Trade Setup | FII flows starting to wane, but can global market optimism rub off on India markets today? #BQLive
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00:00 Good morning and the global cues are to India's support, but there are opposing factors at
00:04 play too. First, what the US markets did in Friday's session, and you will see a bit of
00:09 an uptick there for the Nasdaq in particular, the Dow and the S&P also about half a percent
00:14 to a percent higher, Nasdaq up 2%. Quite interesting the kind of differentiation in the moves.
00:19 More importantly, from an Indian market's perspective, yes, the world markets did okay.
00:24 The 10-year yield, let's stick to that, the 10-year yield at 3.95 was much higher.
00:29 Now we're seeing in the yields closer to 4%. That's a bit of a dampener. You kind of think
00:35 about what's happening to financials, why they aren't doing well. In some manner, I
00:40 would reckon that the 10-year yield also has a part to play there. But there is a change
00:46 that has happened in terms of this morning. So the global news flow is important before
00:52 we get to the gift Nifty. So like I said, S&P 500 closed near 1% higher and the Nasdaq
00:58 was about 2% higher, third straight week of gains. 2-year treasury fell slightly on Friday
01:04 as data showed slowing inflation. There is news that India and UK could sign the trade
01:08 deal this year as per Reuters. But also from a market's perspective, BOJ announced unscheduled
01:14 bond buying operation and Goldman and Morgan Stanley see BOJ's tweak boosting Japanese
01:20 stocks and that's what's happened viewers today. Asian markets are trading well. There
01:25 was about a percent and a half to 2% kind of a gain on the Japanese markets early morning
01:31 in trade. I wonder if that's playing out on the gift Nifty. I think we'll get the gift
01:35 Nifty quote in just a second. But while we corrected on Thursday and stayed stable on
01:42 Friday, let's get the gift Nifty up if we can or at least get the what quantum is the
01:47 gift Nifty trading at. It's trading flat, maybe a positive marginal bias or no big negative
01:54 bias today because the world markets are doing OK because the other cues are kind of against
01:59 us and I'll get to that in a moment. I mentioned about how high crude prices, high yields and
02:04 FI flows not being positive. All of those are a few dampeners. Now, what did the Nifty
02:09 do in Friday's session two days ago? It ended flat. The bank Nifty decreased about 0.46%.
02:17 But the broader markets increased with the Nifty mid cap up about half a percent, small
02:21 cap 0.2%. India VIX decreased by 3.59% and closed at 10.13. Nifty Realty was the top
02:28 performer, followed by Nifty Energy and Nifty IT declined the most. So that is the setup.
02:33 That is what happened on Friday. A lot of liquid stocks with high volumes gained in
02:38 trade. India Woods Housing Finance and there's newspaper reports about how Samir Geylot is
02:43 reducing his stake or Tata Power, Tata Chemicals, LIC Housing Finance, NTPC. Those are the kind
02:48 of stocks that did really well. And these are large liquid stocks with very high volumes,
02:54 which had a move in Friday's session. Now, what's the trade set up there for the day
02:59 today? Well, one would reckon that the uptrend has paused, but not entirely upended. Key
03:05 supports are at about 19,500. Very difficult to see the bank Nifty outperforming in the
03:10 very short term because of the factors that I mentioned, higher yields as well. And both
03:17 the higher yields and the higher crude prices kind of play a small sport to large further
03:22 upticks. That is the problem. And Goldman Sachs, for example, this morning has said
03:28 that they see the global oil market moving from a surplus to a deficit. We are approaching
03:34 winter in two months time or three months time. All of that doesn't augur well. But
03:39 let's wait and watch. What is doing well in India though is power and power related stocks,
03:44 continuous improvement in fundamentals, high investor interest, lots of HNI's buying into
03:50 some of these power names. And therefore, you will see this space continuously being
03:56 in focus. Foreign investors have sold about 1000 crore shares yet again. TI's bought about
04:02 1634. So in the last two or three days, we've had some serious selling from the FIIs. They're
04:08 re-emptying what is happening to crude and yields. Earnings are in focus. Adani Green
04:15 transmission, there's Bosch, there's Yale India. More importantly, there is Maruti Suzuki
04:20 coming out with numbers. All eyes out for that one. There's also, of course, Naveen
04:24 Florin and Sumitomo Chemical from the chemical space today. And of course, Wellspun India
04:29 from the textile pocket. Can this bring a surprise much unlike what some of the peers
04:33 have done? Remember, Wellspun India, very strong last quarter. Can they do an encore
04:38 is the question. And there's, of course, UPL and all eyes will be out on what UPL does.
04:43 The expectations are very muted. So let's wait and watch if UPL can spring a surprise
04:48 positively out of its hat. Well, that is, we'll get to know when we get to know. For
04:53 now, let's try and focus on stocks that will be active at 9.15 on market open. Right. So
04:58 first up, Glan Pharma. I'm getting all the stocks in news first and get the results.
05:03 So Glan Pharma, zero observations and no action indicated classification from USFDA inspection
05:10 of its Vishakhapatnam sterile oncology facility. Minimal Enterprises, the numbers were a ho-hum,
05:17 not too many people impressed, but they've approved a buyback, 1.4 crore equity shares.
05:22 Shares will be bought at 1.250 apiece. The current price at 1072. There's a bit of a
05:27 difference there. Maybe the stock reacts. Time will tell. DivGi talk transfer systems.
05:33 It's an expensive stock. It's not a cheap one in terms of valuations, I'm saying, not
05:37 in terms of price, but it received an order from an overseas customer to supply components
05:42 for an OE program worth rupees 180 crores. The production is expected to begin from Q4
05:47 of fiscal 2024. So some time away. About a couple of quarters. Yes. A couple of quarters
05:53 away, but who knows? Maybe the stock reacts positively. NDPC will separate the coal mining
05:59 business into unit NDPC mining. So that is part one. And then part two, the numbers.
06:04 Revenues were flattish, but margins improved 29.8% versus 25%. EBITDA up 19% at 12855 crores
06:13 versus 10796 crores. And the net profit zoomed 23% to 4907 crores versus 3978 crores. So
06:22 they did well on the operational metrics. And that's why NDPC, along with the fact that
06:27 they've given this announcement about separation of the coal mining business into NDPC mining.
06:34 When companies do that, when they see valuation accretion into the separate units, wonder
06:40 if all of this leads to NDPC reacting positively to it. Let's wait and watch. Now we'll see
06:46 JL reacting positively likely and we'll get to that in a moment. But since we're on NDPC
06:51 and power, let me talk about the other power related names. Since I said that power is
06:55 seen some favor, right? So INOX wind revenues up 65% at 348 versus 210 crores. EBITDA at
07:03 31 crores versus loss of 45 crores. Net loss at 63 crores versus loss of 129 crores. They
07:09 have halved the loss as well on their bottom line and they've done EBITDA positive. The
07:14 stock has run up quite a bit. So that's the caveat that should be kept in mind. But I
07:19 reckon they should please the street. So not bad. And so turn around quarter for INOX green
07:25 by the way. Revenues at 63 crores versus 61 crores. EBITDA at 30 crores versus 18 crores.
07:31 There's a pat of 3 crores versus a loss of 11 crores. So a turnaround quarter and certainly
07:37 could react positively. United Breweries could react negatively. Revenues down 6.7% at 2278
07:45 crores versus 2434 crores. The expectations were 2633. So much, much lower than estimated.
07:52 Margins 9.8 versus estimated 12%. Full 220 basis points on that base is large. Net profit down
08:03 16% at 136 crores. The estimates was 207 crores. Nearly 12% volume decline seen during this
08:09 quarter due to RTM changes and a bunch of other factors. But RTM changes I reckon is the
08:13 predominant factor. So net net, not a great quarter. We'll probably see UBL reacting negatively
08:21 on open today. MCX should react negatively. Sales up 34%, which is fine. 146 crores versus 109.
08:29 EBITDA down 78% at 11 crores versus 49. EBITDA margin 7% versus 45%. BAT down 53% at 20 crores
08:39 versus 41 crores. There's a lower than expected yield plus the profitably impact due to the payout
08:45 to 63 moons. Viewers would remember we'd spoken at length about the kind of numbers that MCX has
08:51 to pay to 63 moons and the sarcastic press release or the exchange release by 63 moons
08:57 when they spoke with so much of sarcasm about what MCX is having to do. Well, it's showing
09:04 in the numbers for MCX, by the way, not a great set of numbers. Should react negatively, I would
09:10 reckon. Brokerages do not do impress, by the way. Obviously so. IDFC first bank numbers seemed good.
09:17 NIIF 36%, gross NPAs improved, net NPAs improved. PAT up 61%. Couldn't find too many faults with
09:26 this. So you might see a positive reaction here as well. Equitask small finance bank, NIIF 28%,
09:33 gross NPAs, flattish net NPAs, flat, PAT up 97%. Who knows, may react positively. A lot of HNIs
09:41 interested in this stock, interestingly. RPG Life QOQ did a good number, really. Sales up 25%,
09:47 148 crores versus 118 crores. EBITDA margin at 22% versus 13%. BAT up 114% at 22 crores versus
09:55 10 crores. A good show, could react positively. Chalet Hotels, a mixed bag, if you will, revenues
10:03 at 310 versus 317. So in line. EBITDA 109 versus 135. So that's the problem. There is a bit of a
10:13 downtick there. As also in EBITDA margins, a bit of a downtick there. Net profit is up, showing a
10:19 210% number, 88 crores. There are some tax benefits that come into this quarter or the tax losses in
10:27 the last quarter. All of that led to that, because otherwise difficult to see EBITDA margins being so
10:33 low and yet the net profit number being seeing a pump up. So there are those one-offs there in
10:37 Chalet Hotels. But net, net, maybe a number not as impressive as Indian Hotels. You have to admit
10:44 that. Because if you look at the EBITDA number miss of Indian Hotels, it was about 100 basis
10:50 points. Here, the EBITDA miss is much, much higher on Chalet Hotels. So, bit of an issue.
10:58 You will hear Sanjay Sethi today. So that is something to watch out for. Lakshmi Organics,
11:03 the numbers were again, okay. The reason I'm bringing this up is that the revenues were up 3%,
11:10 but EBITDA margin net profit numbers, not, not the best, maybe marginally better than estimated
11:17 on the net profit front, but otherwise not the best numbers. The one which will move a lot or
11:22 could move a lot is Siemens. Shareholders have opposed the sale of low voltage motors,
11:27 geared motor business. Because remember the news was that Siemens had proposed sale and transfer
11:33 of units to Siemens Large Drives India as per the exchange filing. Now, shareholders have opposed
11:39 this. And because, you know, the majority of minority shareholders of Google was needed for
11:44 this. And how is this important? Look at the Jefferies note, it tells you why. So Jefferies
11:50 has a buy on Siemens with the target price of 4520. They say that the sale of Siemens low voltage
11:58 motors division to parent has not been approved because a majority of minority shareholders,
12:03 approval was needed for this transaction to go through as per SEBI guidelines. The implied loss
12:08 to shareholders was 189 rupees per share because the proposed sale value was at an EV to sales of
12:15 2.1 times versus the company multiple of 8.4 times. The fact that this hasn't gone, shareholder
12:21 activism, kudos to shareholders, they're able to do this. And this would mean that Siemens could
12:27 see a bit of a bump up in the session today. More, more than the fact that the share price will move
12:33 up because there are only in fact people who currently have holdings in Siemens, or maybe
12:37 we're smart enough to maybe even buy at a good price today if the stock is meant to go up further.
12:41 I have no idea how much it will go up. I'm just saying it's a positive reaction. According to
12:46 Jefferies, the difference is about 180 rupees per share. The point being that shareholder activism
12:51 leads to an event which ideally should never happen, not happen, which is a great sign. So
12:57 watch out for Siemens, watch out for Gale. UBS has a double upgrade to a buy, the target price
13:03 has been raised to 150 from 80. The business turning from cyclical to structural as per UBS.
13:08 UBS says they think consensus is yet to fully appreciate the upside to realize tariffs. And
13:14 according to them, it's trading at 24% and a 50% discount for 10 year price to book as well as be
13:21 in a deep discount in investment value. And therefore, they are constructive on Gale. Watch
13:26 out for Gale in addition to Siemens, which could do well. And of course, all the other result
13:30 reactions that we will see. By the way, Maripo, the numbers were okay. I thought the systematics
13:36 note captured it well. So that's where I'm bringing it. They were bad at the target price of 645.
13:41 The same company is confident of talking up 350 basis points improvement in gross margins and 20
13:46 plus EBITDA margins for FY24. The revenue trajectory, according to them, will pick up from
13:51 the second half after a flattish second quarter driven by gradual volume pickups. So don't expect
13:56 material things in Q2 as per systematics. The Wahoo business can see high single digit growth
14:02 from the second half with softening inflation. Essentially, margin improvement and a strong
14:09 second half. Is that good enough to bump up Maripo today? Don't know. But is it a good
14:15 investment rationale? Maybe for the second time, if the stock doesn't work too much, maybe. Remember,
14:20 all of these maybes are also subject to what crude prices do viewers. So as we wrap up trade setup,
14:26 keep in mind that India is trading at good valuations or at reasonably high valuations.
14:33 And a few factors might turn against and if they do, then you've got to be careful.
14:41 Crude prices, like I said, yields, like I said, flows. We've had three strong months of flows.
14:47 Those are marginally at the margin turning against. If the FI flows continue to turn at worse,
14:52 and I'm not saying they'll disrupt the market too much because the local flows are strong, by the
14:56 way, but FI plus DI flows combined positive kind of bumps up the market. That not being negative
15:03 is a bit of an issue, but the longer term numbers don't seem to be too bad. And I would reckon that
15:11 there's so much money waiting on the sidelines to come that a 4-5% dip into Indian markets,
15:16 I would reckon that we will see buying coming in. So if for whatever reason, the index will go from
15:22 circa 20000 to even 19000, forget 18000, even 19000, we might see some bit of buying starting
15:31 to come in. So bear that in mind. But yeah, leverage trades, maybe not because a few of
15:38 the technical factors, like I said, turning marginally against, so that's to be kept in mind.
15:42 Thanks so much for tuning in a clutch of very important conversations today,
15:47 all through the day. So we'll have of course, Oshay Katri on IT company earnings. He's an
15:52 important name and therefore interesting to hear what he has to say. Then Sanjay Mukhim,
15:58 head of equity research at JP Morgan coming in on Talking Point at 10am today. You will hear
16:05 Vivek Janathan, IDFC first bank at 10.15 or 10.20 or thereabouts. Also here Rajdeep Gupta of Root
16:13 Mobile coming in at 10.30am. There is Sogale Gupta of Marico at 12.05. That's to be tuned in for.
16:21 Like I said, Marico is an interesting one. Nitish Mithrasen of Nazara comes in at 2pm.
16:27 And of course, like I said, BEL at 11.50am. That's an important number because they clocked in such
16:34 a fabulous quarter with such high flows. Important to understand from BEL as to what they have to say
16:39 about the quarters ahead. Thanks so much for tuning into The Trade Setup. Have a great day.
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