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Dec 14, 2022
Rating: buy: Ashok Leyland: Strong demand to continue

Commercial vehicle manufacturer Ashok Leyland’s strong Q3 performance was driven by a better mix, price hikes and commodity costs (healthy margins). The stable demand environment and improving pricing power should boost earnings. AL is the best play on the CV cycle recovery, along with market share recovery and the expansion of revenue/profit pools. We raise our FY23/FY24 EPS estimates by 17%/4% to account for better realisations and improving pricing power. Maintain Buy with a target price of `185.

The company expects to sustain strong demand momentum, led by a recovery in the macro environment, a pickup in construction and infra led activities such as mining, and growth in replacement demand. The industry is inching toward the historical peak. For AL, the focus will remain on gaining deeper penetration, growth in better margin products such as LCV/exports/aftermarket and operating leverage.

Valuation and view

We raise our FY23/FY24 EPS estimates by 17%/4% to account for better realisations and improving pricing power. Unlike the previous cycles, AL is on a strong footing (lean cost structure and reasonable debt) and is focused on adding new revenue/profit pools. The valuation at x19.6 FY24e EPS and 11.1x FY24e EV/Ebitda reflects the mid-cycle recovery. However, it does not fully reflect AL’s  focus on adding new revenue streams and profit pools, as well as its EV business. 

Key risks include: loss of road share for freight movement from the upcoming DFCC, and increasing competitive intensity, resulting in a loss of market share and margins.

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Dec 13, 2022
Adani Transmission, Alembic Pharma among 197 BSE stocks to touch 52-week lows, 58 stocks hit 52-week highs

Benchmark indices BSE Sensex and NSE Nifty traded flat on Wednesday, as Sensex sank 0.06% or 36 points to trade at 60,993 while Nifty declined 4 points, at 17,925 level amid volatility. Reliance Industries, Adani Enterprises, Apollo Hospital, HDFC Bank and Eicher Motors are the most active Nifty 50 stocks intraday.

Nifty 50 Gainers and Losers

On the NSE Nifty index, the top winners are Eicher Motors, Apollo Hospital, Adani Enterprises, Tech Mahindra, Reliance Industries, with Eicher Motors up 4.64%. The biggest laggards are ONGC, Hindustan Unilever, Britannia, HDFC and Sun Pharma, with ONGC down 1.35%.

On the flip side, 197 stocks fell to their 52 week lows. Venky’s (India), Uflex, Vipul Organics, Stovec Industries, TCNS Clothing, Thyrocare Technologies, TV Today Network, Shri Bajrang Alliance, Shilpa Medicare, Sambandam Spinning Mills, Sahyadri Industries, Ramco Systems, Rajapalayam Mills, Polyplex Corporation, Loyal Textile Mills, Matrimony.com, Mangalam Organics, KSE, Jindal Poly Films, Hitech Corporation, Excel Industries, Graphite India, GE Power India, EKI Energy Services, Adani Green Energy, Adani Total Gas, Balaji Amines, Bharat Rasayan, BASF India, Adani Transmission, Alembic Pharmaceuticals and others were among these scrips.

NSE Highs and Lows

On the NSE Nifty, 25 stocks hit their 52 week highs including Siemens, APL Apollo Tubes, H.G. Infra Engineering, Cigniti Technologies, Finolex Cables, Mrs. Bectors Food Specialities, Linc among others.

Alternatively, 129 stocks including Bharat Rasayan, Bharat Rasayan, BASF India, Balaji Amines, Venky’s (India), Bata India, Polyplex Corporation, Adani Total Gas, Adani Transmission are at 52 week lows.

Volume Toppers

Reliance Industries, Bajaj Finance, Tata Steel, ITC, Tech Mahindra, ICICI Bank are among the volume toppers on the BSE Sensex-30 index.

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Dec 13, 2022
Gold Price Today, 6 Feb: Gold tanks globally, dollar firms on fears of continued rate hikes; MCX gold rises

Gold Price Today, Gold Price Outlook, Gold Price Forecast: Gold rate is trading higher on Monday despite negative global cues, while the silver rate is up 0.12%. On Multi Commodity Exchange, gold April futures were trading at Rs 56,887 per 10 grams, up Rs 302 or 0.53%. Silver March futures were trading higher by Rs 302 at Rs 67,696 per kg on MCX.

Globally, the yellow metal hit a four-week low as the dollar strengthened on fears of continued interest rate hikes from the US Fed. Spot gold was little changed at $1,865.88 per ounce after hitting its lowest level since Jan. 6 earlier in the session. U.S. gold futures rose 0.2% to $1,879.40. The dollar index was 0.2% higher, making gold less attractive for buyers holding other currencies, according to Reuters.

The readings spurred fears that the Fed has enough economic headroom to keep raising interest rates, which fuelled a recovery rally in the dollar and Treasury yields. We expect gold and silver to remain volatile in today’s session. Gold has support at $1851-1840 while resistance is at $1878-1890. Silver has support at $22.20-22.00, while resistance is at $22.62-22.85. In INR terms gold has support at Rs 56,320-56,160, while resistance is at Rs 56,870, 57,150. Silver has support at Rs 67,150-66,620, while resistance is at Rs 68,050–68,480.

Gold witnessed profit booking from highs: Manav Modi, MOFSL

Gold prices dropped over 2%, to a more than three-week low after stronger than expected U.S. jobs data raised fears that the Federal Reserve could keep hiking interest rates. After a sharp rise in both gold and silver prices, profit booking was witnessed from the highs which was coupled with strong jobs data and rebound in dollar index. US employment growth accelerated sharply in January, with 517,000 positions added, almost double the gain in December. The unemployment rate hit more than a 53-1/2-year low of 3.4%, pointing to a persistently tight labour market.

After this data, US 10 Year Yields traded higher, along with the dollar index which from the lows of 100.80 it is trading around 103.20. In the last Fed policy meeting, a 25 bps rate hike was announced with a less hawkish tone, however a tight jobs market data comments from Fed officials scheduled this week w.r.t further Fed’s stance will be very important to watch for. Focus this week will also be on the RBI policy meeting and Governor Powell’s speech. Broader trend on COMEX could be in the range of $1855-1895 and on domestic front prices could hover in the range of Rs 56,500-57,200.

Near-term outlook on gold remains bearish: Deveya Gaglani, Axis Securities

MCX Gold posted a worst weekly drop of more than 1 percent in the last 3 months, and it settled around Rs 56,500 due to better-than-expected Non-farm payroll data that led to a swift recovery in the Dollar index and a pick-up in Treasury yields. Non-farm payrolls came at 517K against the forecast of 193K. The positive data print from the USA brought a high degree of uncertainty regarding the Federal Reserve’s next move that the Central bank will soon end the tightening cycle that dented Precious Metals’ appeal. The dollar index recovered swiftly from the lows of 101.5 up to the 103 level which bulldozed precious metals from 52 week high. Precious metals prices are highly sensitive to interest rate hikes and the Dollar index. A strong support zone in Comex Gold is seen around $1750 and resistance is around the $1920 level. The near-term outlook remains bearish for Gold as long as the price is trading below $1920 on a weekly basis.

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Dec 11, 2022
Gold outlook for Akshaya Tritiya: Geopolitical risks, inflation key drivers; gold may hit Rs 54000 in 3 months

By Jigar Trivedi

Gold is one of the earliest traded assets, much loved by Indians. And with Akshaya Tritiya around the corner, we have one more reason to buy gold. The yellow metal carries a traditional and cultural value for most of us. It adds to the asset value of the individual or the family, even a business. It offers best investment returns too. It’s also considered to be a symbol of prosperity and wealth. Akshaya Tritiya is marked as an important day in the Hindu calendar, it is also known as Akha Teej. For ages, buying gold on Akshaya Tritiya has been considered an auspicious activity and believed to bring good fortune.

 

As seen here, gold has given positive returns to investors over a period of five years. Looking at the current global economic background, we are of the opinion that gold may continue to give positive returns for some more foreseeable period.

The investment demand has grown multi fold ever since the world was hit with a pandemic. While traditional yield and currency drivers suggest bullion is overvalued, demand for the haven asset remains strong. That’s because gold buyers piling into exchange-traded funds are taking a pessimistic view of the US Federal Reserve’s ability to cool decades-high inflation without hurting the economy. For them, gold is a hedge against soaring prices and low growth.

The global economic outlook remains murky as a robust recovery from the pandemic is tempered by the war in Ukraine and China’s continuing battle against Covid-19. Any escalation in the conflict, which is already weighing on growth forecasts, could further burnish the appeal of gold. Increasing geopolitical uncertainty following Russia’s invasion of Ukraine is also driving strategic portfolio diversification by investors who are less concerned about higher real rates. 

Sanctions on Russia could also herald a more far-reaching shift that bolsters bullion. The seizure of about half the Russian central bank’s foreign exchange reserves will result in a new monetary paradigm where gold plays a greater role. The current price has less to do with inflation and rising yields and more to do with geopolitical risks and the Russian central bank pivoting toward accumulating alternative sources of wealth.

The outcome of the Fed meeting will be gold’s next big test as policy makers seek to tame inflation. Money market traders are betting the U.S. central bank will deliver a supersized interest-rate hike at the meeting to help curb inflation running at the fastest pace in four decades.

The ECB, meanwhile, could lift its policy rates above zero before the end of the year unless the euro-zone economy suffers a severe shock, and it might even have to deploy “restrictive” policy to get surging prices under control, Governing Council member Pierre Wunsch said.

The short term outlook is not so bullish however, triggers like concern for a global growth owing to hot inflation in the US, resurgence of Covid-19 in China and on-going geopolitical risk between Russia and Ukraine are all tailwinds.

Challenging factors / headwind is a strong dollar owing to a pretty hawkish Fed as the Federal Reserve has given strong hints that going forward in interest rates could be increased by 50 basis points for a minimum couple of occasions. US bond yields have marched higher on expectations that the Federal Reserve will aggressively hike interest rates as inflation accelerates at its fastest pace in 40 years. Hence we don’t deny the possibility of a consolidation / weak undertone for the short term.

Geopolitical risk and inflation pressure are currently the two primary drivers for the gold market. An aggressive Fed rate hike of 75 bps could be a short-term price damper, while elevated inflation due to supply shocks could mitigate the negative impact. MCX Gold June futures may decline to Rs. 50,500 per 10 gram however, ahead of an auspicious occasion – Akshaya Tritiya – retail buying may provide a strong floor and Gold may rebound to Rs 54,000 per 10 gram in one to three months.

(Jigar Trivedi, Manager — Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Views expressed are the author’s own.)

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Dec 10, 2022
ITC stock value moving to FMCG from cigarettes; proof, sharp rise after Budget 2023

ITC share price saw a volatile day of trade on Wednesday as a result of the tax hike in cigarettes, announced in Budget 2023. The ITC scrip saw a 6.6% fall intraday before soaring to touch a fresh 52-week high at Rs 365.65 on the BSE, up 3.7%. The tobacco giant continued to extend its gains on Thursday, gaining 7.4% over the course of two sessions. The share price traded at a discount of 0.5% at Rs 376.65 on Friday, ahead of its Q3FY23 earnings.

ITC shares rebounded on 1 February once the market calculated the overall tax increase will be a meager 2%. “Given the general inflationary environment and no-price hikes since the last two years, we believe ITC is likely to offset the impact of tax hike through selective price hikes,” ICICI Securities said. As a result of this, HDFC Securities stated cigarette companies like ITC and its peers may see a relief rally.

More experts and analysts are moving away from the view of ITC being solely a tobacco giant, and are now recognising its capacity across sectors, especially FMCG and hotels. As the Budget was announced, AUM Capital stated that the hike in agri credit target as well as the makeover of tourist destinations to be developed for tourists are positive for ITC.

“We expect the narrative around the ITC is getting strong on account of – 1) Stable cigarette volume growth led by market share gains and new product launches; 2) FMCG business reaching the inflection point as its EBIT margins expected to inch up from 7.7% in FY22 led by – effective implementation of WIMI strategy, driving premiumisation, leveraging technology on demand and supply side; 3) Strong and stable growth in hotels, paperboard, and agribusiness,” said Axis Securities.

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Dec 9, 2022
Gold prices fall globally but rise in India; here’s why gold is rising on MCX

Gold prices corrected sharply on Friday as result of the positive U.S. employment report. The strong jobs data stoked fears of continued rate hikes from the US Federal Reserve. However, despite the global fall, April gold futures on the MCX gained in morning trade, adding Rs 400 or 0.7% to trade at Rs 56,980. Concerns regarding the Fed reinstating an aggressive, hawkish policy gave rise to the dollar index and the U.S. 10 year Treasury yields, further denting the appeal of the yellow metal.

“MCX Gold April futures gained on Monday morning after declining sharply on last Thursday and Friday. The dollar index firmed up around 103 on Monday morning after jumping more than 1% in the previous session, as stronger-than-expected US jobs data suggested the Fed has more room to hike interest rates,” said Jigar Trivedi, Senior Research Analyst – Currencies & Commodities, Reliance Securities, believing a factor resulting in the rise could be a technical bounce.

“Gold in MCX is trading at 0.7% this morning despite strong sell off witnessed in COMEX. The primary reason is the depreciation of the Indian Rupee. The loss in COMEX is offset by the depreciation of Indian Rupee which opened 0.67% and that is why MCX Gold opened higher,” said Bhavik Patel, Commodity and Currency Analyst, Tradebull Securities.

“Gold prices slipped from nine month highs and slipped below its important support $1874 per troy ounce but today we are seeing some fresh buying and short covering in international gold. On a domestic level, we have witnessed more rise than international gold due to rupee weakness. Today, the rupee got weaker by 0.63% against dollar and that’s reflected in MCX gold futures which is trading at higher around 0.70% higher,” said Rahul Kalantri, VP – Commodities, Mehta Equities.

The safe haven asset witnessed a meteoric surge in its price over 2022, as central banks over the world flocked to the commodity to protect their bottoms lines during excessive global uncertainty. In the short term, the rapid increase in gold prices have pushed the metal into an overbought zone. Traditionally, when gold prices rally extensively, there is a chance of correction; however, this drop was abated as a result of the less-hawkish FOMC commentary.

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Dec 9, 2022
NSE FO ban: Indiabulls Housing Finance, PNB and others under ban on Wednesday, February 15, 2023

The National Stock Exchange (NSE) banned the trading in futures and options (F&O) of up to four stocks/securities on Wednesday, February 15, 2023. BHEL, Indiabulls Housing Finance, Ambuja Cements and Punjab National Bank (PNB) are the stocks/securities placed on the National Stock Exchange’s futures and options (F&O) ban for trade on Wednesday. According to the NSE, the stocks mentioned above are prohibited in the F&O sector because they have exceeded 95% of the market-wide position limit (MWPL). During the F&O ban period, no new positions are permitted for F&O contracts in that stock.

Earlier, on Tuesday, the total number of contracts traded in Index futures was 3,09,461 with a turnover of Rs 29,812.52 crore; while contracts traded in stock futures were 8,03,705 with a turnover of Rs 52,041.47 crore.

The same stocks, BHEL, Indiabulls Housing Finance, Ambuja Cements and Punjab National Bank (PNB) were put on the F&O ban earlier on Tuesday, February 15, 2023. The domestic equity indices ended the previous session broadly in green with BSE Sensex surging 600.42 points or 0.99% to 61,032.26 and NSE Nifty 50 rising 158.95 pts or 0.89% to 17,929.85.

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Dec 9, 2022
Sebi proposes corporate governance norms for high value debt listed entity

Capital markets regulator Sebi on Wednesday proposed corporate governance norms pertaining to Related Party Transactions (RPTs) for a high-value debt-listed entity, with an outstanding value of listed non-convertible debt securities of at least Rs 500 crore.

In its consultation paper, the Securities and Exchange Board of India (Sebi) has suggested the need to review the LODR Regulations, relating to RPTs and shareholders’ approval for such related party transactions.

Such corporate governance norms are related to the composition of board of directors, minimum number of meetings to be held per year, framing and implementing risk management plan for listed entities, constitution of various specialized committees and stipulations related to Related Party Transactions (RPTs) among others.

In its presentations, such entities told Sebi that their shareholding is substantially held by one or a few shareholders, which are related parties. When these HVDLEs enter into related party transactions (RPTs), they are required to obtain the approval of the majority of the shareholders who are not related parties.

Such shareholders, who are not related parties, either hold a negligible portion of the equity or none at all, in which case the entity will not be able to transact such RPTs because of ‘impossibility of compliance’ with the provisions of LODR Regulations.

Accordingly, Sebi felt the need to address the issues faced by HVDLEs.

High Value Debt Listed Entity (HVDLE) is a listed entity which has listed its non-convertible debt securities and has an outstanding value of listed non-convertible debt securities of Rs 500 crore and above.

For HVDLEs, where 90 per cent or more shareholders in number are related parties, Sebi has suggested that proposal, relating to RPTs to be placed for approval by shareholders, should be applicable to HVDLEs having only listed non-convertible debt securities; and 90 per cent or more of the shareholders in number are related parties.

If ‘objections’ are received from the debenture holders holding 75 per cent or more in value, based on the number of responses received, then the board of director should ensure that the agenda item pertaining to RPTs is withdrawn.

Sebi observed that one common factor in major corporate wrongdoings was that they were allegedly carried out by persons with the ability to influence the decisions of the company. Shell or apparently unrelated companies, controlled directly or indirectly, by such persons were purportedly used to siphon off large sums of money through the use of certain innovative structures, thereby circumventing the regulatory framework of RPTs.

Apart from the use of circular transactions, companies appear to have diluted the requirements under their policy on RPTs by procuring approvals for continuous lending to group companies.

In addition, Sebi proposed that once the regulations become applicable to a HVDLE, they should continue to remain applicable till such time the outstanding value of listed non-convertible debt securities of such entities reduces and remains below the specified threshold for a period of three consecutive financial years. Further, outstanding amounts may be re-viewed on the last day of every financial year.

Currently, Listing Obligations and Disclosure Requirements (LODR) Regulations provide that the corporate governance norms should continue to apply to a HVDLE even when the outstanding amount of listed non-convertible debt securities falls below the specified threshold of Rs 500 crore.

However, there is no specified period for which a HVDLE should continue to comply with such provisions, once the outstanding amount of listed non-convertible debt securities falls below the specified threshold.

The Securities and Exchange Board of India (Sebi) has sought comments from the public till February 23 on the proposals.

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Dec 9, 2022
Sebi proposes to enhance role, accountability of mutual fund trustees

Amidst growing scale of the mutual fund industry, capital markets regulator Sebi has proposed to increase the role and accountability of the trustees in a bid to safeguard unitholders’ interest.

In addition, the regulator has suggested to enhance the accountability of board of asset management company (AMC).

In order to have an independent review mechanism for the decisions of AMC from the perspective of the unitholders’ interest across all products and services, Sebi has proposed to mandate that a “Unit Holder Protection Committee (UHPC) should be constituted by board of AMC”.

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In its consultation paper, Sebi has suggested that trustees of mutual funds should focus on market abuse by AMC, its employees and mis-selling by the AMC to increase the asset base.

Also, trustees should be responsible for fairness of fees and expenses charged by the AMC, compare its performance with peers and ensure that AMC’s sponsor is not getting any undue advantage.

In addition to the core areas, the trustees should be responsible for periodically reviewing the steps taken by AMCs for the folios which do not contain all KYC attributes with bank details.

Further, Sebi has suggested that trustees and their resource persons should independently evaluate the extent of compliance by AMC and not merely rely on AMC’s assurances.

To facilitate trustees’ supervision, AMCs should provide them with analytical information.

Presently, the trustees primarily rely on the AMCs for ensuring compliance with the applicable rules.

Under the rules, trustees hold the property of the mutual fund in trust for the benefit of the unitholders. The trustees appoint an AMC to float schemes for the mutual fund and manage the funds mobilised under various schemes, in accordance with the investment objectives.

“In view of the increasing scale and reach of the mutual fund industry, trustees’ role in respect of unitholders’ protection assumes even greater significance,” Sebi said on Friday.

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Over the past decade there has been a five-fold increase in the size of the mutual fund industry. The assets under management (AUM) has surged from Rs 7.93 lakh crore in November 2012 to Rs 39.89 lakh crore in December 2022.

To ensure that trustees devote time and attention to their core responsibilities, Sebi has suggested that for fulfilling other responsibilities, trustees may rely on professional firms such as audit firms, legal firms, merchant bankers for carrying out due diligence on their behalf.

The Sebi also listed some duties trustees can delegate to AMCs. This include ensuring that all systems are in place prior to the launch of any scheme by the AMC, and calculating any income in the mutual fund due to the fund and any income received in the mutual fund for unitholders.

The regulator has proposed to provide a one year time to existing trustees with board of trustee structure to convert into a trustee company, from governance point of view.

Presently, two structures for trustees are permitted — corporate and board of trustees structure. Moreover, there are a few mutual funds which have the board of trustees structure while the trustees of all other mutual funds have adopted the structure of a trustee company.

Considering the enhanced role of trustees over the period of time, Sebi has suggested to increase the minimum number of trustees to adequately perform their functions. Presently, the minimum number of trustees prescribed is four.

Also, it has been proposed that the chairperson of the trustee company should be an independent director.

Sebi has suggested that apart from the meeting of the audit committee of AMCs and trustees (which mostly comprises of independent directors), the board of AMCs and the board of trustees may be mandated to meet at least once a year to discuss the issues concerning the mutual funds.

The regulator proposed that the existing MF Regulations on AMC and its obligations may be amended to include additional clauses with respect to the obligations of the board of AMC.

The proposed amendment may include a clause which casts an obligation on the board of AMC to ensure that all the activities of the asset management company are in accordance with the provisions of these regulations.

The Securities and Exchange Board of India (Sebi) has sought comments from public till February 24 on these proposals.

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Dec 8, 2022
Nifty in short-term downtrend, but these two stocks may help investors pocket gains

By Subash Gangadharan

Markets slid down further this week before recovering sharply from the lows. The bounce-back happened from close to the 200 day EMA. Selling pressure again seen on Wednesday ensured it was a negative and volatile week. On the Daily chart, we observe that 200 day EMA has acted as a support during the recent fall as Nifty bounced back strongly from there. But short term trend still remains down as the Nifty has failed to fill the recent gap area and cross the recent swing highs. 14-day RSI too is in decline mode, indicating more short term weakness is possible.

The below picks are for the next 15-26 trading sessions

Buy Apollo TyresTarget: Rs 240

Apollo Tyres has shown relative strength this week. While the Nifty index has lost 0.78% this week, Apollo Tyre has gained 5.13% over the same time period. In the process, the stock has also broken out of its recent trading range on the back of above-average volumes.

Zooming into the daily chart, we can also observe that the 20 day SMA has recently crossed above its 50 day SMA, indicating a positive moving average crossover. The stock is also trading above the 20 week SMA and weekly momentum indicators like the 14-week RSI too are in rising mode and not overbought, which augurs well for the intermediate uptrend to continue.

We, therefore, believe the stock has the potential to move higher and take out its previous intermediate highs in the coming weeks. We recommend a buy between the 208-212 levels. CMP is 210. Stop-loss is at 195 while target is at 240.

Buy Dr. Lal PathLabsTarget: Rs 3050

Dr. Lal PathLabs has recently reversed its short term downtrend when it crossed its previous swing high of 2843 recently. After taking a breather, this week the stock has again started rising and is now on the verge of taking out its recent highs.

Technical indicators are giving positive signals as the stock trades above the 20 day and 50 day SMA. Weekly momentum indicators like the 14-week RSI have bounced back and are in rising mode now.

With the intermediate technical setup looking positive, we believe the stock has the potential to move higher in the coming weeks and therefore recommend a buy between the 2780-2820 levels. CMP is 2799.85. Stop-loss is at 2680 while target is at 3050.

(Subash Gangadharan is a Senior Technical and Derivative Analyst at HDFC securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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