India Market Open | Wall Street Mixed Ahead Of Key Jobs Data | NDTV Profit
- Global news flow & cues
- Stocks to watch, trade setup
- F&O strategies
Samina Nalwala, Niraj Shah and Tamanna Inamdar bring all this and more as we head towards the 'India Market Open'. #NDTVProfitLive
- Stocks to watch, trade setup
- F&O strategies
Samina Nalwala, Niraj Shah and Tamanna Inamdar bring all this and more as we head towards the 'India Market Open'. #NDTVProfitLive
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TVTranscript
00:00:00 The volatility will continue on the street and I think being prudent, cautious is still the name of the game.
00:00:06 Very likely. I mean the only thing that befuddled me yesterday completely from a trade perspective,
00:00:12 by the way India won the test match so I must say that, but the only thing that befuddled me yesterday was…
00:00:16 That was how I predicted it.
00:00:18 You didn't lay a bet on it, your loss, but the put call ratio from 0.7 or lower than that in one day jumped to 1.22.
00:00:28 These weekly expiries are playing a bit of a havoc and kind of creating a bit of a confusion when it comes to data points I must say.
00:00:35 And what were the wicks? Anything on the wicks? I didn't see that.
00:00:38 And lower.
00:00:39 So low wicks I guess is always good, but globally Tamana we are still sulking I believe.
00:00:45 Globally we are still, I would say uncertainty rather than sulking.
00:00:50 So it's all about the jobs data overnight and looking forward to the big data numbers which are coming in today.
00:00:56 So a quick wrap on what's happening on the US market front.
00:01:00 So mixed sort of cues coming in from Wall Street ahead of that key jobs data.
00:01:06 The Nasdaq closing lower for the fifth straight session because of stocks like Apple,
00:01:12 bad sort of brokerage reports or bad cues over there.
00:01:17 So that's looking like a pain.
00:01:19 So what has come in? Let's just take you through all of the data that has actually come in.
00:01:23 Jobless claims have fallen by 18,000 to 202,000 versus an estimate of 216,000.
00:01:32 So jobless claims have fallen more than expected or less than expected.
00:01:38 Private payrolls meanwhile have grown 164,000, so more than expected because the estimate was 133,000.
00:01:45 Now this is a private estimate by an agency called the ADP.
00:01:50 But the government numbers will come out later tonight, India time, and that's the non-farm payroll data.
00:01:59 The expectation is 170,000 increase in non-farm payrolls and an unemployment figure of 3.8.
00:02:06 Long story short, what is the street looking out for with all of these data points?
00:02:10 Are you seeing an increase in jobs but not in wages?
00:02:15 And that's the key point of finding that Goldilocks zone which will allow the Fed to start cutting rates faster.
00:02:22 That's the big takeaway that the street is looking for. So that's what we'll have to see.
00:02:27 Because of that uncertainty you saw a fairly sharp move in the US 10-year,
00:02:32 at least psychologically above the 4% mark ahead of this key jobs data.
00:02:37 Crude is another interesting story which is developing because a confluence of factors over there.
00:02:43 Your Red Sea crisis continues to put pressure on whether crude prices will go up.
00:02:49 But that's not really happening because a lot of that demand, instead of carriers for example,
00:02:54 taking the long route to avoid the Red Sea, are increasing their offtake from the US,
00:02:59 whose crude supplies are pretty robust overall.
00:03:03 The US crude inventory as a result, and this is EIA, it's a weekly data set that comes out,
00:03:08 fell about 1.26% to 431 million barrels. So you've seen crude softening as well.
00:03:15 And I'll just add before I hand it over to Neeraj that FIIs were buyers yesterday in Indian markets.
00:03:22 They bought about 1500 odd crores and domestic investors are the ones who sold close to 1400 crores.
00:03:29 So FIIs are definitely, maybe that will pick up the rest of the month and that's what we'll see.
00:03:34 - Very likely, very likely as allocations pick up. I mean usually people say,
00:03:38 all the fund managers who come in, the PMS guys who manage global money say that 10th of January
00:03:41 is the date from which they start getting this allocation messages.
00:03:44 So let's wait and watch what happens there.
00:03:46 But I think Tamannaah set it up very well. Uncertainty in the global front.
00:03:51 From a Q's perspective, uncertainty on the local front as well, I must say.
00:03:55 So yesterday one thing that happened is that indices respected the 21,500 mark on the Nifty.
00:04:02 Remember we were saying yesterday that the maximum put OI was at 21,500.
00:04:08 They also respected 47,500 on the Nifty Bank.
00:04:11 Four days on a trot there was weakness, but around that mark is where the bounce back happened
00:04:15 and the Nifty Bank traded higher as well.
00:04:18 If you just look at the put options chain now, you will see that the maximum OI shifted from 21,500 to 21,600.
00:04:26 So the distribution on the put side is substantially higher at 21,600
00:04:31 and that zone, 500 to 600 now, remains that big support zone for the markets, if you will.
00:04:38 Technically you could argue, I was looking at a couple of notes, that there's a short-term reversal.
00:04:44 The positives are that there was market breadth which was constructive.
00:04:48 Volatility which came off as well.
00:04:51 But put call ratio jumped from 0.7 to 1.22 in a single day.
00:04:56 These are things that are not normally seen, but that's happening as well.
00:05:00 And what brings caution?
00:05:02 I mean, 11 stocks in F&O band.
00:05:05 You don't see such early in the series, so many stocks entering the F&O band.
00:05:09 This is usually something that happens in the last 10 days of trade.
00:05:12 But 11 stocks in the F&O band, this is usually the higher end of the range, if you will, right at the start of the series.
00:05:18 Also, real estate had gone berserk yesterday.
00:05:23 If you look at the trading delivery volumes on real estate stocks, there's a pittance.
00:05:29 Although you could argue that with such high volumes, usually delivery percentages would come off.
00:05:34 But even then, the delivery percentages were very, very low for the real estate stocks.
00:05:38 So while the index went up and could well do today, I mean, it'll be the talking point on an editor's cut on all the guests that we talked to
00:05:46 because of the kind of move that the real estate index made yesterday.
00:05:49 6.76% is unheard of really.
00:05:52 So we'll focus on that.
00:05:53 But what this also brings, guys, just before we get to stocks to watch and other things, is that something that Ganesh Ram Jayaraman of Avenda Spark was telling me yesterday
00:06:02 that unsold inventory in the top 15 metros is at the lowest, I think he mentioned some 10, 12 years or something.
00:06:10 And he mentioned, and therefore his call was that real estate ancillaries could start doing well
00:06:15 because it's only when new construction picks up is when the ancillary demand comes in.
00:06:19 Otherwise, inventory sell-off does not result to demand for plywood pipes, etc.
00:06:23 So the belief is, and then I spoke to a couple of other people, the belief is that the next 12 months, while real estate stocks may do what they do,
00:06:31 real estate ancillaries could see some serious demand because of new construction pickup.
00:06:36 And that is a pocket to watch out for, for sure.
00:06:37 So pipes, paint, cement, coal, aura.
00:06:40 All of that.
00:06:41 In fact, I should bring this up.
00:06:43 We're going to be talking to Sumit today and this is one of his few bets are in the APLs and the Hari Om pipes of the world.
00:06:49 But you know, Neeraj, you've talked about most sectors.
00:06:52 Quick one on Bank Nifty.
00:06:53 We've got to give that some credit to it.
00:06:55 It did pull back really well last yesterday.
00:06:57 48,195 is where Bank Nifty closed out in trade.
00:07:01 I think the big trigger now for Bank Nifty will be the business update that comes in from HDFC Bank.
00:07:06 So I think that will be the next cue to help Bank Nifty take a move higher.
00:07:10 On the WIX, which we talked about while you said there was a big jump on the PCR,
00:07:15 the WIX also didn't just fall by a percent, it was down nearly 5% to go out at 13 odd levels.
00:07:21 So 13.3 is where the India WIX closed trade yesterday.
00:07:25 So indicating the bulls may be having some more control on the street.
00:07:29 Consolidation, remember, will continue.
00:07:32 Neeraj, I'm sure, will talk about power stocks with a change of CRC norms, but we'll leave that to him in a minute.
00:07:39 But generally speaking, it'd be nice to know whether Bank Nifty will drive the index over the course of the next couple of days.
00:07:45 For now, looking comfortable around 48,200 odd.
00:07:48 GIF Nifty indicating to a flat to lower start in trade.
00:07:52 So it could be a morning where some profit may be taken off the table.
00:07:56 We may consolidate or spend some more time consolidating before the markets resume the up move.
00:08:02 One quick view on this, guys.
00:08:04 Usually markets either go through a price correction or a time correction.
00:08:09 And that is the nature of the markets that we live in.
00:08:13 And this is what makes me wonder, is January going to be all about spending some time in a range consolidating?
00:08:18 Or will we actually see a sharp fall before we go back up?
00:08:22 We were talking about this yesterday morning, Samina, but look at how the entire day panned out.
00:08:28 So there is a lot which has become unpredictable in terms of especially how Indian markets will react.
00:08:35 There's a different story going on here and a different trajectory going on here.
00:08:39 So change is the only constant, no?
00:08:41 And a lot of it is stock specific, a lot of it fuelled by business updates and a tonne of them this morning.
00:08:47 And we will take a look at all of those this morning.
00:08:49 But before we go into business updates, Grasim is one counter you want to be watching out for in today's day of trade.
00:08:54 There's enough and more. We've talked about fundraising from IPOs to QIPs.
00:08:59 This one, of course, looking to raise Rs 4 lakhs, why a rights issue.
00:09:03 The record date has been announced as 10th of January.
00:09:07 The ratio is six shares for every 179 shares held.
00:09:11 Price of this comes at a 12.7% discount to yesterday's closing of Rs 1,812.
00:09:20 That is the price that we are looking at in terms of Grasim's rights issue.
00:09:24 Promoters are going to bring in Rs 1,700 crores in this issue.
00:09:29 A large part, the chunk of the money will be used to expand and be invested rather in their paint business.
00:09:35 We will be talking to, in fact, on our editor's card, that's one stock that will be in focus.
00:09:40 Sajid will break it down for us, talk about Grasim in a little more detail, talk about the stock performance
00:09:45 and what this really means for the stock and investors of Grasim.
00:09:49 Another one to watch out for this morning is going to be Dapur.
00:09:52 They've said that they have seen early signs of revival in consumption.
00:09:58 Rural demand continues to lag versus urban demand.
00:10:03 They are saying that they expect the food and beverage segment to grow in high single digits.
00:10:07 Home and personal care division to grow in mid-single digits is what they've indicated.
00:10:11 They expect operating profit to go slightly ahead of revenues.
00:10:15 There's also a report on MK on Dapur where they've maintained a price target of Rs 650.
00:10:20 They did say that the weak winter hurts India's show, valuations capture headwinds.
00:10:26 So that's the view and I believe Neeraj just gave me that look.
00:10:28 You want to comment on Dapur at all?
00:10:30 No, just that point that Citi also came out of the note and said that they maintain the sell
00:10:35 and they say that while there is a pace, there is improvement, but the pace of improvement is very, very gradual for Dapur.
00:10:41 No, just that point, just that addition on Citi.
00:10:43 There are, I mean, despite those numbers and I don't even think to be fair, Dapur is not sounding excited either.
00:10:49 They very clearly said that rural demand is lagging.
00:10:51 So brokerages are pretty much mirroring what the management of Dapur has said.
00:10:56 So no surprises there.
00:10:57 It could be a weak side, even though they've said that there are early signs of revival,
00:11:00 we'll have to see which way the market really wants to look at this.
00:11:04 In terms of business updates that Tamanna was indicating to, she's got a whole bunch of them.
00:11:09 She mentioned RBL. Remember yesterday they sold their credit card business and that was the big trigger for RBL.
00:11:16 This morning they've given us an update where their gross advances are up by 20% at Rs. 81,870.
00:11:22 Deposits are also up 13% year-on-year. Their CASA ratio stands at 33.8% versus 36.6%.
00:11:29 So watch out for this one. There will be some reaction coming in on that business update.
00:11:34 I'll leave it to both of you to take the other stocks, but I have some updates on Sobha and Suntech, which we can of course then talk about.
00:11:40 I just wanted to make a quick comment on what Dapur has said and the larger indications of that.
00:11:49 This data usually comes and this commentary usually comes from your FMCG players and your large FMCG players
00:11:56 who've tapped into what is happening on ground in terms of rural demand.
00:12:00 This is one thing to watch out for. While day in and day out we look at all the positives
00:12:05 and there are an overwhelmingly large number of what's happening in the Indian economy.
00:12:09 This is one sort of speck on the horizon or cloud on the horizon that we need to keep a watch out for.
00:12:16 That the rural economy needs to fire back. We've had a whole year of patchy rainfall.
00:12:21 It's impacted crop output and that will start to catch up at some point.
00:12:26 Before we start the show, we were talking about business updates.
00:12:31 Then you see the numbers, but business updates is something that the market watches.
00:12:35 Utkarsh Small Finance Bank has come out with its business updates.
00:12:39 Gross loan portfolio is up about 31% year on year.
00:12:43 All these numbers by YOY, total deposits are up about 17.6%.
00:12:47 While their CASA ratio is at 20% versus 21% in Q3 2022.
00:12:54 L&T Finance has seen a 31% increase in their loan book.
00:12:59 Their retail disbursements are up 25% as well.
00:13:03 Their portfolio rationalization is estimated at 91%.
00:13:08 That's interesting. We'll also get to Harsh in later in the day to break down more of these
00:13:14 and give you a more holistic picture of what these business updates are indicating for the financial space.
00:13:19 But I want to bring in IIFL as well into the conversation because of a note by Motilal Oswal.
00:13:26 That might be a stock that you want to keep on your radar.
00:13:29 They've initiated a buy coverage with a buy rating and a target price of Rs. 800 on IIFL.
00:13:42 They've estimated a PAT CAGR of 28% over FY23-26 estimate as well.
00:13:50 And the estimate ROE/ROE of 4.1%.
00:13:54 So, the overall expectations that IIFL will be able to maintain its NIMS at similar levels in FY25-26.
00:14:01 And that's one big indicator that we need to look at.
00:14:04 REC, I suspect ahead of Vibrant Gujarat you're going to see a lot of news flow around MOUs being announced.
00:14:12 And at the end of the day, remember, these are MOUs.
00:14:15 The actual order flows have to be inked.
00:14:18 But nevertheless, there have been reactions to this in the last trading session as well.
00:14:23 So, REC Power Development, perhaps a Rs. 2,094 crore MOU with Gujarat government.
00:14:28 It's an MOU for implementation of a smart metering project.
00:14:33 And this I would perhaps take a little more seriously because across large cities you're seeing the move to smart meters in a big way.
00:14:41 Jupiter and BML, it came in just before market close yesterday.
00:14:45 But significant orders from the Ministry of Defence for both.
00:14:48 Jupiter Wagons has received an order of Rs. 473 crores.
00:14:52 They'll be supplying 697 Bhoge Open Military Wagons.
00:14:56 And BML has secured an order for 56 mechanical minefield marking equipment.
00:15:02 It's a Rs. 329 crore order.
00:15:04 Yes, Neeraj, you want to add something?
00:15:05 There's only one thing left to add, which is the electric utility stocks.
00:15:10 Because CASS published the draft tariff norms for the FY25-29 period.
00:15:15 And essentially it's an overhang lifted because the norms have been leave regulated ROE largely unchanged.
00:15:22 Maybe a small downtick for newer projects from April 2024.
00:15:27 But for all the current projects, there is no change.
00:15:30 So most brokerages term it as a big overhang lifted.
00:15:33 And for NTPC in particular, it's a decent one because CASS increased the incentive for generation above norms for NTPC to Rs. 75 per kilowatt per hour from Rs. 65 during peak hours.
00:15:46 I think all of this is an increase to encourage additional generation to meet power deficits.
00:15:51 Remember 2024 will be a year of power deficits as GSW Energy has gone on record multiple times telling us.
00:15:58 If this confuses you, the one line that matters from a trade perspective is what Jefferies has said.
00:16:05 And their estimate is that NTPC's FY24-26 EPS could see a 1-3% upside risk while power grids could see 1-2% downside risk.
00:16:16 So watch out for this as well.
00:16:18 We have to do editor's cut.
00:16:19 But Samina, you wanted to do the updates.
00:16:21 Quick 30 seconds.
00:16:22 Soba and Suntech. On Suntech, Pabrai Investments sold 2% stake on 2nd of Jan.
00:16:29 The update has only come in yesterday evening.
00:16:31 And also in Soba, Dendana Investment, Mauritius has picked up 0.53% stake.
00:16:36 And only mentioning this one because the stock was raging in trade over the last couple of days at Rs. 1269.57 a share.
00:16:44 They have also posted a 37% gain on total sales value.
00:16:48 Average realisation price per square foot is Rs. 11,732.
00:16:53 Soba is also in focus because Jefferies has said that they may look at raising the price target on this one.
00:16:57 Looking at how well it's been for the company and the sector as a whole.
00:17:01 But yeah, that was pretty much it.
00:17:03 I had to talk about real estate.
00:17:04 No, no, real estate does make a difference, of course.
00:17:06 But about time on the trade set up.
00:17:07 Let's go across to Alex for the editor's cut.
00:17:10 And Alex, a packed house today.
00:17:11 Oh yeah, it's going to be a power packed session today, Neeraj.
00:17:15 And in fact, let me break it down very quickly while the editors are walking on to stage.
00:17:19 And the most important factor that we're discussing today, of course, is Bajaj Finance.
00:17:24 You saw the numbers.
00:17:25 35% assets under management growth in the third quarter.
00:17:28 The question that we're asking is, does that mean that the growth concerns are out of the window?
00:17:33 And what does it mean for the rest of the year?
00:17:35 The second point is the real estate sector that was just being discussed.
00:17:39 And the fact that the real estate index yesterday increased by a whopping 6.7%.
00:17:44 What's new?
00:17:45 Because this is an index that's gained, nearly doubled in the last 12 months.
00:17:50 And certain factors like sales have already been discussed.
00:17:53 Now, the third one that we're discussing is Grasim.
00:17:56 And the rights issue pricing, of course, is in.
00:17:58 But the question that we're asking is whether or not the market is pricing in or will price in
00:18:04 the paints business that is going to be launched imminently.
00:18:07 So, let's start with the first one.
00:18:09 And that has to do with Bajaj Finance.
00:18:10 Harsh, the question stands.
00:18:14 Are growth concerns out of the way?
00:18:16 Alex, it seems so, is how I would put it.
00:18:20 Because it's a second consecutive quarter.
00:18:22 I know it's a seasonally strong quarter.
00:18:24 And Vishy can probably weigh in.
00:18:26 It's a seasonally strong quarter, but it's, you know, a 35% growth,
00:18:33 especially when your guidance for FY24 is 30%, is quite a beat.
00:18:39 And it's not like in Q2 they didn't do that.
00:18:42 In Q2 as well, they clocked a 33% year over year growth, 7% sequential for a second consecutive quarter.
00:18:48 So, extremely strong.
00:18:49 And this is on the back of two key things which have played out.
00:18:53 One, certain RBI restrictions on a couple of their products.
00:18:57 Second, the risk weighted assets being tweaked by the RBI.
00:19:02 And it's a double whammy for NBFCs.
00:19:05 Because one, on the lending side of things, RWA has been tweaked.
00:19:09 And even on the borrowing side of things, RWA has been tweaked.
00:19:12 So, it's a double whammy.
00:19:14 Of course, margins are going to be key.
00:19:16 But at the moment, growth does not seem to be a concern per se.
00:19:21 How have they grown? That's the question, right?
00:19:23 Because we were talking earlier and you said 45 days is more or less what they would have had to deal with,
00:19:28 with the change in RWAs, which was supposed to make things costlier for them.
00:19:33 And was supposed to be a little bit of a barrier for lending.
00:19:36 Why have they grown 35%?
00:19:38 So, one is they've done a very smart capital raise in November.
00:19:43 It's an equity raise.
00:19:44 In a market where they are probably one of the most well capitalized NBFCs,
00:19:50 they've gone ahead and they've done an equity raise.
00:19:52 So, that's one thing which has given them the confidence to go out and lend.
00:19:57 And second, it just seems that their machine seems to be chugging along.
00:20:01 There seems to be some level of confidence that they are still able to lend despite all of this,
00:20:06 which is a clear sign.
00:20:08 I mean, it's not like an NBFC can grow 7% sequential in 45 days.
00:20:13 It would be growing through the month and maybe we should continue on that as well.
00:20:17 So, I don't think that it's something that they've tapered off in the last one and a half months of the quarter.
00:20:24 It seems that they've grown consistently through the quarter
00:20:27 and there seems to be a sense of confidence within the quarter.
00:20:30 I think if not devil's advocate, a note of caution is what Vishy is here to talk about.
00:20:35 Yeah, so that's right Alex.
00:20:37 So, when you look at the numbers as Harsh put them out,
00:20:40 yes, it looks extremely well done and extremely well placed as a lender in the economy.
00:20:47 But let's look at some of the commentary that came in in Q2, right.
00:20:51 There was a note of caution that Rajiv Jain, the MD and CEO of Bajaj Finance pointed out
00:20:56 with respect to imprudent borrowers and specifically in the rural segment.
00:21:01 Of course, there are few in the urban as well.
00:21:03 What in Q2 what the company did was reduce their exposure by 8% in the urban areas
00:21:09 about 14% in the rural areas.
00:21:11 Now, that doesn't just vanish in one quarter.
00:21:15 This is something that is going to last and if you look at the commentary that Rajiv Jain made,
00:21:18 he said that probably around February is when this is expected to turn around
00:21:23 and that we still need to see solid evidence of that improving.
00:21:28 One could point to say Mahindra Finance which is specifically rural lender
00:21:34 and if you would look at their quarterly updates, there as well they have seen Q3 being a very strong quarter.
00:21:40 Of course, Mahindra Finance has its own cyclicalities.
00:21:44 So, we need to wait and see whether that translates as strongly in the Q4 numbers as well.
00:21:50 But as far as Bajaj Finance is concerned, now yes, there are business institutions which came in 45 days ago
00:21:56 and to show 35% growth, you need to have grown during that period.
00:22:00 My personal thesis is that there is a shift in the portfolio.
00:22:04 They are moving towards safer assets because there is a clear risk emanating in the unsecured portfolio
00:22:09 which is very clear by RBI commentary, which is very clear by the FSR notes that they have made.
00:22:14 Too many people borrowing too much money and there needs to be a shift in that.
00:22:19 That's what the RBI's caution is. So, it's unlikely that a lender of Bajaj Finance's size is unaffected by that.
00:22:26 So, possibility that the shift in the texture of the loan book is leading to the growth that we are seeing.
00:22:31 We will get clarity on that in just a bit. The last point on valuations,
00:22:35 does it capture that 35% potential for that kind of run rate?
00:22:39 So, Alex, I will put it very simply.
00:22:43 There's been only two times in the last eight years that Bajaj Finance has traded below six times price to book.
00:22:50 Currently, it's trading at roughly 6.8 times price to book.
00:22:53 The two occasions when it was below the six times price to book mark was 2016 and 2020.
00:23:00 2020, of course, being that exceptional year.
00:23:03 Currently, at 6.8 times current price to book, what market analysts are projecting is an upside of 16% from here.
00:23:12 Sure.
00:23:13 Over the 12-month period.
00:23:14 Okay.
00:23:15 So, that's where it is. And mind you, it gets that valuation because of asset quality.
00:23:19 Never has the net NPA been above 1% since FY 2010.
00:23:24 Okay. Alright. So, one to watch certainly. But the real estate pack, Sajith, 6.7%.
00:23:30 It came kind of out of the blue, one would think, at least because the fundamental factors are already factored in, one would think.
00:23:37 So, what's playing out?
00:23:38 So, if you look at the commentary that we've been hearing in 2023, is that exposure to real estate was mainly through ancillary sectors.
00:23:48 Okay.
00:23:49 Your century plies and those kind of companies which are…
00:23:52 Pipes.
00:23:53 Pipes, companies and everything. Now, look at the holdings of the institution, mutual funds and FIS.
00:24:00 They've been underweight or neutral on real estate for the last whole year when Nifty Realty Index went up by 96%.
00:24:06 Yeah.
00:24:07 I was looking at the FI numbers and these are fortnightly numbers coming out on the NSEL side.
00:24:13 The total AUM was around $6.8 billion. It went to $13 billion and primarily because of asset valuation, not because they have been putting new money.
00:24:23 Right.
00:24:24 The net new money has been only $350 odd million in 2023.
00:24:27 Wow.
00:24:28 So, they are grossly underweight or they don't have it.
00:24:33 What's changing for the sector? The sector is seeing a pre-sales growth of nearly 30 odd percent compared to 15 to 20% in the previous years.
00:24:42 This year, FI24, they expect the total value of those sales to cross 1 lakh crores.
00:24:47 So, assume that top 10 or 12 companies which are part of the Nifty Realty Index, if I look at these companies, we're looking at sales in the next 3 to 4 years because these have to be executed.
00:24:58 Yes.
00:24:59 Accounting norms are there. They have to recognize revenues based on the completion methods.
00:25:04 You're looking at the revenue and the profitability flowing in the next 3 to 4 years and people don't have that kind of in their portfolio or they have very limited there.
00:25:15 So, that's what is driving real estate now.
00:25:18 Institutions are now taking a call saying that if you're going to bet on the ancillaries and they have been doing because they have been doing a lot of CapEx as well, then it's better also to look at the real estate companies because they are sitting on that kind of pre-sales numbers.
00:25:33 So, what you're suggesting is that this is insti-buying that is causing all of this?
00:25:36 It could be insti-buying, it could be portfolio building of real estate because from now on if you have to deliver that 100,000 crores which they have pre-booked in 2023-24, it has to be done in the next 2 to 3 years because that's the delivery period for them and that will translate into revenues, EBITDA and profitability for them.
00:25:55 So, while the index has jumped, the stocks have jumped, institutions have been staying away from holding real estate because of various reasons, transparency, accounting issues, everything but the stocks have run up and they've been on the free.
00:26:11 Delivery is also higher, right?
00:26:13 Delivery is, look at yesterday's volumes, they were up nearly 3 and a half times the regular 1 month average volume. Delivery has been higher 2 and a half times average 1 month delivery volumes. So, there is holding or buying into these companies, at least the 10 companies which are part of the Realty Index, they've seen good amount of buying happening and delivery happening on those companies.
00:26:39 Alright, so delivery based buying and real estate companies. The last topic of the day has to do with Grasim and the question essentially we are asking, it's not just about the rights issue, of course the rights issue was something that was talked about, the pricing is new and of course this is going into the CAPEX plan and the Payments Business is part of that. Is the market factoring that in, that Payments Business?
00:27:00 So, to set it in context, the rights issue is around 12% discount to the current market price. It's going to be raised, they're going to raise 4000 crores over the next 2 years by March 2026. The Payments Business is going to be launched in February, the backbone is ready for them, the distribution model is ready for them and they've tested out in at least 8 to 10 cities for the Payments Business.
00:27:23 If I look at the valuation of Grasim and I'm putting plain numbers out here for everyone to think, 16 to 17 times forward earnings which is there, it will have an EPA of around 127 rupees or so and that's giving the current market price for them.
00:27:41 Even if I assume that the earnings doesn't go and the Payments Business top line is going to grow and Payments Business is going to take 2 years to get profitable and the earnings remains at the same level of 127 to 130, there's going to be a multiple that's going to build up on Grasim because of the Payments Business.
00:27:59 Grasim today is at 16, in 2 years and market is going to factor that in now, 16 to 17 times forward earnings is now. Look at Asian Pains, it's 60 times. So even if I say that Grasim is not going to be an Asian Pains, it's still have a re-rating to say 25 times, what is the price going to be?
00:28:21 It's a simple calculation, over 3000 rupees. So I'm sure that investors in Grasim or shareholders of Grasim are looking at it from that point of view and the market will start factoring in that re-rating or the band shift of the PE which Grasim has been stagnating for the last couple of years because Grasim is now moving into the Payments Business which is much more high growth business for them in that sense.
00:28:47 So then that pricing of the rights issue of 12.5% discount starts looking more juicy.
00:28:52 You'll see an active trading in the rights which will be available on the stock exchanges. So that's going to happen going forward from here.
00:28:59 Alright, on that note, that brings us to the end of this particularly entertaining and informative edition of the Editor's Cut. It's back to everything you need to know before the start of trade. So do stay tuned.
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