Trade Setup | Smallcaps overextended, but largecaps look corrective as well. #BQLive
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00:00 Good morning, wishing you all a happy Ganesh festival and Meccha Me De Bram to everybody.
00:06 Thanks so much for tuning into the Trade Setup, I'm Neeraj Shah.
00:09 Let's take stock of the global news flow first before we get to what the market's performance has looked like.
00:14 So Asian stocks have remained skittish for a third consecutive day now,
00:17 that might have a pairing in addition to the other factors on the Indian markets.
00:21 India has expelled senior Canadian diplomat as the tensions rise between the two nations.
00:26 Australia's Bureau of Meteorology has made a linear declaration.
00:30 And BlackRock's strategic have downgraded China's stocks on growth concerns.
00:35 Well, it's not pretty news. And even on the commodity side, it's pretty iffy,
00:41 maybe because of the growth concerns or otherwise.
00:43 So if you look at wheat, it's extended the drop with Ukraine's Black Sea grain ships in focus.
00:48 That might be construed a positive, but oil prices continue to rise.
00:52 Yes, they have eased a little bit after hitting the $95 per barrel mark.
00:56 Currently, about 94 ahead of the Fed decision, but that's hardly any solace.
01:00 Goldman has cut aluminum price estimates on weak ex-China demand.
01:04 And Rio Tinto CEO says Chinese steel demand is close to peaking.
01:08 Well, that's not great news for ferrous metal companies.
01:11 And we saw some signs of this on on Monday's trade when commodity stocks came under a bit of pressure.
01:17 OK, when we get to that. But first, what the US stocks didn't trade yesterday.
01:22 Again, sideways to marginally lower, if you will.
01:25 But yes, that is ahead of the Fed. Certainly a bit of a quiet on Wall Street in trade yesterday.
01:32 But the yields have been stuffed. The final yields have been stuffed as well.
01:36 I would reckon the 10-year yields, too, would have moved up a little bit.
01:40 So as of 7.30 a.m., the US 10-year yield was at 4.36, higher from the 4.34 mark.
01:46 Volatility was steady. Dollar index steady at 105. But the yields certainly have been stuffed.
01:52 The GIFT Nifty, the last time I had checked, was indicating a start which is flattish.
01:56 And yes, about this month. So no big changes there as of now.
02:00 But could this be a false indicator today especially?
02:05 Well, I think time will tell. But, you know, I think from from my perspective,
02:10 when I look at the trade set up for the day today, yes, small caps are overextended and that is known.
02:15 But I think large caps, too, are now looking corrective.
02:18 For a lot of times, some of you have been asking whether this is the time to go naked short.
02:22 I don't recommend trading recommendations, per se. Unfortunately, I'm not an expert enough to do that.
02:27 But it certainly looks like there is a bit of caution warranted, especially on leverage trade.
02:33 So forget the index, even on specific stocks, leverage might not be a great word currently.
02:38 You might essentially get corrective moves. And there are various reasons for this.
02:43 Right. The India Canada tensions, oil prices being higher, a Fed meeting focus.
02:48 And if the Fed doesn't do what the market expects it to, then there are these two or three reasons in focus which might bring about a corrective move.
02:55 I'm not saying it's a very deep correction and 4-5 percent can happen at these levels.
03:00 Remember, but 4-5 percent on the index would mean much higher at the broader end of the spectrum.
03:05 So please be careful with your leverage positions if you have them.
03:09 Commodity stocks corrected in trade on Monday and I reckon that it could continue today based on my conversations.
03:15 The only place which looks set for more gains is oil upstream.
03:19 You could argue that in a Jefferies note today, I read that even telecom might be that place.
03:26 But oil upstream looks poised for more gains, while Bank Nifty could sulk today.
03:31 Now, viewers, the point is this, that we have multiple reasons why there could be corrective moves with oil prices being a principal one.
03:43 Remember that in addition to valuations. So therefore, in terms of pockets, oil upstream at one end looks good.
03:49 I was reading a Jefferies note today which says that when you look at the view from Delhi,
03:55 that the FISC situation that we have and considering the oil prices have risen,
04:01 it only makes the manuring room a bit tighter, might all lead to maybe a bit of a corrective move.
04:10 They have raised their cash levels in their note. They have mentioned that we advocate raising cash,
04:16 moving out of even some of the CapEx themes into cash and into,
04:22 they've mentioned that they've got into part the air tail. But the limited point that I'm trying to make is,
04:27 yesterday a very, very smart thinker and a fund manager sent me data around the over-extended moves in mid caps and small caps.
04:36 And by the way, my colleague Chinmay Vasdev has done a story on a couple of key indicators which lead one to be cautious at the broader end of the spectrum.
04:45 So you would hear multiple people tell you this. We are not the only ones,
04:49 but I'm just telling you that that story is worth reading because it gives you a sense or two on the profit pools and the market cap representations.
04:56 Do try and log into our website and search by Chinmay Vasdev's stories that we've done,
05:01 and you will get this story about two indicators that indicate that there could be need for caution at the broader end of the spectrum.
05:09 So be mindful of at least the mid cap and the small cap space and the leverage trades if you have them out there.
05:15 Please, please be careful of that. Now, stocks to watch today.
05:19 I'll start off actually with a brokerage note if we can, and that is HDFC Bank's note,
05:23 and then move on to the others, because I think to my mind today HDFC Bank remains a key stock to monitor.
05:29 So Morgan Stanley, post that analyst meet, has come out with a note saying that their target price is unchanged at 2110.
05:36 The rating is not buy, it's overweight. So excuse us for that.
05:40 But nevertheless, be that as it may, please, if you if you ignore that, the target price is unchanged at 2110.
05:48 Now, what is the call? They are lowering their book value per share and earnings estimates is Morgan Stanley.
05:54 They say the one time net worth and PLN adjustments are one of the key reasons why they have lowered their estimates,
06:01 because HDFC is restated from India's to Indian GAAP accounting.
06:06 And that brings about these adjustments necessary. They believe that the NIMS will be lower given ICRR and excess liquidity drag,
06:14 as well as elevated competitive intensity. And that is certainly true.
06:19 I mean, a lot of people are now opening accounts digitally with other places which are giving them a higher bang for the buck
06:27 and not necessarily the HDFC banks of the world. Now, is a short term phenomenon.
06:32 After a bit of a corrective move, you will see if you see growth there and people might believe that it's merit in buying
06:38 the largest bank and the safety thereof. But for now, most analysts meet and the notes that have come up.
06:44 I suspect that HDFC bank would have a bit of an issue today, maybe not too much, because remember,
06:49 the valuations are no longer expensive for HDFC bank relative to a bunch of other banks.
06:55 It used to trade at much higher three and a half times price to book all their bugs.
06:59 It's come off quite materially from those levels. So therefore, it's not trading expensive, but just that.
07:04 Yes, there are, as this note suggests, a couple of issues out there.
07:10 So do watch out for HDFC bank today and HDFC bank led softness in bank Nifty, led softness in the Nifty as well.
07:22 Such a high weighted stock and most of the analysts meet. Certainly no buying there.
07:27 So this, to my mind, is the biggest thing. In addition to all the stories floating around Canadian pension funds
07:34 and what they back out there could be. I must tell you, viewers, before I go on to the other stocks,
07:39 that on the India-Canada thing, I spoke to a couple of people and I asked them because they manage money in some fashion.
07:48 Most people are saying that there is no way to figure out whether something like this can happen.
07:57 Pension funds and other funds have boards which do not necessarily take a decision based on one day geopolitical developments.
08:09 There are returns responsibilities and therefore it might be unwise to try and think of large Canadian investments into India definitely at risk,
08:23 especially in a passive side, in a fund management side on individual company specific things.
08:29 Sure, things could happen. So there is, I'm sure all of you will hear about how, for example,
08:35 Prime Focus gets 70% of its revenue from Canada. Could that get impacted? Sure, it could.
08:41 And therefore, Prime Focus as a stock could react. Phoenix Mills, company and CBPI,
08:46 we have got an agreement to develop an office-led mixed-use project as a joint venture in Mumbai.
08:50 Could that get impacted? Sure, because they could decide that, OK, we don't want to go ahead with a particular individual thing.
08:55 But to say that a large set of investments are at risk, I personally don't think that is wise to say it that way.
09:04 But like Sweden Watch, there could be some pressures out there.
09:07 So we'll have stories on our website, by the way, my colleague Sajid Mangat has put out a version of his assessment of what are the businesses wherein Canadian funds have the largest investments.
09:19 If you want to tune in or just log in and try and read that, that will help you.
09:24 It will be on our website in about 10-15 minutes. So pre-market hours, you will get a good sense of that.
09:29 Then stocks to focus on, Data Motors will increase prices of commercial vehicles up to 3% with effect from October 1st.
09:36 Watch out for that one. Biocon is appointed. Peter Payne says Biocon Group CEO with immediate effect.
09:41 So there is a person out there in addition to Kiran Bhusundar Shaw running the show.
09:46 Blue Star QIP to raise up to 1000 crores open on September 18th.
09:50 Flow price for the QIP set at 784. Prakash Industries has received an environmental clearance for its Chhattisgarh commercial coal mine.
09:59 The development is fast in progress, so this will be constructive for Prakash.
10:03 So watch out for that one. And while I've brought you the Morgan Stanley view on HDFC Bank, the other one as a brokerage note that stood out for me was the Jeffries note on JSW Energy.
10:13 They were buy and a target price has been raised to 500 from 365.
10:17 They say they expect three triggers to play out for JSW Energy over the next 12 to 24 months.
10:21 Visibility improving on renewable energy moving to 81% of capacity by 530 from 52%.
10:27 Commissioning of the 700 megawatt merchant capacity in peak power deficit times, which is positive.
10:33 And progress on one of India's first clean hydrogen plants and green energy storage battery unit.
10:38 All of these are triggers which might help JSW Energy in the times to come up to Jeffries.
10:43 So please do watch out for this one as well.
10:47 That's about that. That's a long and short of the trade set up today, viewers.
10:51 There are concerns out there, not permanent concerns, but ones which can certainly bring about a bit of a corrective move on the markets.
10:58 I'm not trying to scare anybody here. All I'm saying is that if you have leverage, please, please be careful on select items.
11:05 There might be merit if you are a sharp trader to even go short. But more importantly, for an average person, average investor,
11:13 it just makes sense to be a bit careful with your mid cap and small cap investments at the very least.
11:19 Please do check your conviction levels around them.
11:23 I'm not completely convinced. Certainly don't. Certainly do have a little bit of leverage if you have that.
11:29 If you have that. Thanks so much for tuning in to the trade set up. A clutch of important conversations.
11:33 We told you about Chris Wood and that played out on Monday, but so many issues around evaluations and other things.
11:39 So Anish Iyer Choudhury of BNP Paribas from his vantage point talks to a lot of global managers as well.
11:45 Would be an interesting talking point today. So do tune in for that.
11:49 And Nandan Chakraborty of DAM Capital joins in to talk about their India strategy note,
11:54 where they're talking about a clutch of stocks which have a potential to double.
11:59 Ask BQ at 1130. Sorry, let's get that going. Ask BQ at 1130.
12:03 You can put in your individual stock queries for Dharmesh Kant and Nilesh Jain.
12:07 So that's at 1130 a.m. today. Do try and tune in for that as well.
12:11 A derivative show as well. But my colleague Agam Makhil today happening at 1030 a.m.
12:18 Kunal Shah of LKP Securities would be on for that.
12:21 So a bunch of things happening on BQ Prime. You might want to tune in for all of these.
12:25 Thanks so much for tuning into the Trade Cellar.
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