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00:00 Thanks so much for tuning into The Trade Setup. I'm Neeraj Shah. It's Friday morning. And
00:04 much unlike the fanfare of yesterday when we were nudging the 20,000 mark, within a
00:10 kissing distance really of 10 odd points, we might not have that kind of optimism early
00:17 morning at least. Let's see what happens during the course of the day. First the global news,
00:21 first the US markets, then the global news flow. So the US markets had a bit of a pullback,
00:26 especially the NASDAQ in trade yesterday. Sharp gashes out there. And you know the reason,
00:31 some of the key heavyweights, including the AI stocks, had a terrible, terrible pounding
00:35 in session yesterday. TSMC in particular had a very, very, I mean, essentially everything
00:40 across the board, NVIDIA, TSMC, ASML, all of them came off in the session yesterday.
00:45 Dow was up about half a percent, but the NASDAQ took a brutal beating. The yields expanded
00:50 a bit as well. I think they've gone up very close to the 3.9 or maybe above 3.91. Yes,
00:55 3.91. So the yields expanded a little bit as well. The dollar index again back over
01:00 100, and that led to tech taking the beating that it did. Now, this would mean that the
01:05 GIFT NIFTY, independent of what it is showing right now, will have a gash on open. It is
01:10 showing a start which is positive, but with INFI likely to do what it is expected to do,
01:17 and the world markets not exactly hunky dory. I don't know if we'll start off flattish.
01:24 Let's wait and watch. Nevertheless, the global news flow. So we spoke about how the US markets
01:31 had a beating, and one of the key reasons was that the US applications for unemployment
01:35 benefits dropped to the lowest level in two months. US increases to presence in Middle
01:40 East amidst the Iran tensions. We hope this situation doesn't escalate. We can very well
01:46 do without another large conflict in addition to the one that is already ongoing. Oil is
01:51 set up to eke the fourth weekly gain with liquidity falling. And Japan and India have
01:55 signed a cooperation agreement for chip making. Well, much needed. So in light of all of this,
02:02 what is the trade set up for the day today? Well, as I always say, trade the market, not
02:07 the forecast. And sharp knocks are very likely on NIFTY IT, which may keep the lid on any
02:13 kind of upticks on the NIFTY. Now, the point is, viewers, banks are in fine fettle, and
02:19 the gains in the private banks are actually broadening out. Yesterday, if you saw Kotak
02:22 Bank, ICICI Bank, etc. participate, it was not just restricted to one or two names or
02:28 the PSU Bank X. And that is actually very positive news. So if banks can do well, if
02:33 Reliance in addition, ahead of its numbers can do well, then you might well be with a
02:38 fighting chance of doing that 20,000 magic number right at open or in a sense in the
02:43 first one hour. But even if that doesn't happen, excuse me, even if it were to happen
02:50 during the latter half of trade, well, 20,000 is right there. We're almost there, right?
02:56 So it's just a few numbers, just that the INFY, a spoiled sport will snuff out the chances
03:03 probably in very early morning trade. The good part viewers though, is that the reaction
03:10 to con calls of Polycab or select others show that the market is willing to bet on strong
03:15 growth. Now keep in mind, everybody is talking about how very expensive stocks should not
03:19 be bet on. Now all those people who missed out that chance on a Polycab, for that stock
03:24 to do what it has done, post results and post con call, is quite astounding. It is not a
03:29 cheap stock. It had gained after the results and then post the con call, gained another
03:34 10% yesterday. Just shows that if there is certainty of growth, certainty of high quality
03:40 growth, the market is willing to bet on those names. Quite stunning really what's happened
03:46 here and it's probably a message to what could happen to almost all of these building materials
03:53 stroke electric goods pockets as well. And at least the ones which are focused. Now,
03:59 you would argue that Habels could have had the same outing and probably did, but Lloyds
04:04 all the party for Habels in some sense, right? We'll be talking to the management today,
04:09 of course, at some time later in the day to try and focus on all of that too. But let's
04:16 wait and watch how it shapes up. So that's my argument. Flows look okay. Foreign investors
04:22 bought another 3000 crores in trade yesterday. So that was good going. DI sold about 193
04:29 crores, which is fine. It's a busy day of results. A lot of index names and a lot of
04:33 non-index names as well coming out with numbers today. So look at Reliance, Ultratech, JSW
04:39 Steel and HDFC Life amongst the large index names. Then there are some large non-index
04:43 names in the likes of Hindustan Zinc or DLF more importantly. Ashok Leyland, which is
04:48 expected to come out with a rock solid quarter. Watch out for Ram Krishna Forgings. It's had
04:52 a really good run. Tejas Networks has had a really good run. A lot of these stocks which
04:56 have done very well. RT Drugs signed DLM, imperative upon the stock to actually deliver
05:02 a good number. So let's see how this goes. There's also a strong listing expected today.
05:10 Utkash Small Finance Bank got subscribed heavily, very likely will list strongly. Now, excuse
05:19 me for the throat. Stocks to watch in the session today. You know, Infosys, everybody
05:23 knows the numbers and the fact that they cut the guidance. I thought what was important
05:27 to bring in was the key reasons for the cut down in the revenue guidance. And look at
05:32 those words, mega deals pushed out and delayed for a longer interval. A big significant cut
05:42 in discretionary spends across segments, PFSI, retail, telecom, high tech. Volume from the
05:49 mega deals which are currently under execution is slowing down due to macro challenges in
05:54 the key economies. And therefore, I would suspect that not only are mega deals getting
05:58 pushed out, but the current mega deals also will get spread out and therefore it impacts
06:02 the current year revenues. Decision making has slowed down, affecting timely deal ramp
06:07 ups. You know, this is not good. Now, the point is, is this Infosys specific or could
06:15 it happen to others? Last quarter, everybody was singing a completely different tune of
06:19 what's happening to a TCS versus what's happening to an Infosys. This time around, people are
06:23 going to probably talk about what's happening to an Infi versus what's happening to some
06:27 of the others. Now, the point is, HCL Tech did not say any of this. They said that yes,
06:35 Q1 has gotten impacted, but they're very confident about Q2, Q3, Q4. We've spoken to Emphasis
06:41 today, we'll be speaking to Persistent today. And I think that's the kind of questioning
06:45 that we'll do to all of those as well. Are they seeing these issues coming up in their
06:50 conversations with their clients, especially companies which are North America based focus
06:54 of Persistent, I think is 78% from NA. I think it'll be important to figure out whether North
07:00 American JFOC Persistent is different than what it is for Infosys. And Persistent business
07:04 model is different, but Emphasis right up there. It'll be interesting to see what they
07:09 have to say. Speaking of other companies, Persistent Systems, the numbers. So I think
07:15 Infosys will start off lower. That is to be given. Sorry, just before we get to Persistent,
07:19 Infosys will start off lower. Sorry, sorry, sorry. Infosys will start off lower. And the
07:25 interesting piece is brokerages are divided. So Jeffrey says that there will be a buyer
07:29 in the note they've written, there'll be a buyer post the 9% fall. They arrived at a
07:34 9% maybe on the back of the ADR dropping. But they are saying that if it collects that
07:38 much, there'll be buyers. Some of the others are saying, you know, we want to reduce. So
07:42 it'll be interesting to see how it goes. Now, the others. So Persistent Systems, the
07:47 numbers and the revenue numbers were in line with estimates. But for Persistent, they had
07:53 a one-off celebration expenses as a result of which EBIT down, margins down, net profit
07:59 down much lower than estimates. Now, will the street give it the benefit of doubt that
08:03 this was a one-off? And yes, it was a one-off. And therefore, it's all cool. Or does the
08:09 street punish it for doing this? Well, let's see. I don't have a clear handle on this,
08:13 to be honest. The adjusted margins were almost in line with estimates, maybe about 60 odd
08:18 points lower. So that's the view on Persistent. CoForge, the numbers seemed OK. More importantly,
08:23 they have reiterated their FY24 annual revenue growth guidance of 13 to 16% in constant currency
08:28 terms. We know what happened to HCL Tech after they did that. So maybe not a bad day for
08:34 CoForge. Emphasis, not quite sure. Revenues were down 3%. The other aspects seemed OK
08:39 and in line with estimates. So 3252 versus 3362. So the revenue fall was steeper than
08:46 what was anticipated. One anticipated a flat revenue. They've come down 3%. EBIT margin
08:52 is flat. Net profit fell 2% to 396 versus 403. Maybe a bit of a pickle for emphasis
08:58 as well.
08:59 Excuse me. Then HUL. By and large, the numbers seemed OK, but for the fact that the volume
09:07 growth numbers was disappointing. So revenues 15496, expectation was 15491. EBIT margins
09:14 flat-ish. Net profit or in line with estimate. Net profit almost in line with estimated.
09:20 The problem is the muted volume growth. Around 3% versus 4 to 5% level for the past two,
09:25 three quarters. That's the problem. Let's see if HUL kind of underplays a part in undoing
09:33 the kind of good work that ITC did for the FMCG index yesterday. Remember ITC nudging
09:39 that or hitting that 6 lakh crore market cap mark. Let's see if HUL puts some pressure
09:43 on FMCG today.
09:45 Then one other disappointment is Dalmia Bharat and will certainly correct today. Revenues
09:51 up 10%, 3624 versus 3693, which is fine. But EBIT margins came off 16.8% versus 17.8%.
10:00 Not a great performance. Net profit fell 30% to 144 crores versus 205 crores. So poor set
10:08 of numbers. Very likely that Dalmia Bharat will see a bit of a reaction in the session
10:12 today. I wouldn't be surprised if it does show. Union Bank actually had a good doubting.
10:18 So if you look at the Union Bank numbers, NII, 8839 versus 7581, net profit more than
10:23 doubling. Gross NPA is moderating. Net NPA is coming off a little bit. Are they still
10:28 at elevated levels relative to some of the others? Yes, but relative to its own history,
10:33 the GNPAs are looking okay. So Union Bank could actually do well. What will do well
10:40 is United Spirits. I don't have brokerage notes as yet on this one, but the performance
10:47 is very strong. EBIT margins really expanded. Net profit up 83%. It's good going for USL.
10:53 Premiumization strategy likely playing out for this one. So suffice to say that you might
10:58 see a bit of a positive reaction in this one. Tanla platforms, the numbers seem okay. Margins
11:04 have expanded. Maybe this stock too reacts positively. India Mart intermesh. If not for
11:08 results, then for the buyback will react. So these are the results. Firstly, revenues
11:13 up 25%. Margins flattish. Net profit, there are one-offs there, but be that as it may,
11:18 the more important piece for India Mart is the next plate, which is that it has approved
11:22 a buyback. Board has approved a buyback of up to 12.5 lakh shares, representing about
11:29 2% stake via the tender offer. The buyback price will be around 4000 per share, a premium
11:35 of 38% over Thursday's closing price. So very likely that India Mart intermesh, to my mind
11:40 at least, could react positively. So watch out for that one. Speaking of buybacks, Larsen
11:45 and Toubro is the other one. The board has approved a buyback. Sorry, let me correct
11:50 myself. It's not approved. It's considering a buyback and a special dividend on July 25th.
11:57 So this one could be interesting. Now, on this, there is a note. I saw a note on L&T.
12:09 So Jeffries has a note on Larsen and Toubro. They're saying that the buyback or the special
12:14 dividend is the management delivering on its plans. They say it's in line with the management's
12:20 commitment to return cash to shareholders. 2nd August 2023 will be a special dividend
12:25 record date if approved. Approximately 6600 crores is the net cash position of L&T standalone.
12:35 Assuming that half, which is around 3300 crores, is used for buyback, it adds 10 to 40 basis
12:41 points to FY24 and 26 ROE, taking FY26 to 17.9% versus our assumption of 17.5%. But
12:50 the impact, implied EPS impact is less than 0.5%. So maybe not too much. The price target
13:00 though for that brokerage on L&T is about 2910 versus the current price of 2494, which
13:07 means an uptick of about 17% from the current market price. It's trading around its 52-week
13:15 highs, but who knows, there could be more in store. So watch out for Larsen and Toubro
13:19 in the session today. The buyback may help the stock a little bit. Then there is HAL
13:26 and defence doesn't go out of flavour, does it? HAL, the Argentinian defence minister
13:30 has visited HAL and there's an LOI that has been signed on cooperation for light and medium
13:36 utility helicopters for the armed forces of Argentina. You know, viewers, for all of these
13:42 businesses which is defence, which is railways, the last 12 months or 18 months, the managements
13:49 have come out and said that because of the large capacity that we are now utilising and
13:54 setting up for India Ops, we stand a chance of being competitive globally. You all scoffed
14:00 at it, and rightly so, because the history was against that. Most of the times these
14:05 spaces are only flatter to deceive. The last 12 months have been different. You look at
14:12 what a Mazagon dock is doing every single day. You look at what a Teetagard Wagon is
14:16 doing every single day. And you know, brokerages, I mean, Mazagon dock is separate, but in Teetagard,
14:23 there's an HSBC note, which we've storified on our website as well, you can read it. But
14:28 in the note, when the analysts are saying that they are now jumping on the bandwagon,
14:32 or the company is jumping on this whole bandwagon of uptake in railways, and there could be
14:37 substantial upsides there, their target prices were higher. So, the limited point I'm making
14:42 is without getting into individual stocks, is that some of these defence names, some
14:46 of these other manufacturers, PLI manufacturers are now having the size, which makes them
14:53 competitive globally, and which is a great sign. Now, will it definitely last that way?
15:00 I don't know. It's something that we haven't seen. We've seen private companies, pharma,
15:04 spec chem, IT services, the poster boy, do really well on the global scale. And some
15:10 of these businesses also do an encore. Who knows? But for now, the party is strong. So,
15:16 HAL should be in focus. Rice stocks could be in focus. India has banned non-Basmati
15:20 white rice exports to check the local prices. Maybe it's a bit of a damper for some of the
15:24 rice exporters. So, watch out for those two in the session today.
15:30 NetNet. It'll be interesting to see how some of these stocks shape up today. Some people
15:37 were asking about whether it's a good time to do an SIP into IT funds. You know, it might
15:44 not be a bad idea. For the next six months to maybe 12 months, the space is under a bit
15:48 of a cloud, going by Infosys commentary. But this is the time when there's a downtick to
15:54 maybe accumulate some of these high quality companies. Since you don't know it very well,
15:58 it's best to do it through a mutual fund. So, maybe not a bad idea. We'll definitely
16:02 ask this question on our next mutual fund show as well. But I don't think it's a bad
16:05 idea per se, as long as it's an SIP and not a lump sum, because nobody can predict what
16:09 will happen over the next six months. But the long term future for some of these companies,
16:12 time and again, has been proven to be very, very good. So, watch out for these as well.
16:19 And a clutch of conversations lined up today on BQ Prime. Earnings conversations. So, HAVLs
16:23 will be an important one to hear out from the management, Mr. Anil Rai Gupta at 10.35.
16:30 So that is something you need to definitely tune in for. There will be Persistent Systems
16:35 CEO Sandeep Kalra, who will be in conversation with me, talking about their quarter. So,
16:40 do tune in for that. And Nelco, it's well, Q1 review and more with CEO PJ Nath at 12.30.
16:47 There is Emphasis in conversation with my colleague Tushar, the CEO and the CFO. So,
16:53 that's at 9.40am. And that will give you some idea about the other IT commentary too. You
16:58 might want to tune in for that as well. And of course, the Trade Talk conversations at
17:02 8.30, 11 and 3.15. So, all of those would be important. Thanks so much. And let's hope
17:09 that the other sectors buckle up and we nudge the 20,000 mark today. It'll be great to have
17:15 a solid weekend. Thanks so much for tuning into the Trade Sala.
17:26 [BLANK_AUDIO]
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