Railway Stocks Finding Favour | Trade Setup: August 29
Trade Setup | Quant indicators strongly suggesting no leveraged shorts trade working well thus far. #BQLive
Transcript
00:00 Good morning and thanks so much for tuning into the Trade Setup. I'm Neeraj Shah.
00:03 Let's take stock of the global news flow first before we dive into what could happen to our
00:07 markets. So Asian markets have risen as Wall Street has come off a winning day. Nothing major,
00:13 but in the green over half a percent, which is good news. Gold is steady after a modest advance
00:21 as treasury yields have declined. Sugar is heading towards two-month highs on concern
00:26 over Indian exports. And in business news, interesting news, OpenAI has unveiled Chad
00:31 GPT for business, stepping up the revenue push. More importantly, independent of what it does
00:36 for OpenAI per se, the fact that AI related tools are opening up for business as well
00:43 is looking very, very interesting. So what did the US markets have done? Well, let's pull them up.
00:49 Like I said, 0.7, 0.8 percent uptick. So 0.8 percent for the Nasdaq, 0.63 percent for the S&P
00:56 500. And yields in particular, we need to pull up the next plate because yields are now below 4.20,
01:03 4.18. Volatility steady, dollar index steady at 104 odd mark, the yield below 4.20. That's
01:13 interesting. In fact, we've, you know, on August 21st, I think ISEC put out a note and I'll get
01:19 you that note today. But in that, ISEC is saying that we don't believe that yields will necessarily
01:25 stay higher and implications for FBA. We'll get to that in a moment. The GIFT Nifty should be
01:32 indicating a flattish to a marginally positive start. You know, independent of what this does,
01:37 I think we probably are set for not a bad day yet again. We did have a bit of a gain yesterday,
01:42 by the way. So, you know, what happened yesterday is that the Nifty 50 gained about 40 points to
01:47 close at about 19.306, which is 0.21 percent. Bank Nifty increased by 0.6 percent led by Federal Bank
01:55 and PNB. The broader indices ended positive. The Nifty mid-cap 100 was up about half a percent,
02:00 small cap was about 0.74 percent. I think the FMCG were the only two indices to end in the red,
02:05 per se. But essentially, we had a good day in trade yesterday. Can we see a continuation of
02:10 that today is the key question on trade setup? Well, you know, before we get to what could
02:14 happen on the positive side, I'm glad that quant indicators thus far have been strongly suggesting
02:20 no leverage shorts. And I think that trade has worked well thus far, because frankly,
02:24 we haven't had a trending day downwards either. So much as people might want, would have believed
02:29 that there could be a sharp downtake, leverage shorts would not have worked for sure. And the
02:34 pullback yesterday, possibly a kind of meandering outlook today could do well. You know, the problem
02:44 with the market currently is, or at least in today's session or otherwise, is that the monsoon
02:52 is now playing the errand. And as a result of which, the positive sentiment, if any, could get
02:58 clouded further because people might believe this might be inflationary in nature, might force the
03:03 RBI's hands on so forth. You know, that whole dialogue might come into play. And rightly so,
03:07 by the way, I'm just saying that monsoon is kind of clouding the sentiment a little bit.
03:12 The highest put OI though, for this expiry, has swapped from Friday. Remember, Friday,
03:18 when I was talking about this yesterday, I was saying that 19,000 has very large OI
03:22 and 19,300 was the next. Now there's a bit of a swap there. 19,300 is again, the largest OI. So
03:28 there's a strong support at that level. Should that break, there could be a swift dominant
03:32 effect downwards to 19,000 maybe, but for now, 19,300 likely the strong support.
03:38 You know, I'm using this as an example, though, Tata had corrected 4% yesterday. We highlighted
03:44 that the wagon manufacturer's data wasn't the strongest and therefore there could be a bit of
03:48 a corrective move there. But the others, Tex Rail, Railtel, by railway stocks, I don't just
03:54 mean wagon stocks. Everything related to railways is actually finding a lot of favor. Yesterday,
03:59 you saw Tex Rail up 11%, 12%. Railtel going up 15% because of those commentary uncovered,
04:07 just shows that that pocket is finding a lot of favor. For a stock to go up 15% means there was
04:15 large fresh buying on the cash side, related to the cash stock that would have happened. It just
04:21 shows the optimism that people have in these companies, even after they have risen so much.
04:26 Remains a pocket to certainly monitor. Okay, now having said all of this, what are the stocks to
04:34 watch? Well, some price and volume buzzers from yesterday's session first to bring up,
04:39 and these are liquid names and therefore I'm bringing these. There will be others which
04:42 would have done more as well, like I said, Railtel, for example. But India Woods Housing,
04:46 11% higher, volumes much higher. Pyramal Enterprises, 4.5% higher, two times volumes
04:51 because of that investor day. GNFC, and you know GNFC, GSFC, GMBC, that whole bucket of
04:58 Gujarat PSUs did very well yesterday. Glenmark Pharma, 4%, nearly 4% on good volumes. And
05:04 Vodafone Idea continues to jump higher, 3.5% higher on nearly three times volumes. So watch
05:10 out for these. Now, three things which I haven't given, and I'll start off with them first and then
05:17 move on to specific stocks as well. Steel companies, so there's that whole talk across
05:23 media about steel companies having increased long product prices. Keep in mind, even if that is true,
05:31 the list prices may have increased, but from what we gather, and my analyst Rishi has spoken to
05:38 some of the steel companies, that they are still selling the long products at a discount. So there
05:43 is no material benefit that is coming to the steel companies. Please keep that in mind.
05:46 If you are trading steel stocks on this news that they have hiked prices, the stocks may still move,
05:51 but I'm just laying the caveat out there that companies are actually not selling at the higher
05:55 prices. If indeed the prices are higher, they're still selling at a discount. And APL Apollo block
06:01 might happen today. As for other media, I don't have confirmation of the same, but I'm just laying
06:05 it out there so that, and apparently happening at just around 1600. But what I hear is that
06:13 there's a lot of appetite for APL Apollo block and the stock may actually absorb that supply very,
06:20 very quickly. So be mindful of that. There is also a Zomato block that is on the anvil
06:25 from Softbank. You never know that could also happen today. Be mindful of that block that
06:30 happened yesterday for Zomato. There will be some more that could happen today. And I'll come to
06:33 Zomato in a moment. Now, continuing with the list of stocks to monitor. Hindustan Construction
06:39 Company, they have said that there are exclusive talks or discussions with Demartheaux Park. I
06:45 believe that's the pronunciation, but it's a company headquartered in France for the sale of
06:49 Steiner Construction SA, a material subsidiary of the company. I would reckon that the street
06:54 might view this positively. You know, the stock has gained 40% in less than a month, I think.
07:00 And there has to be good reason. This decision will be taken on the 30th. There is some meat
07:06 on the 30th in which HCC will announce this discussion formally, maybe. But they've made
07:12 an exchange release. Interesting announcement. Do watch out for this. Gokartas Exports, a very
07:18 interesting acquisition. They've acquired UAE-based Atraco Group, a leading manufacturer of Aperol,
07:23 for $55 million. The acquisition will be funded by a mix of debt and internal accruals. Remember,
07:30 textile companies haven't had a really great last nine months. The last quarter for select
07:35 companies was very strong. There is a lot of talk of restocking demand happening. And Gokartas
07:41 doing this is a very interesting time that they've announced this, which is actually
07:50 a pretty good thing. So do watch out for that one as well. So here's the deal, right?
07:58 Agreement to acquire Atraco Group, which is a leading manufacturer of Aperol with a strong
08:04 market position and customer relationships across the US and Europe. This, I think, goes in just,
08:13 I mean, Gokartas, the MD, I think, has said that they are excited to welcome Aramco's leadership
08:19 team, their employees, and their global customers, most importantly. So a pretty interesting
08:26 announcement there. We'll try and talk to the management today. SJVN is the other one. They've
08:30 got a flurry of orders, and there's one more here. They've backed a deal from APDCL for three solar
08:35 projects of cumulative capacity of 320 megawatts in Assam. The cost of the projects is 1,900 crores.
08:42 So one more shot in the arm for SJVN. Tata Motors could be interesting. JLR's Euro bond, due July
08:50 28th, has likely posted its biggest rise since March 21st, according to Bloomberg compiled prices.
08:56 Yesterday, as of 3.30pm London time, the stock was trading, this bond was trading materially higher,
09:02 and I reckon it will close that high. So do watch out for Tata Motors. This could be slight
09:09 positive. Sun Pharma, they expect high single digit, FI24 consolidated top line load, some other
09:14 constructive comments that have come in as well. Do watch out for this one. This is happening at
09:18 a time when there has been a bit of a, there has been a downgrade from, I think, HSBC on Dr. Reddy's
09:24 and some other pharma companies, I think. But not bad, actually, the comments from Sun Pharma,
09:29 not just on this, but other aspects as well. So do watch out for this fund. Now, I was talking
09:34 about Zomato. Tiger Global's internet fund, 3pt, sold about 12.25 crore shares or 1.4% stake at
09:40 91 apiece. Buyers included Sockgen, Kotak funds, India Midcap fund, Naxos Mutual fund, Morgan
09:45 Stanley, amongst the others. And there is other news as per IFR, Swiggy is seeking to raise at
09:51 least $600 million in the IPO. Of course, we don't know the valuation, but I presume that these stocks
09:56 are finding favour. The timing of Swiggy whenever they do the IPO means that they also believe there
10:04 is demand. And you can see by the virtue of the fact that the stock has done so well, Zomato,
10:09 there are buyers out there readily available for the stake. And the announcements that they have
10:15 made that they are doing a delivery fee as well just shows that they are now feeling confident
10:20 about the model and could be very interesting times for Zomato. It was really interesting
10:26 when Zomato was not so high. We did that really lovely conversation with Sanjeev Icchandani and
10:33 Pankaj Murata of Renaissance Investment Managers on Insight, a series that we did about a couple
10:38 of months back. But Sanjeev explains the rationale behind his confidence around business models like
10:45 Zomato. And then Pankaj, of course, as a co-anchor and as a professional investor, kind of brings his
10:52 insights both in the questions and in his view on why companies like Zomato or some of the others
10:58 could stand a chance. I think it's worth hearing that conversation. You might want to tune in at
11:04 some point of time on YouTube today or our website today or Twitter today and try and hear that
11:10 conversation. Okay. Vedat has brought it up. Okay. Maybe not able to quite go there. Yeah. But this
11:15 is the conversation that we are talking about that you can go on Insight and Pankaj Murata
11:24 of Insight and Sanjeev Icchandani and that might give you this piece. Okay. Some bulk deals,
11:31 Star Health Fidelity's EM fund has bought about 12.37 million shares. So that's one. There was
11:36 also one on Zomato, which I've already put out. And there's one more which I'm missing out. But
11:40 anyways, these two seem to be the more important one. And then lastly, a couple of interesting
11:46 pieces from brokerages. So on 21st August, ISAC put out a note on yields. They say an FPI flow,
11:51 they said, FPI outflows likely to be short lived as spike in the US 10-year bond yields
11:57 take it to the upper end of the range seen over the past year, although it does not indicate a
12:02 breakout. So both fundamentally and technically, ISAC was of the opinion that there will not be a
12:07 material breakout of the 10-year yields. They might pull off at some point of time and therefore,
12:10 FPI outflows, which have been there for the last few days, may not necessarily last. Let's see if
12:16 they turn out to be true. On the other hand, Sanjeev Prasad of Kotak is not all that constructive
12:21 on markets at large. He says we see low potential returns for the market over the next two, three
12:25 years based on bottom-up assessment of sectors on our three by three matrix of earnings and
12:30 multiples. He says most sectors fall in the growing earnings, de-rating in multiple cell.
12:35 Current economic and market conditions are not very different from five years ago.
12:39 The Nifty 50 index has gone up 67% in the past five years. Well, interesting. Sanjeev Prasad
12:46 is not that constructive on markets. Didn't seem that he's bearish as a result of this. But
12:52 as multiple people have said that the market by itself may do what it does and not necessarily
12:58 go up too much, 3, 4, 5%, but bottom-up sectors have the potential to do well. So my urge to you
13:03 as we line up trade set up today is that whenever you hear market calls talking about Nifty being
13:08 sideways, that's not necessarily bad. If indeed Nifty remains sideways, by the way, Bofa says that
13:13 it will be 20,500 by December, which is not that big a move, 5% in the current scheme of things,
13:19 but still constructive. But the point being, or 5, 6%, whatever. But the point being that if the
13:23 Nifty stays steady and does not buckle down, a lot of broader end of the spectrum sectors,
13:28 which are coming to the fore, might have the chance to do well. So that's the key thing.
13:32 I think we'll talk about this with Pankaj Tibrewal today. I think this is a material question
13:37 to ask him. He's an ACE fund manager at Kotak AMC. It'll be lovely to talk to Pankaj about how
13:42 does he see this disconnect between the Nifty and the broader end of the spectrum at Kotak AMC,
13:46 when they manage both large-cap funds as well as flexi-cap funds. So it'll be lovely to understand
13:51 from him how their position also at a time when people have said that they are constructive now
13:55 more on large caps as opposed to small caps, because small caps have run a bit. So good
14:00 conversation coming up at 10am on Talking Point. You might want to tune in for that.
14:04 Thanks so much for tuning into the Trade Setup. Have a great day.
14:07 Have a good day.