Nifty PCR At 1.46; Corrections Usually Set In After 1.50 | Trade Setup: September 12
Transcript
00:00 Good morning and thanks so much for tuning into the Trade Setup. I'm Neeraj Shalek. Let's
00:03 take stock of the global news flow in the US markets before we come to our markets,
00:07 which are above 20,000. So the global news flow, European stocks, in addition to the
00:13 US stocks, closed higher in a busy week for global economic data. Tesla shares jumped
00:18 9% after a Morgan Stanley upgrade, actually jumped 10% nearly after the Morgan Stanley
00:23 upgrade and just shows that when there was apparently no other reason for a market cap
00:29 as large as Tesla to move up 10%. Just shows the dearth of ideas there too maybe. Oil prices
00:35 are steady around the 10-month highs. India has imposed some anti-dumping duty on some
00:40 steel products, Chinese steel products for five years. And Apple's iPhone 15 event kicks
00:45 off today. Well, it was not just the European markets, by the way, the US markets did okay
00:51 too. If we just look at what the performance of the US markets was, a percent higher for
00:55 the NASDAQ, S&P 500, 0.67%, Dow quarter of a percent and no doubt Tesla had a part to
01:02 play. By the way, while Tesla did really well, if you look at what happened to, for example,
01:07 Oracle after in the after hours trading, that stock was down about maybe 8, 9% as well.
01:13 So of course, not as large as Tesla, but I'm just mentioning it. The other cues, the dollar
01:20 index came off a little bit. So from 105 odd levels, it's now at 104 and that is probably
01:26 leading to what's happening in the metal space in the session today. VIX is flattish and
01:31 the 10-year yields have stayed steady at around that 4.30 mark. The gift Nifty early morning
01:37 was indicating a start in the positive about, you know, right now it's saying what it is,
01:43 but it was indicating a startup or a third of a percent higher. So bear that in mind.
01:48 Now what's the trade set up there for after we've nudged 20,000 yesterday? I think arguments
01:53 can be made of a need to exercise caution selectively, but a blanket avoidance is certainly
01:58 not necessary, not even at the broader end of the spectrum. I know there is a Kotak note
02:04 which has done the rounds yesterday and the stories that are on our website as well about
02:08 how they are saying that they are kind of avoiding or withdrawing recommendations maybe
02:14 on a bunch of mid caps or all mid cap stocks because of the kind of valuations that we
02:19 are trading at. I don't know if that is indeed necessary. In fact, I would urge people to
02:28 read up or hear the conversations that we had with not one, not two, but three experts
02:35 and three large portfolio managers about what to do post that. Yes, they exercise caution
02:39 and they spoke about it, but they mentioned that. I mean, there are select pockets which
02:43 are doing well. So it's not necessary to have a blanket avoidance to my mind. But there
02:49 are cautionary signs. Nifty PCR is very close to 1.5 levels from where it usually brings
02:56 about a bit of a pullback. Quant indicators are talking about greed zone, maybe not extreme
03:00 greed, but it's certainly the greed zone as opposed to the fear zone. And PSU stocks are
03:05 trading at punchy valuations. And you need to be very selective in that sector, at least
03:11 for now. Just look at the kind of moves that some of the PSUs have done in the last one
03:15 month. And I can't talk about future P's because don't quite have a handle on, for example,
03:22 the earnings that BHEL will show up. So I've looked at TTMP and look at the valuations
03:27 that some of those are trading at and look at the one month gains that some of those
03:30 are trading at. I mean, the last one month have been just spectacular for some of these
03:36 companies. So that is to be kept in mind. You know, a very dear friend who is a portfolio
03:42 manager has sent me a note this morning and it brings out some very interesting data points
03:48 about some of the PSUs. So that's to be kept in mind. So, SJVN, I haven't mentioned SJVN
03:57 here. It was up about 15-20 percent, whatever it is. The market cap at 30,000 crores with
04:04 P multiples at 30 times trading 12 months. ROC just 10 percent. Sales growth for the
04:10 last five, 10 years has been less than 10 percent. Not too much delivery mark, delivery
04:15 based buying. RVNL, 16 percent higher. Market cap is at 27 times P. It rose at 17-18 times.
04:24 Delivery percentage is not very high. People are asking why is IRFC more expensive than
04:29 Porta can HDFC Bank? Well, maybe pertinent questions, but maybe as some people are saying,
04:35 PSUs as a pocket are changing. And yes, there are a lot of naysayers, but there are believers.
04:41 The likes of Ramesh Damani have been vocal and speaking on various platforms about how
04:49 they believe that this space is undergoing a change. I don't know what will be right
04:54 and what will be wrong, but the PSU stocks for now are enjoying a run like they've never
04:59 enjoyed in the recent past to my mind. And my only limited point is that because of the
05:04 valuations that some of these are trading at, you've got to be a bit careful and selective
05:08 in choosing which one might be worth its weight in gold. So please, please be careful there.
05:15 Stocks in news, metal stocks, softer dollar and Chinese credit data boosted metals on
05:19 LME with copper, aluminum and zinc, all of them rising. Separately, as per a Reuters
05:24 story, India has imposed anti-dumping duty on some Chinese steel products for five years.
05:33 Maybe watch out for some wheel companies as well as steel companies, so on and so forth.
05:37 So watch out for some of the metal and metal related stocks in the session today. Some
05:42 of the East India based cement companies might be in focus. As per a Nomura note, there is
05:47 a price hike in cement in East India and dealers suggest that the first hike was largely absorbed
05:54 by the media. Well, this could be interesting for some of those cement players. So keep
05:59 an eye out if any of these react, you know why they are reacting. As per media reports,
06:04 L&T Finance could be in focus because Bain Capital will send stake of up to 2.62 percent
06:09 equity, which is worth about 850 crores via block deals. The floor price is just set at
06:14 around the current market price. And if it gets absorbed, then there might be some more
06:18 gains or some gains for L&T Finance. So be mindful of that.
06:24 With big boy Reliance Industries, KKR invest about 2000 crores in Reliance Retail Ventures,
06:30 increasing its stake to 1.42 from 1.17. The deal values the retail giant at 8.36 lakh
06:35 crore rupees. I haven't mentioned Tata Par and I want to make a brief mention about the
06:43 Adani Group stocks, which I'll make at the end of this trade setup. Larsen and Toubro
06:48 is the other one. They've increased the buyback price to 3200 from 3000 apiece. And the number
06:54 of shares has been reduced from 3.33 crores to 3.12 crores. Power Grid now has officially
07:02 won the bid for the 20 gigawatt interstate transmission project in Rajasthan on a build,
07:08 own, operate and transfer, BOOT basis. The shares will turn X bonus today by the way,
07:12 the ratio of one for every three shares held. So there could be a bit of a price drop in
07:16 Power Grid, but the point being, they have won this large bid, 20 gigawatts is a large
07:22 one. The only point is that we spoke about this, I think last week or last to last week,
07:26 talking about how they were the front runners, any which ways and they'd almost won the bid.
07:30 So in some sense, part of the news is discounted. But keep in mind, I think some media put out
07:36 a very interesting tweet yesterday, where he's talking about how in the life journey
07:41 of a power plant, they are L1, then they've won, then they've got the concessions, then
07:46 they've done this, then they're starting constructing. The stock can't move on all of these announcements
07:51 because it's a part of a chain. But that notwithstanding 20 gigs is a large one, maybe Power Grid reacts
07:57 today. So that's to be kept in mind. A lot of promoter action, okay, Virat is pulling
08:03 out something. Yeah, this is the one. It's actually a pertinent tweet for you. So bear
08:11 that in mind. Then a lot of promoter action and mutual fund action. You know, why bring
08:16 this up? So for example, yesterday, a clutch of these Adani Group stocks, just before we
08:21 get to the MF action. Yesterday, a clutch of the Adani Group stocks, excuse me, I'll
08:27 just. Yeah, a lot of these Adani Group stocks were in focus yesterday, because the stocks
08:38 gained quite dramatically in the session. The only key point is that the news that had
08:43 come out was that the Adani Group stocks or the Adani Enterprises and Adani Ports had
08:48 seen the promoter group increase the stake. And as a result of that, these stocks went
08:56 up in trade. Now, wherever you see some smart promoter action, there might be merit in trying
09:01 to see what could be happening in those pockets. So bear that in mind. Similarly, on the mutual
09:05 fund side, there's some bit of buying that has happened in some stocks yesterday. So
09:09 watch out for A&R Construction. HDFC Mutual Fund bought about 15 lakh shares. Zomato,
09:14 Kotex Select Focus added Zomato. Rishabh Instruments, Quant Mutual Fund has bought 1% stake. Nippon
09:20 MF has bought 2.63% stake. So do watch out for each of these. Then some queries. I'll
09:30 start off with the last query first, which is somebody is asking about whether the time
09:34 is right to take a leverage short. Ashish Gupta is asking. I don't know if this is in
09:41 reference to how I've been saying on the trade setup for the last few weeks since that time
09:46 that don't take a leverage short. And I hope people acceded to that request because it's
09:50 not my intelligence alone. It's just that what some of the indicators are suggesting.
09:54 Our indicators are suggesting that it's time to go leverage short. Not as yet. But is this?
09:59 So it's a good question to answer because this may not be the time to take a leverage
10:03 long. I think that certainly comes out. But maybe, maybe, Ashish, I mean, maybe you're
10:10 a better judge because you might be a better trader. I'm just saying maybe there are indications
10:14 which are taking us to levels from where, you know, there might be some shorts underway,
10:22 but short position opportunities underway, but maybe not as yet. In fact, I think JM
10:28 Financial's Rahul mentioned in a tweet that he believes that we are on course for 20,400.
10:38 That's just a percent percent and a half of it. So wouldn't surprise if it gets eclipsed
10:42 as well. I'm just laying it out that maybe not as yet, but who knows, I could be wrong.
10:47 I just the way I'm mentioning this is that it's not a time to take very large leverage
10:53 long for sure, except for select pockets, if you're confident. Then there's a query.
10:58 Do you think the IT sector is ready for a rally? It's lagging as of now. Well, Surya,
11:05 very good morning to you. Multiple people that I've spoken to have said that IT is getting
11:10 ready for becoming very attractive at some point of time in the next two or three months,
11:14 maybe not immediately. But remember, they have won a lot of orders recently. So that
11:19 is one good part. Select companies have won large deals at a point of time and everybody
11:23 thought that that wouldn't happen. So that's a positive. So that's part one. And part two,
11:33 some of the valuations are certainly attractive. So selectively, these things could happen.
11:41 There's a query about, so I can't mention if there is a rally in the offing immediately
11:46 or no, but investing in an IT fund might not be a bad idea. SIP. Some query about PE, Guy
11:54 on Nifty at all, all time highs, what PE says about PE of Nifty, Bank Nifty, Mid Cap. Well,
12:00 you know, Vijay, very good morning. The only problem with this such kind of data crunching
12:06 is that data can show you both the positive and the negative side. If you compare it to
12:11 historical multiples or historical multiples when we were at peaks, you know, I don't think
12:18 we are that expensive compared to what's happened at peaks, you know, excessive bubble territory.
12:24 So we are not there yet. Does it mean we have to reach the bubble territory? Maybe not.
12:29 So but are we expensive? Yes, we certainly are. Is there caution warranted? Very likely.
12:38 You know, yesterday, Siddharth Bhaiya of Equitas and two other vendors, Vikas Kimani, one of
12:43 them mentioned that there is merit in trying to be selectively cautious. But like I said,
12:48 much unlike the Kotak note, I don't think that there is need to be a there needs to
12:53 be a blanket avoidance, if you will. There's a query on Adani Port. I'm sorry, I can't
12:59 mention about Adani Group stocks because they own Kevin BQ Prime, 14% stake in BQ Prime.
13:06 So and I can't anyway stock on individual stocks per se. I'm not an expert. But what
13:10 we can do is, Kevin, if you have a question on Adani Ports, we've now started our show
13:14 Ask BQ at noon and on select days. And therefore, maybe you can try and put in the query there
13:21 and somebody can answer that. But, you know, the fact that there was a rally in the offing
13:30 yesterday in a meaningful way and brokerage notes constructive on this stock. The consensus
13:39 estimates are higher than the current market price is what I can tell you. But I don't
13:43 have a view on any individual stock, to be very honest. I can't give a view and I don't
13:48 want to give a view and certainly not on Adani Group stocks per se, because standard disclosure,
13:53 the Adani Media Group, Adani Media Ventures owns 14% stake in BQ Prime, which is the owner
13:59 of Quitdil in Business Media. So please keep that in mind, the standard disclaimer. Anyways,
14:05 a bunch of important conversations lined up today with Nifty at 20000 since there's so
14:09 many people want to know what to do. Sourabh Mukherjee of Marsellus joins us at 9.30am
14:13 to talk about his thoughts on how does he see the market and life beyond 20k. We do
14:20 a conversation with arguably one of the largest money managers in the country, Prashant Khemka.
14:25 So that conversation will play out sometime during the day today. So that's something
14:28 you want to tune in for at 1.15pm. Adarsh Sinha of Bank of America joins in to talk
14:34 about currencies and what the dollar index strength/weakness might mean for currencies.
14:42 And we'll try and extrapolate that conversation with Prashant on to what it would mean for
14:49 for risk assets. So some very, very important names, some very cerebral names joining to
14:55 talk about their thoughts today, in addition to, of course, the common trade talk that
14:59 we will do, which will be very important as well. So at 8.30pm, at 11pm, at 3.15pm, you
15:05 may want to tune in as well. Thanks so much for tuning in to The Trade Setup. Have a great
15:09 day ahead.
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