for a second session . “Despite opening gains, negative cues from global peers cast a shadow over investor sentiments. Underpinned by inflationary concerns, the market is keenly eyeing the US fed meeting minutes, scheduled to be released tomorrow, for hints on further monetary policy tightening. Risk appetite was further hammered by FIIs turning net sellers and fear of El Niño,” said Vinod Nair, Head of Research, Geojit Financial Services.

Stocks in focus on 22 February, Wednesday

Mahindra & Mahindra: M&M entered into an Asset Transfer Agreement with Mahindra Electric Automobile Limited for transfer of certain identified assets (capital work in progress) related to the 4 (Four) Wheel Passenger Electric Vehicles. The transfer will be completed by 30th June, 2026. M&M and British International Investment will invest up to Rs1,925 crores in the company in two or more tranches.

Mirza International: The NCLT, Allahabad Bench has permitted the composite scheme of arrangement between RTS Fashions Private, Mirza International and REDTAPE. RTS Fashions will be amalgamated with and into Mirza International.

MPS: The merger between two subsidiary companies of MPS, E.I. Design and MPS Interactive Systems Limited, an unlisted public company, has been approved by their respective boards. MPSI is a direct subsidiary and E.I. Design is a step-down subsidiary of MPS.

SBI: The bank has successfully raised Rs 4,544 crore Non-Convertible, Taxable, Perpetual, Subordinated, Unsecured, Fully Paid Up Basel III compliant AT 1 Bonds at a coupon of 8.20% p.a.

HCL Tech: HCL America Inc., a wholly owned step-down subsidiary of HCL Tech, on 6 February announced its proposal for a Cash Tender Offer for up to $125 million of its $500 million 1.375% Senior Notes that were issued with a maturity date of March 2026. However, the firm has the maximum acceptance amount to $247.8 million.

Reliance Industries: Reliance New Energy Limited completed the purchase of 7,433 Common shares; 1,518 Series B1 Preferred shares; and 660 Series B2 Preferred shares of Nexwafe GmbH for 7,55,684 euros.

Sapphire Foods: Gamma Pizzakraft (Overseas), wholly-owned subsidiary of Sapphire Foods has approved subscription of up to 81,914 Equity Shares of Gamma Island Food, which operates Pizza Hut and KFC restaurants in Maldives under franchise agreements. This will take the shareholding to 75% from the current 51%.

Bharat Electronics: BEL has signed an MoU with Aeronautical Development Agency (ADA), DRDO, for the Advanced Medium Combat Aircraft (AMCA) programme.

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Dec 16, 2022
F&O expiry: Nifty daily time frame chart forms ‘triangle’, may soon hit 17450; Bank Nifty support at 35500

By Sameet Chavan

The global markets did extremely well last night and early this morning as well. As a result, our markets started the day with a strong bump up almost at the 17200 mark. However, without wasting much of a time, NSE Nifty 50 came back to its equilibrium to match with what SGX Nifty was indicating. The Nifty almost corrected nearly 100 points from opening high and almost tested 17050. The mighty bulls pounced on this opportunity and grabbed it with both hands. Markets took a U-turn thereafter and with the help of a broad-based buying in the latter half, Nifty hastened towards 17300. Eventually, with some expiry adjustments, Nifty ended the April series on a promising note around the 17250 mark.

As of now, we expect it to happen in the northward direction where 17400 – 17450 are the levels to watch out for. The moment we surpass this, we could see a lot of individual stocks participating in the next leg of the rally. For Bank Nifty, the levels to watch out for would be 36700 – 37000 on the higher side and the sacrosanct support zone is placed at 36000 – 35500.

During the series, we observed some short formation, but it seems most of them are out of the system now. Rollover in Nifty and Bank Nifty stood at 78% and 85% respectively, which is on the lower side if compared with three-month average. Stronger hands added bearish bets throughout the series and have rolled over these positions. Their ‘Long Short Ratio’ is at 35%, which clearly hints they are oversold now. Going ahead, it would be very interesting to see their action, any covering shall be a very encouraging sign.

Most of the key indices are placed at a crucial juncture and they are waiting for some trigger to make a move. We hope to witness a much-awaited breakout in the early part of May series which will certainly bring back the wider smile in traders’ fraternity.

(Sameet Chavan is a Chief Analyst-Technical and Derivatives at Angel One. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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Dec 16, 2022
Fund houses, distributors jittery about more caps on TER

The Securities and Exchange Board of India is currently studying the fee taken by mutual fund houses for various schemes, a move that is a tad worrisome for sector players as there may be further reduction in the total expense ratios charged by them from their customers.

Sebi’s move comes after complaints that distributors are shifting investors to new schemes from old ones to earn higher commissions being offered by some fund houses.

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The market regulator is also been pushing direct plans – which incidentally completed 10 years in 2023.

“This does seem like a push towards direct plans, which could change the dynamics of the industry. However, this won’t change much for AMCs as far as financials are concerned because though costs pertaining to distributors and commission may reduce, expenses on marketing and setting up customer service platforms to deal with investor issues will simultaneously rise,” said a CEO of a fund house, who did not wish to be named.

According to him, such a move could reduce distributor participation further. “With increased investor awareness, direct plans have good prospects,” he added.

The mutual fund industry has been working towards increasing the number of distributors. In March last year, the Association of Mutual Funds in India (Amfi) announced an internship programme to groom mutual fund distributors.

Later, Amfi also came out with a media campaign called “MFD Karein Shuru” to establish MF distribution as a lucrative profession. As a result, over 20,000 people took up the MF distribution licences in 2022 compared with 17,000 in 2021.

At present, the maximum total expense ratio (TER) that can be charged by smaller players, with assets under management (AUM) of up to Rs 500 crore, is 2.25% for equity schemes and 2% for debt funds, according to the Association of Mutual Funds in India (Amfi).

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This reduces with an increase in the AUM size of a fund house. For the larger players with an AUM over Rs 50,000 crore, the same stands at 1.05% and 0.8%, respectively, since 2020.

Sebi had in December said it has initiated a study into such fee and expenses charged by fund houses, with the objective of getting inputs for future policy formations.

TERs typically comprise management and administrative costs as well as distribution fee. The Rs 40-trillion mutual fund industry has 43 players at present.

According to Moin Ladha, partner at Khaitan & Co, the move is primarily aimed at enhancing transparency and accessibility to investors. He agreed that making direct plans more popular is a likely objective.

“With TERs having been reduced already, it is not clear how much more they could bring it down. However, the hit on AMCs’ profitability may not be as much, given that higher investor awareness will lead to a rise in volumes,” he added.

A top executive of a fund house said on the condition of anonymity that this is unlikely to affect the profitability of asset management companies to a large extent.

The executive stressed that direct plans, with attractive returns and no commission involved, have become favourable with newer generation, which is more tech-savvy and has wider access to information.

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Dec 15, 2022
How electric vehicle push is reshaping energy and auto sector on Dalal Street

By Divam Sharma and Sreeram Ramdas, 

In the auto industry, change is constant. Companies that are able to embrace change and innovate their product offering with time will continue to command higher valuation premiums than their counterparts. The transition towards EVs will be a transitional change rather than an overnight disruption. With 2W’s and public mobility vehicles being electrified first, the journey has begun for the Indian automotive and Energy sector. Currently, EV 2W adoption is at 2% which is forecasted to enlarge to 38% by 2030. Hence, EV adoption in India is surely becoming a reality.

Stocks like TATA Power and JSW Energy have been bracing for this transition by focusing on setting up renewable power capacity – mainly solar. New capacities announced by these players are futuristic, mainly comprising wind and solar capacity, and in the case of TATA Power, they aim to set up 10,000 EV charging stations in PAN India. JSW Energy has stalled the setting up of new thermal units and expects to ramp up its renewable capacity by 10x by 2030.

Energy is a commodity and historically commodity stocks have commanded a single-digit price multiple. However, the entities mentioned above now trade at record valuations as the market foresees growth in revenues and margins as they embrace the change.

Other players down the value chain like Exide Industries and Amara raja Batteries have come out with their own ambitious plans. Amara Raja for instance has committed to setting up a lithium-ion cell manufacturing unit under the PLI scheme and setting up EV charging stations as part of its transition.

Auto component manufacturing companies are doubling down on their R&D for developing components that find special utility in EVs going forward. Taking the drive train for instance, in an ICE engine, you have close to 2,000 moving parts, and when it comes to EVs you only have 20 such moving parts. Hence, as the transition gains momentum along with the 4W space, the incumbent players who are adamant to innovate will eventually face hardships.

Markets do not price in what’s happening today, in fact, markets are forward-looking, and prices in the expectations of tomorrow.

Renewable energy has now become much cheaper than coal. India set up a target of achieving 500 GW of renewable energy capacity by the year 2030, and in order to achieve this several wheels have to be turned to make this a reality. Firstly, India has one of the most inefficient transmission mechanisms in the world with a T&D loss of 20%, which is twice the world average. Hence, lithium-ion batteries and storage systems will be essential as India ramps up its renewable capacity.

Investors must focus on these dynamics – the undercurrents and transitions happening in the automobile and energy sector. EVs are becoming a reality faster than anyone had expected and investors’ appetite will favor those companies that are spearheading the transition. Companies that are primarily manufacturing ICE components, battery manufacturers that aren’t budging, and energy companies that are doubling down on coal capacities will feel the wrath of negative investor sentiments.

(Divam Sharma is the co-founder, and Sreeram Ramdas is an Analyst at Green Portfolio, SEBI Registered PMS. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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