- 1 year ago
Ventura Securities warns of a shift, with US-driven risks mounting, domestic sectors like banking and NBFCs offer a safer path, leaving IT investors to weigh growth against growing uncertainty.
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NewsTranscript
00:00It's 9 a.m. and we're here to get you ahead of the curve as markets kick off trading for the day.
00:04First, let's take a look at what's hot in the corporate and financial space this morning.
00:08The U.S. Federal Open Market Committee cuts interest rates by 25 basis points after keeping
00:14it unchanged for five consecutive meetings. Rates likely to be slashed by another 50 basis points
00:20by December. The U.S. Central Bank has warned of higher unemployment, higher inflation,
00:24but has also raised its economic growth forecast. The Fed is also ironically reducing its own staff
00:31by 10 percent. Investors on Wall Street sell on news with two of the three big indices declining
00:36after the rate cut. Index futures, however, bullish on expectations of half a percentage point
00:42further by the end of the year. Strong start to Asia this morning as well.
00:46Gold declines from record levels after the Fed's much-anticipated cut after briefly spiking
00:57to a fresh record of $3,708. The precious metal fall nearly a percent. Price is likely to tread
01:03a similar path in the Indian market today.
01:09AI hardware giant Nvidia slips for the third straight day, with China cracking down on its chips.
01:14Shares fall after reports say that China's internet regulator has banned the country's biggest tech
01:19companies, including ByteDance, Alibaba and others, from buying the RTX Pro 6000D,
01:26its custom-made artificial intelligence chips from the Chinese market.
01:33Families of four passengers killed in the Air India Ahmedabad crash have sued Boeing and Honeywell,
01:39the company that made the fuel switches, in a Delaware court in the U.S. According to Reuters,
01:44the lawsuit blames a faulty-looking mechanism in the switches, which the U.S. aviation regulator
01:49has given a clean chit-to for the 12th of June crash.
01:52All right, a quick look at the global market action overnight. Remember, the much-anticipated
02:10Fed meat giving mixed signals. We did see a sell-on-use effect coming in. We've had the S&P 500,
02:17NASDAQ closing lower, while Dow's maintained somewhat of an uptick at about 0.6 tenths of a
02:22percent higher. Let's look at Asia this morning as well and see how it's doing post all the news
02:28coming in. And those are, of course, your tech majors in the U.S., slightly mixed coming in there.
02:34And remember, Donald Trump wanted this rate cut, and it's the first one in nine months. It was an
02:3911-to-1 vote, with the sole dissenter seeking a 50 basis point cut. Importantly, there are indications
02:46that the rates may be cut by another half a percentage by the end of this year. The Fed
02:50chairman also raised some red flags. Let's listen in.
02:53In the near term, risks to inflation are tilted to the upside and risks to employment to the
03:00downside, a challenging situation. When our goals are in tension like this, our framework calls for
03:07us to balance both sides of our dual mandate. With downside risks to employment having increased,
03:13the balance of risks has shifted. Accordingly, we judged it appropriate at this meeting to take
03:19another step toward a more neutral policy stance. The median participant projects that the appropriate
03:24level of the federal funds rate will be 3.6 percent at the end of this year, 3.4 percent at the end of
03:302026, and 3.1 percent at the end of 2027. This path is one quarter percentage point lower than projected
03:39in June. Well, let's decode the Fed news for you. A big market trigger, Radhika Rao, ED and senior
03:46economist DBS Bank Singapore joining us this morning. Radhika, good to have you with us.
03:51As usual, the Fed, of course, giving mixed signals to the market. Clearly, they're also still wading
03:57through and trying to decipher the economic scenario. What's your key takeaway from the meet and the
04:03commentary? Hi, good morning. A certainly very important meeting. Like you already mentioned,
04:10it's the first one in almost a year after they had cut about 100 basis points last year.
04:14And I think we were looking at three takeaways from the meeting. The first being what is the move
04:19we saw now at 25 basis point. Obviously, there was a small minority in the market who were of the view
04:25that it could be a more aggressive 50. The second was, you know, how are they going to balance
04:30a weakening labor market but signs of higher inflation? What you saw, in fact, is that the
04:37markets actually, when the decision was announced, you saw the dollar correct. You saw, you know,
04:42market expectations switch towards expecting more rate cuts. But at the press conference,
04:47when we heard Chief Powell speak, then you had actually seen a bit of a drift back up because
04:53there was then the view that they are not as dovish as it was expected. And the third point that we're
04:58looking for is who, how does the board actually vote? Do they vote towards a rate, you know, how many
05:05of them vote towards a rate cut? And what you saw is actually one dissent vote by Mr. Stephen
05:09Miran. The rest of the team actually went for a 25 basis point. So these were the three takeaways,
05:15not as dovish as expected, as markets anticipated. And we were looking for a 25 basis point. And that
05:21pretty much played out.
05:25So, Radhika, help to decode this for some of our viewers in terms of, you know, when it comes to
05:31those key economic factors that the Fed is eyeing. Is it once again, the tariff impact that perhaps
05:37is leading to uncertainty and some amount of hawkishness from the Fed?
05:43Yes, certainly. I think there is no doubt of pressure from the government. But I would think
05:49that the Fed is trying to, you know, take a more center path, because they are facing a very,
05:56I would say, divided economic backdrop, but there are not clear signs that rate cuts are required,
06:02because their own growth projections have actually been dialed up. Unemployment rate, same for this
06:07year, but next two years, it's been, you know, broadly in the 4% handle. Inflation numbers have
06:12also been dialed up. So the backdrop that they have presented with, it's quite divided. So I think that
06:18that's why they are trying to take a path to the center. Tariff impact, for example, we do think it is
06:25still going to play out in the next, you know, three to six months at the least. So we haven't
06:30really seen that feed through right now. If you see the inflation breakdown, you're seeing pressures
06:34from some part through services, you know, some part very selective goods that you that seems to be
06:40showing the pressure. So the tariff impact per se, is likely to only show in the subsequent one or two
06:46quarters. So yes, certainly to your point, tariffs is an important watch factor. Balancing the pressure
06:52from the government is another. But I think in the midst of all of this, a cautious approach, a data
06:57dependent approach certainly makes a lot more sense. And that's why they're going with, you know, three
07:03rate cuts, including 25 basis point that's already been delivered, and perhaps one more in 2026.
07:10So one more in 2026, I think the market is going to immediately price in. But Radhika, forward looking
07:16from that, given, you know, what they're anticipating or the commentary that you heard, do you feel the Fed
07:21will stick to it? How much do you feel we're going to really see, again, a wait and watch kind of
07:27scenario? And also, what's your understanding of how the impact on the currency will play out as
07:34well? Sure. So our own, you know, house view is that the markets are pricing in a three plus three,
07:41essentially a lot more aggressive rate cutting cycle from the Fed versus what the Fed is saying,
07:47which is going to be a three plus one, which is that they cut this year a little bit 2026, and then
07:51they hold. We are gearing, I mean, leaning towards what the Fed is saying, which is that we expect three
07:57this year, including what was delivered, and one next year. And for the dollar, our view, our FX
08:04strategist view has been that the dollar is likely to trend down. He did anticipate a bit of a
08:09consolidation in May, you know, July, August kind of timeline, because a lot of negativity that was in the
08:15dollar was just about playing out. But hereafter, we do expect for the dollar softness into the
08:21final quarter of the year. All right, great. Radhika, thanks so much for joining us and helping
08:28us understand and decode the Fed's commentary, as well as the impact going forward. We're just
08:32counting down to market opening. I've got Shail Bhatnagar also with us. Looks like a gap up in pre-open.
08:38Shail, given that this was a much anticipated meet, but we have seen a sell on news effect,
08:43what's the likelihood of seeing that gap up come to light in just under a minute?
08:52Good morning, Abha. I think we are going to have a quiet day after the gap up. We've already rallied
08:58about 940 points before this gap up happened. So add another 110. That's a round of 1050 for the
09:06nifty in less than 12, 13 sessions. So enough is enough. Now a bit of profit booking. We are already
09:12at two week high. Therefore, I see that markets will be down a bit in today and tomorrow. And of
09:21course, a lot of value buying happening in all sorts of PSU shares, profit booking in gold.
09:26And the opening bell ringing as well, Shail. Talk us through the opening trades, because as you said,
09:29it's about four tenths of a percent higher, but expectation that perhaps trending quite after that,
09:35given recent highs that we've seen. Just talk us through some of those opening takes on your screen.
09:43Well, the advanced decline, Abha, is really, really good. At the moment, 5 is to 1. 1470 shares in the
09:51green versus 270 in the red. Out of 19 indices, 18 are in the green. And we are led by the IT index,
09:58the metals index, the nifty bank. Out of the top 10 that make up the index, we have a slew of gains
10:07coming into Infosys, 26 rupees higher, 1548, TCS, 15 rupees higher. ICICI, LNT in the green, HDFC bank,
10:16the highest rated up 10% in terms of all time highs as far as the NSC 500 is concerned. Early, well,
10:24it's all the way auto and auto. Maruti, fresh record high. Hyundai, fresh record high, 26.59. And of
10:31course, LNT finance, 243 for you. Again, a record high. Lots of gains across the board. You have
10:39defense counters doing well. Cochin Shipyard, 1.6% higher. Zen Technologies, 3.5% higher. And of course,
10:46within the auto space and IT space, you have Escorts, Persistent, and LNT Technology Services,
10:51ABBA, doing a great job early morning on the Lal Street. To you.
10:58Okay. I want to bring up some of those news makers also, just to touch upon them. You mentioned
11:02auto. So Hyundai Motor India, they've signed a three-year wage settlement with the union.
11:06Jindal Steel to rehabilitate the Hwangi plant in a $455 million Zimbabwe drill. Just bringing that up
11:13because, you know, some of those Jindal counters across the different Jindal companies have been in
11:18the news this week. And Steel, of course, continues to be in focus as well. JSW Steel,
11:23meanwhile, to raise interest in the Illawarra Coal Holdings. That's about $60 million there
11:28for JSW. So let's pull that one up as well. And meanwhile, I think we had touched upon LTI
11:34Maintree. They're going to launch an AI Commerce Center. So that one's in the news on that front.
11:40Yes Bank, a stake to rise to 24.2% for an SMFG post, the Basque deal for Yes Bank.
11:47So let's see if that stock's recording any kind of uptick this morning. But looking at a slight
11:53stake uptick there in SMFG post the Basque deal. That's Yes Bank in the news as well.
11:59Let me welcome in Vineet Polinchker, who's joining us, Head Research Ventura Securities.
12:04Vineet, good morning. Is the market playing out as you expected post the Fed meet? Are you
12:10disappointed or are there slightly cautious commentary? No, I think it's along expected
12:17lines. And we believe that, you know, India is going to be a bigger beneficiary of the rate cuts
12:23that happen in the US. Because as the dollar declines, you know, we are going to see a lot
12:30of money move into Asian markets. There is hope that, you know, FIs have been selling in India because
12:36of the valuation concern. But, you know, soon it's, I think it's going to stop. And, you know,
12:42our market should start moving up from here again.
12:49All right. So, you know, we've been talking a lot about building up to some kind of Diwali high.
12:54And even if we are taking a little bit of a breather at the current high that we've been seeing,
12:59what's your sense, Vineet, and where are you focusing? What kind of strategies,
13:03themes are you looking at over the next few weeks?
13:06So, you know, a couple of things that have happened is that the GST benefits that have gone
13:12have arrested the negative sentiments around the Trump tariffs. And with Trump's team coming to
13:19India to negotiate, I think things are panning out well. And we will see banking sector because of
13:25that move rather well. Earlier, it was expected to not do well. But right now, we believe that they
13:30will do well. And from tomorrow, I think consumption is really expected to speak up
13:35once the, you know, the GST benefits start trickling in the rate cuts.
13:40So, the place to focus is on public sector banks. Two topics out here are Canada Bank and SBI. Both of
13:47them are having their subsidiaries listed in the future. You know, so we will see leg up there on
13:55both these stocks. We also like HDFC Bank. You know, the NBFC space is also expected to do well.
14:04So, I think the best proxy on the economy for, you know, playing the consumption theme is to play the
14:10finance sector. Okay, fantastic. So, talking about financials, let me go back across to Shell. Shell,
14:18Mannapuram Finance, that one's in focus and on your list. We've seen a lot of buzz on some of
14:23these financial names. Why Mannapuram in particular?
14:26Sir, Mannapuram is… Yes, sir. I think Mannapuram is something…
14:33Go ahead, Shell, and then I'll come back to Vinita.
14:39Actually, about four months ago, Bain Capital purchased an 18% stake in Mannapuram Finance,
14:47which is a gold loan provider for somewhere like 236 rupees. They poured in about 4,300 crores and
14:56above 55% uptick in Mannapuram Finance year to date. This is a multi-bagger stock. Over the
15:03last 10 years, Mannapuram has returned about 27% each year as CAGR return for its long-term
15:10shareholders. Well, why is it critical at this point of time? Gold prices are at a record high
15:16and a lot of small borrowers are moving away from microfinance loans to gold loans simply because
15:23you can get more loan with less gold pledged. And more importantly, the scrutiny that was happening in
15:31MFI gold loans, which is microfinance loans, is much, much higher than gold loans. Mannapuram,
15:37in fact, has shown a surge in loans which are in the range of 2 lakhs to 5 lakhs. And that is
15:44something that is growing dramatically in the market as far as unsecured and secured loans are growing.
15:49So, all put together, except for the negative, which is, you know, lower yields, which again is
15:56is something that Mannapuram is doing on purpose. It wants to attract higher strata borrowers and
16:05therefore is reducing its loan costs. This is a stock that needs to be looked into mainly because
16:11Bain Capital is now on the driving seat. Gold prices are shooting through the roof and more importantly,
16:18gold loans are now acceptable in the broader market. So, this is a theme that is going strong,
16:25already at a record high. You need to consult a financial advisor before you get into it. But
16:31this is a tailwind, which is very, very strong in India and especially in the NVFC space, Abha.
16:39All right. Vineet, let me come to you on Mannapuram in particular. You also had a comment on that.
16:44No. So, I think most of it has been summed up very beautifully by Shail.
16:49So, there's nothing much that I can add on to this. I think the valuations are also pretty decent.
16:55So, you know, we like the stock as well.
17:03Great. What else, Vineet, is looking good to you in the market? So much to choose from.
17:06You know, you mentioned some of the themes that you were looking at, but some of the, you know,
17:10other action-driven stocks this week. We've been tracking BEL. We've been tracking some of the
17:17tire companies and auto angst. Of course, IT, that's another big one. Let's pull up that pocket
17:22because that's looking good this morning in particular. Anything appealing to you from the
17:26IT pack, Vineet? So, you know, although IT has been doing rather well, you know, we are a little
17:33cautious on IT. We believe that there's a lot of negative activity happening in the US.
17:38There's concentration to the US market is very high for the Indian IT stocks. And, you know,
17:44you have headwinds from, you know, H-1B visa. You have headwinds from AI. And, you know, generally,
17:53headwinds to the US market because more than 50-60% of your business is coming from the US markets.
17:59And so we think that it is a real red flag. And especially considering the fact that they're
18:05going through a lot of stress in that particular geography, I think, you know, investors would do
18:12well to stay away from those stocks. I'm not saying that they will not go up, but, you know,
18:18the risk reward in the domestic themes is far secure than what you get with the ID.
18:30All right. Shail, what else are we picking up this morning? Yesterday was all about textiles and
18:35shoemakers and so on and so forth. Today, like you said, even though it might be a slightly more
18:41quiet market, any spots of action that you're looking at?
18:48Well, Abha, it's PSUs and PSUs all the way. And that's because these are the ones that provide
18:55a deep value at this point of time. Look at the rail side of the government business. You have RVNL
19:021% higher, rights up about a percent. And within the PSU theme, there is a lot of activity that's
19:08happening on Ireda. This is a renewables financing company, 2% higher. Very strong
19:15moves coming into defense counters. Cochin Shipyard, no stopping it, 2.2% higher. 1932,
19:21PNB housing about a percent higher. Apart from that, BHEL adding about half a percent. So,
19:28early deals yet in the market, but a gap up of about 100 points plus a 930 point rally
19:35is now making investors and traders a bit cautious. We need to digest these gains over
19:40the next one or two weeks and then take it forward. Remember, it's Thursday. It's also
19:45the weekly expiry of the Sensex. And anything and everything with this, whether a rate cut or a
19:51record high on the Nikkei is now baked into the price. It is time for retailers to come into the
19:57market and for big players, HNIs, Ultra HNIs to book some profit and shift it to banks.
20:04Aaba.
20:05All right. Great. Vineet Shail, thanks so much for joining us and taking us through all the market
20:11action this morning. It was all about the Fed meet. We've been counting down to that. And as expected,
20:17and therefore the Nifty is seeing a gap up, but likely to remain pretty steady through the day,
20:22given that the Fed didn't really come out with any major boost or surprise. A few other newsmakers
20:27this morning, Adani Commodities on a deal nod from the China regulator. Bandhan Bank has sold a bunch
20:35of shares for 154 million. So, Bandhan Bank in the news. We were looking at Yes Bank earlier as well.
20:44Bandhan Bank has sold a bunch of Yes Bank shares. So, that's why you might see a little bit of action
20:48on that one in particular. And they've sold that to Sumitomo Mitsui. So, the stake is now down to
20:570.2%. Biocon has secured a US FTA approval as well. So, that one's in the news. Let's pick up some
21:03of those names. Bandhan, Biocon, see if they're seeing any reaction on the stock markets this morning.
21:09And we can also take a look at Cochin Shipyard. They've bagged a big order from ONGC to repair a
21:14jack up rig. So, Cochin Shipyard in the news. Havels in the news as well on land allotment. So, that one
21:21also of course is something that one has to keep an eye on today. But that's all from us. A steady
21:27start this morning. Keep an eye on some of those newsmakers and of course continued traction on the
21:32index. Closing the morning show just up about half a percent or so. We'll be back to take you
21:38through all the closing action later. Thanks for watchin'.