Smart Money Accumulating Quality Midcaps Slowly | Trade Setup: October 27
#TradeSetup | Continued declines and levels close to 200-EMA in #Nifty may offer breather, pullback hopes. @_nirajshah #BQLive
Read: https://bityl.co/LxvZ
Read: https://bityl.co/LxvZ
Category
🗞
NewsTranscript
00:00 Good morning and thanks so much for tuning into the Trade Setup. I'm Eidat Shah. Let's
00:03 take stock of the global news flow and what could happen going ahead as well. So keep
00:08 in mind, I mean, the picture is a bit mixed, if you will. So the US economy grew at 4.9%
00:18 pace, which was the fastest in 2021. So that was okay, but the news up ahead are not necessarily
00:23 the best. Oil is set for a weekly drop, which is actually a positive. And amongst other things,
00:30 conflicting cues around China and US keep on coming. So there is China and US releasing
00:36 dueling videos with acquisitions of provocation. At the same time, Janet Yellen saying that the US
00:42 relationship with China is in a more positive place. Remember today, or rather Friday, US
00:49 President Joe Biden means more here as well. So there's lots happening out there, which is beyond
00:53 the realms of normal understanding. We'll try and get you as many cues as we can from people who
00:59 probably understand it more over the course of the next few shows as well. But the US stocks had a
01:06 big day, you would have to admit that the Dow, the S&P, the Nasdaq in particular 1.76% yet again,
01:12 and those tech names continue to come up. In fact, from what I understand, the S&P 500 and the Nasdaq
01:19 in particular actually, is very close to how do I say it, the S&P 500 edge to the correction
01:28 point, down almost 10% from the July peak. Nasdaq fell 2% as well, 1.76%. Meta slumped,
01:40 despite decent numbers, a bunch of others, Nvidia, Microsoft losing over 3.5%. So the US markets was
01:47 not in a ship shape. The yields though came up 4.84 at maybe 7.30am, 4.86 at that point of time. So
01:56 that is not too bad, but that's very volatile and still pretty high, if you will. So no big changes
02:02 there. I don't know if closer to this key level from an index perspective in India, is the GIF
02:11 Nifty showing a bit of resilience? Sure it could. You know, and that's the key point. It was one,
02:17 remember that, so let's bring the trade setup up. It was a down trending day yesterday,
02:22 but the global cues are marginally benign, which is positive, Asia is trading in the green.
02:28 There is technical deterioration in sectoral indices yesterday, mid caps and small caps
02:33 breached some key moving levels. But, but, but the continued decline from October 11th levels
02:41 of 19, 8, 1, 1, and we revisited those levels on closing basis on 17th of October. So viewers,
02:48 this is the point, from October 11th on, we've been in a corrective move, so I can call it that,
02:53 or at least from October 17th, it's been a trending, we are down one way, we are very close
02:58 to the 200 day EMA level. And it's been kind of a fairly steep corrective move. Can we take a
03:07 breather here? Just from a perspective of how markets work, they fall, they take a breather,
03:13 then they may fall again as well. I don't know that, we'll come to that a bit later. But could
03:17 there be a bit of a breather at these levels? You could argue for that. Remember, the last couple of
03:24 days have been saying that these are levels from which bottoms get formed. Now, I mean,
03:28 it's been proven horribly wrong, because from 19, 100, we're down to 1800. I did say that the gap
03:33 of 200, 300, or 100, 200 points, and we kind of circled those levels. Could we make a bounce
03:38 for you? The case is there, the argument is there. But let's see if it's just a bounce before a bit
03:44 of a resumption of a downtrend, or could there be some semblance of sanity at these levels remains
03:49 to be seen. I do know what I do know is that I mean, it's a month's game to try and predict what
03:53 the index will do. What I do know is that smart money is accumulating some quality mid caps,
03:59 but at a very slow pace, and without any hopes of near term gains. So most of the
04:04 real smart money names that I spoke to over the last three, four days, are all telling me that
04:10 select stocks that are there on their radar, those stocks are available cheaper,
04:14 are they buying them? Yes. Are they putting in all the money to work? No, maybe 10%,
04:18 maybe 12%, maybe 15%. But they are saying that we are buying this with the knowledge that the
04:23 stocks may be a little bit lower at some point of time later as well. And we're not expecting
04:27 any gains in the next six months. So if you want to put money into the markets currently viewers,
04:32 my simple submission on the basis of the conversations that I've had with people
04:36 is that don't expect breakaway gains into anything. I mean, it may happen, but don't
04:41 expect that necessarily. Maybe just maybe tactically, put in some money to work. You know,
04:47 this is where the SIP culture that has been induced by mutual funds over the last few years,
04:52 works beautifully. Spread out your investments into stocks, into mutual funds, that's probably
04:57 the best way to do it. Fund flows, I'm not bringing it up today because, you know, yesterday
05:02 was an expiry day, very large numbers. I think let's play it by the year and see what happens
05:07 today and then try and figure out if there is a trend. Big results today. So first on the large
05:11 cap side, there is Reliance, Maruti, Bajaj Finster, SBI Life Insurance, so the insurance plays there,
05:18 two pharma plays in supply and Dr Reddy's and SBI Cards, a big determinant of what consumption
05:23 spends could look like. So watch out for these and other results, the not so large names,
05:28 but large in their own right, like Indian Hotels or SRF, leading companies in their own right or
05:34 Oberoi Realty for that matter. There is MGL too, there is RateGain, there is Inox Wind and a few
05:40 banks. So watch out for a clutch of results today. You know, this is the other factor
05:44 from a Nifty perspective, could, because there are so many large names, could they have a telling
05:50 who or what Nifty does on Monday? It remains to be seen. Reliance will certainly come out,
05:54 post-market ask, remember that. Now, the stocks to watch, RailTel, revenues up 28%,
06:00 EBIT margin 12.9 versus 8, 500 basis points expansion in margins, reported PAT up 77%.
06:08 A lot of people accuse some of these railway companies of being exorbitantly valued, but just
06:13 the numbers, very, very strong. Colgate Pharma, if the numbers look okay, by the way, the margins
06:20 got saved because of cutting down a lot of incidental other expenses, reported PAT, they put
06:26 up 22%, but volume growth numbers muted, the near-term outlook very cautious, and I think the
06:33 Motilal Oswal note puts it into perspective well. And they're saying that it's a better than
06:36 expected operating performance, toothpaste category volume growth though, marginally lower,
06:41 and they reiterate the neutral rating on cautious near-term outlook on demand. So that's the view
06:47 on Colgate. Dixon, I thought was very good set of numbers, revenues up 27%. In that business,
06:54 margins will typically hover around these levels. If they expand in any good quarter,
06:59 it kind of becomes a good quarter. You won't see these businesses break the threshold of 5%
07:05 usually. At least Dixon won't break 5% now, but will not probably break 7%.
07:09 That's probably the nature of the game, but very good. I thought pretty good numbers. You'll hear
07:15 from the management first on BQ Prime at 9.45 today, and we'll come to that. I'll give you an
07:19 update on what companies are going to do with us today. But Dixon becomes a very important number
07:25 to monitor. Strong mid-cap earnings include an AGI greenback, revenues up 20%, EBITDA margin 22%,
07:31 reported PAT up 65%, very strong set of numbers. Watch out for AGI greenback. Watch out for Venus
07:38 Pipes, revenues up 51%, EBITDA margin at 18% versus 12.27%, reported PAT up 95% at 20 crores
07:46 versus 10 crores. Sadhana Nitro, revenues up 15%, EBITDA margin at 29.82%, and therefore a reported
07:55 PAT versus a loss for Sadhana Nitro. Now remember, it's a very small company. So please be mindful of
08:02 that. And you know, the company has done multiple other things in terms of its performance over the
08:08 last few quarters, if you will. But I think the debt for the company really came off, if I'm not
08:17 wrong. And that's why that was good for Kamath Hotels as well, the debt really came off. In
08:25 Sadhana Nitro Chem's case, it's the best result for the company in the last 10 quarters.
08:32 Quite something. Lakshmi Organic, revenues flattish, but EBITDA margins expand a bit,
08:39 which is actually positive news. So that's to be kept in mind. But QOQ, the gross margin
08:46 contracted quite materially. And that is a bit of a problem. You compare these numbers,
08:53 YOY always are not QOQ. But I'm just telling you that if you just look at what's happened quarter
08:58 on quarter on the gross margin front for Lakshmi Organic, it was a very, very, very weak performance.
09:04 And that is a problem. Gross margins were down 30 basis points YOY, 530 basis points QOQ.
09:12 Keep that in mind. Quick heal. Revenues up 52%, EBITDA at 7.72 crores versus an EBIT loss.
09:23 Net profit at 12.9 crores versus a loss of 12.76 crores. So optically, a very strong set of numbers.
09:30 So that is good news. And some other earnings in focus include a UGRO Capital when the reported
09:38 PAT was up massively. Prudent Corporate Advisory Services, where both total income and PAT showed
09:43 a steady performance. And NLC India in particular, I just want to tell you specifically that these
09:50 numbers look weak. There is a reported PAT jump because of another income, one offs, etc.
09:57 But otherwise, revenues were down, EBITDA was down. So please keep that in mind. If you think
10:02 of wanting to trade this stock, be careful that the numbers were not exactly the best set of
10:08 numbers. So please keep that in mind. Kodamandal I thought was a good set of numbers in a challenging
10:15 environment. I haven't given those numbers, but I think that good set of numbers and people expect
10:20 margins to improve. So that's to be kept in mind as well. DB Corp, good set of numbers as well.
10:27 Maybe the reaction has already happened, but keep that in mind. Punjab Chemicals,
10:32 top line is bottom line week, much like a couple of other numbers as well. So that's to be kept in
10:36 mind. Chemfab Alkalis is the other one, wherein caustic soda and chlorine spreads came off,
10:42 weighing down on overall profitability. So that's the other one to be kept in mind as well.
10:47 So these are a few things to be kept in mind, in particular, from a numbers perspective.
10:52 There's a viewer query, will Nifty touch 16,000 again? I'm known to predict what the index does,
10:58 Vasu, but I really doubt that it could go all the way to 16,000, purely by virtue of
11:06 the fact that India GDP is growing smartly. And yes, we might be expensive at 20,000,
11:12 but I think 16,000 is doomsday scenario now. Of course, if there's geopolitics, so on and so
11:18 forth, never say never, if all goes to 120, I still don't think 16,000 is in play for that.
11:24 But really surprised if there's a materially large correction of that nature in play.
11:33 Base case, Vasu, I don't think anybody has that kind of view.
11:39 So that's the long and short of queries we're getting out of time. Just want to very quickly
11:45 tell our viewers what's lined up on BQ Prime today. So Rahul Chadha, former CIO of Media Asset,
11:51 talking at 10am on Talking Point, promises to be a very interesting conversation because he'll be a
11:58 lot more open to talk about sectors and tactical faults. So do keep an eye out for that conversation.
12:04 9.45am, Sourav Gupta of Tixin joins in. The first on BQ Prime, very good, strong quarter,
12:12 would be great to talk to Sourav about what went right in the quarter. Akshay Jatia,
12:17 Executive Director of Westlife joins in to talk about their numbers, and these numbers left a bit
12:22 to be desired yesterday. Chalet Hotels, very strong set of numbers. Sanjay Sethi joins in at 11.
12:28 And AGI Greenpac, again, very good set of numbers. Rajesh Khurshala, the CEO, talks in at 11.15.
12:34 12pm, Amit Singhal would throw light on consumers because of the numbers that Asian Paints came out
12:41 with. Let's see if he's sanguine about the festive season. And Freedom Finance, Vyce Chakraborty
12:46 joins in at 12.30 to talk about their quarter. And of course, the corporate conversations continue.
12:52 Atal Kumar Goelok, B at 3pm. V Ramana, Dr Reddy's, joins in at 6.30pm.
12:58 Back to you in terms of corporate conversations on VQ Prime.
13:01 Thanks so much for tuning in to The Trade Setup today.
13:12 [BLANK_AUDIO]