#Nifty, #Sensex near day's low as #ICICIBank, L&T, #RIL weigh.
Niraj Shah and Tamanna Inamdar dissect key market trends and explore what's to come tomorrow on 'India Market Close'. #NDTVProfitLive
Niraj Shah and Tamanna Inamdar dissect key market trends and explore what's to come tomorrow on 'India Market Close'. #NDTVProfitLive
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TVTranscript
00:00 Dharmesh, what in this space do you like right now?
00:04 Because we're going into an election season.
00:07 If we do have policy continuity as the market is expecting with the same party, same government
00:14 coming back for a third term, you can expect a lot of action, a lot of announcements in
00:20 the first 100 days of a Modi 3.0 if that's, of course, what eventually happens.
00:27 What would be your bet or your positioning at this point in anticipation?
00:32 The top bet in the defense space has been in aeronautics.
00:38 So we have been holding this position for quite some time.
00:41 And the good part is from 60,000 outcrops of order books to 94,000 outcrops, which it
00:46 has reached right now.
00:48 And these are long term decision contracts.
00:50 So this continuity is likely to be there.
00:52 And the tie ups are happening.
00:53 I mean, they have tied up with a French company.
00:55 And they have tied up with a US company.
00:57 And all these are for light combat aircraft manufacturing or helicopter manufacturing,
01:02 where 80% of the know-how would be transferred, the technology would be transferred to them.
01:07 And this is what is the key.
01:09 Because once you get the 80, 70% of our technology being transferred and 60% of an offset clause
01:15 setting in, so the dependency of the other players on you, like this quite a bit, so
01:23 that company is doing well.
01:26 We have seen the numbers for the Q4, almost 11% kind of a top line, though they have reported.
01:31 I do think this is on an inflection point for where 8%, 9% kind of a caggle on the top
01:37 line can catapult to 12% to 15% kind of a caggle by the next three or four years.
01:43 FY26 and 27, this is likely to be established with 25% kind of an operating margin in place.
01:50 So a long way to go.
01:51 It's still cheaper.
01:52 It's still cheaper compared to Bharat Electronics.
01:54 So that's the top play in the defence.
01:56 On the railway side, RVNL is still my preferred bet.
02:00 The management has been sounding very bullish and they're targeting around like order book
02:05 when the next budget is rolled out.
02:07 That's the area, railway is the area where a lot of action is expected.
02:10 Once the government comes into power and the full budget is being rolled out.
02:14 So these two play as the preferred bet.
02:17 There are many others as well in the basket, but I think valuation-wise in the order book
02:21 visibility, execution visibility and the way the transformation is happening in these
02:25 two companies on the execution front, they're mates up.
02:28 As of now, I'm very sure that the valuation multiples don't justify the stock prices,
02:34 but that is likely to be the case in a high growth kind of a company.
02:37 And these are embarking on that trajectory.
02:40 All right.
02:42 So some of the topics there, RVNL definitely about 284% in the last 12 months, but can
02:50 the momentum continue is the question.
02:52 Soni, you want to weigh in on some of these names?
02:55 Definitely, Tamanna.
02:57 The first stock that got discussed, HAL, quite strong.
03:02 You can see it heading towards higher targets of 3700, 3750 also.
03:08 The stock has given a very strong breakout above 3350.
03:12 So on a positional, median term positional basis, one can definitely hold for higher
03:16 targets of 37, 3750.
03:19 If we talk about BEL, BEL is also looking very strong.
03:22 230 was the target.
03:23 I think it has already reached somewhere around 223 today.
03:26 So maybe a buy on dip for this stock can work out better.
03:29 Of course, the support today is quite low around 200.
03:32 So maybe HAL can still give you that figure over BEL as of now.
03:37 And talking about the railway stock, RVNL, just looking at the charts, the stock definitely
03:42 on a medium term positional play, we can see it has run up a lot.
03:46 But from current levels, 240 is a very good support on charts.
03:50 As long as it's holding, it can retest its high levels of 285 to 290 plus levels.
03:55 I think the stock can also play in this zone for now.
04:03 The other thing is today, Soni, some of the private banks have kind of slipped.
04:08 I heard you say that banks would probably be leading and it seemed like that yesterday.
04:13 But today they quite haven't done that.
04:15 So is this ICCA bank Kotak performance disappointing or would you bottom fish here?
04:23 I think, Neeraj, what we can see is that yesterday, Bank Nifty definitely was leading.
04:28 Today, it's very muted and that's how the trend for Bank Nifty has been overall.
04:32 If we just make a comparison in the past two to three months, we can see that's how it
04:37 performs.
04:38 Just like one day, it gives you that hope and suddenly it's just muted.
04:42 So I think what can lead in Bank Nifty, there would be two stocks that one can just focus
04:46 on.
04:47 First would be HDFC Bank.
04:48 Quite well, the correction has happened.
04:49 It has underperformed.
04:50 There's a resistance around 1500.
04:51 But then we have to look at how it has taken the support from 1400.
05:00 It has risen from those levels and now slowly heading towards 1500.
05:05 So I think on a medium term positional basis, we can see that it can head towards 1800 as
05:10 well from current levels and the support is very strong for 1400 as of now.
05:15 I think this could be one stock that can definitely contribute to Bank Nifty, the entire space
05:20 and the entire index.
05:21 The second stock in private banks that can also contribute would be ICICI Bank.
05:27 I think this stock, we've also seen it has given out a consistent performance above 1000,
05:33 1040, which was its resistance zone before.
05:36 It has given a breakout and regardless of whatever the volatility movement we've seen
05:41 in the markets in the last two weeks, the stock has been holding out, defending that
05:47 support level of 1040, 1050.
05:49 I think ICICI Bank on a medium term basis, we see 1200 can get tested.
05:55 So I think HGFC Bank, ICICI Bank together combined can give that support to Bank Nifty.
06:01 Okay, well, on that note, we still have to take Sony's calls.
06:05 But I think what is also important to highlight amongst stocks which are doing well is Tata
06:11 Technologies, which is in focus after executing a joint venture agreement with BMW Holdings.
06:15 Let's bring in my colleague, Puneet with more perspective on this.
06:19 Puneet.
06:20 This agreement is very, very key for Tata Technologies.
06:25 Looking at the key details as for the exchange filings now, this JV expected to deliver automotive
06:31 software, which includes software defined vehicles.
06:35 Now for the premium vehicles, there is a very high content for software and Tata Technologies
06:39 works with a lot of these EV as well as the premium players.
06:41 While they said that the automotive software defined vehicles solutions for BMW is what
06:47 they are going to offer.
06:49 The current stake is 50-50 by both parties in this particular JV.
06:53 And they say that they will establish automotive hubs in Bangalore, Pune as well as Chennai
06:59 in India.
07:00 Now the focus will be delivering automotive software and as well as SDV software defined
07:06 vehicles for BMW.
07:07 While they say that this will lead to transformative solutions for business IT solutions as well.
07:13 Currently, it's very interesting that lately J.B.
07:16 Monger had written a report on the ER&E segment where they saw they had an underperformed rating
07:21 on Tata Technologies, which had a target price of roughly 800 rupees, which is roughly 20-25%
07:28 below the current market price.
07:29 Now they had said that high client concentration was a key factor, which was a problem for
07:34 Tata Technologies and JVs such as this with the likes of BMW will be key to get out of
07:40 this high concentration.
07:41 They had also mentioned that 46% was the current revenue from these anchor clients such as
07:46 Winfast previously that they had worked with in 2021.
07:50 And they say that they needed big evidence such as such deals like JV with BMW to have
07:57 a positive view on the stock.
07:59 So this JV is going to be definitely a very big, big key trigger for Tata Technologies
08:04 and more details are awaited from the same.
08:06 Back to you.
08:07 All right.
08:08 Thank you for that Puneet.
08:09 Just wanted a quick word from Dharmesh on, you know, what do you say about a Tata Tech
08:14 versus some of its peers now after this BMW deal.
08:18 Remember, the biggest, I would say headwind or challenge for Tata Tech always was its
08:24 dependence on Winfast, its largest customer.
08:29 Does this help?
08:30 Yeah, definitely.
08:31 Yes.
08:32 I mean, this is a right is for the Tata Technologies and demonstration of technology and development
08:37 of the various software was deviated through a big brand coming into the client.
08:43 So that definitely goes well with Tata Technologies.
08:47 And this is a future concept stock.
08:49 How I am seeing the Tata Technologies is a doubler if you are going to hold it for three
08:53 to four years.
08:54 So forget about the P-multiples, which is there.
08:56 Numbers will definitely come through.
08:58 And this is a new age company getting to more of the AI platform, which is like which will
09:03 be built into the future cars.
09:05 They are working on that very aggressively and they have demonstrated their technology
09:09 properness as far as the automobile industry is concerned.
09:12 So 2000, 2200 is what we are expecting on the stock price.
09:18 But you have to wait for three years.
09:20 It's an investment buy.
09:21 And this definitely helps them to a bigger distance.
09:26 All right.
09:28 So Tata Tech having a great day and you're seeing that sharp spike up as well.
09:34 What exactly is going to be the details of the deal is what we're hoping to find out
09:39 from the management.
09:40 We'll take a very short break.
09:41 But on the other side, we talk about our stock of the day, ABFRL.
09:47 What does this demerger mean for shareholders?
09:50 We're coming back with all of those details and our special research piece after the short
09:54 break.
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12:30 Back with India market close right here on NDTV Profit.
12:33 And the markets as they are, are looking reasonably OK, though you would have to admit that 0.24%
12:40 lower is nothing dramatic, but it's certainly off from being flattish.
12:46 But really, I mean, it's not so bad that people need to worry about things.
12:53 What we haven't done thus far is take Sony's calls.
12:56 And Sony, can we ask you to give us your recommendations for the afternoon?
13:01 Definitely, the first pick is Hables and it's building very aggressive long built up positions today,
13:11 somewhere around 18 to 19% of long positions added today already.
13:15 So Hables is a very strong on charts.
13:18 Also, we can see 1500, 20, 1500 has had multiple support from current level to 1560 can be the buy zone.
13:24 There's a small resistance of 1560.
13:26 The moment it breaks above that, you can see it firing up towards 1650, 1700 levels.
13:31 So stop loss 1520 and target of 1700 can be looked for Hables.
13:36 And this could be also one of the stocks that can perform very well for the whole of April series.
13:41 So this is the first talk.
13:43 The second is from the banking space, because, you know, I'm holding a bit of a bullish view on Bank Nifty.
13:49 So these stop loss for Bank Nifty, sorry, in the banking space is for PNB.
13:54 So PNB can be bought at current levels, keep a stop loss of 122 and target of 130 to 134 can be seen for PNB.
14:04 So those are some ideas.
14:06 Keep in mind a clutch of volume buzzers include an AB Capital and AB FRL.
14:09 Of course, AB Capital has this upgrade from Macquarie, which is leading to this 10% uptick for that stock as well.
14:16 So much as we talk about Aditya Birla Fashion Retail,
14:18 AB Capital is not far behind some extremely strong showing by that stock too in the session today.
14:25 OK, we spoke to Piper Serica's Abhay Agarwal on the global macro trends as well as the uptick in metals in the wake of China's manufacturing PMI rebound.
14:35 Listen in to what he had to say with regards to that sector.
14:40 We have been tracking China, especially in the last six months for a couple of reasons.
14:46 One is that whenever China local consumption gets into distress,
14:52 we have seen that the Chinese large manufacturers try to get into cash by dumping at cost or below cost their products.
15:02 And that creates a deflationary cycle unintended globally.
15:09 And I think Indian companies, a lot of them in chemical space, agrochemical metals have suffered because of that over the last six months.
15:16 But whatever research we did, we also started seeing over the last quarter, starting January onwards,
15:24 that dumping has ceased and stopped being a problem.
15:31 And the pricing power was coming back in a lot of categories, especially for drugs, metals, chemicals, agrochemicals.
15:38 So I think the data coming out now of China, of PMI increase and to be followed by better domestic consumption,
15:48 cleaning up of the real estate exuberance, if I may say that.
15:53 I think that is all my guess. I would I would I'm happy to make a bet that is behind us now.
15:59 So all the pain that the Chinese economy, Chinese domestic consumption, Chinese exporters had to go through are largely behind them.
16:08 And now we will see Chinese economy recover.
16:12 The good thing about the Chinese economy is that it's not so dependent on foreign flows.
16:17 You know, unlike India, where foreign capits and capital formation is still dependent on international global flows.
16:23 China is not. It has a lot of domestic capital.
16:26 So I think China will grow this year and grow at a level that will surprise the analysts, probably driven by domestic consumption.
16:37 And this will lead, as you said, your bigger question, you know, will the global growth outlook will be better than estimated?
16:44 My guess, my bet is, yes, it would, because I don't see any reasons of, you know,
16:49 the consumption falling off, interest rates are going to train down.
16:52 And when that happens, consumption goes up. The macros continue to improve, especially for India.
16:58 So I don't want to be sanguine or careless, but I would bet that the global growth, global macros will improve from here on.
17:06 OK, so two investing implications. And I'm coming to that before I come to the macro again.
17:11 The first one, let's talk about the Chinese data since you're tracking it so closely.
17:17 Now, usually China growth is associated with uptick, a cyclical uptick in metals.
17:23 Do you see that happening?
17:27 That is a natural outcome, Neeraj, because there is a limited supply of metals that comes into the global markets.
17:38 And the Chinese exporters have been the largest ones there.
17:41 And they have had no pricing power because they have to keep the factories running.
17:45 And that puts pressure across the board.
17:48 You know, in a down cycle we saw last year, their global consumption of metals did fall off the cliff.
17:55 But at the same time, it wasn't growing in a manner that people were used to.
18:00 And on the same side, you have supply coming in continuously.
18:04 I think that is going to even out.
18:08 And the natural implication will be that the commodity prices, especially metals, will firm up from here on.
18:16 However, I don't think it will be a very sharp uptick.
18:21 It could happen in some commodities because we don't really track the exact monthly demand and supply data.
18:28 But barring some, I think there will be gradual recovery.
18:31 So if anybody is going to make a bet about sharp recovery in metal prices, I think they would also be wrong.
18:37 But at the same time, I think the recovery over the next 12 months will be on the higher side.
18:44 I would expect that generally metals as a commodity basket will not be surprised to see a double digit growth in pricing from here on over the next 12 months.
18:54 Right. So that was Abhay Agarwal looking at the big picture.
18:59 But in the immediate sense, markets completely flat this afternoon.
19:04 Just a few buzzing stocks here and there. I just want to pull up what's happening with Indigo and Spice.
19:08 That was another story that we've been covering through the day.
19:11 Arrival Vistara has been facing trouble with its pilots.
19:16 Indigo hit its life high, of course, has come off those highs right now.
19:20 SpiceJet is not doing too badly, actually, in trade about a cent odd up.
19:26 Dharmesh, I'm wondering if you find anything interesting in this aviation space.
19:30 And are you concerned about this shortage or these sort of personnel HR issues with pilots that Vistara is facing?
19:39 Yeah, it's a big surprise. I mean, so many airlines getting shut down and still you're having shortage of pilots.
19:46 So there's something more to it. That is what it appears to me as of now.
19:51 Having said that, I don't find this space very attractive because of this sensitivity to the field prices which are there.
19:58 So it's again on the rise. Indigo is right now having a trading bump up just because of the issues with the other airlines.
20:06 SpiceJet had an issue, Go Air went out of the service. Earlier you had Jet, Kingfisher, all these things are happening in the space.
20:15 And it's more of a, I mean, duopoly kind of a situation coming out.
20:19 So that is the advantage which this airline is having.
20:22 But prices, if you look at the air ticket prices, I mean, they are more or less stable to flattish kind of a thing.
20:29 And they are unable to accommodate in spite of the traffic, a higher air ticket prices with respect to the rise in the field prices.
20:36 So assuming a scenario where, you know, field prices goes to $120 a barrel, it will be difficult for these companies to be profitable.
20:43 And that is where the entire problem lies. Trading plays a role and as of now Indigo is enjoying the trading bump up.
20:50 For some reason Jet Airways is also up another 5% today.
20:54 Since we are talking about the airlines current and hopefully future, Jet Airways is also on a circuit today.
21:03 Let's turn our attention to what's happening on the derivative side of things.
21:06 Agam is standing by with the F&O Qs. Agam, is it as flat and listless on your side?
21:14 It certainly is. It certainly is.
21:16 We are looking at a very quiet day of trade today and the benchmarks have continued to move sideways,
21:22 largely without any sharp movements on either side of in terms of direction, even in terms of the futures.
21:29 While the underlying has remaining absolutely flat at the moment, we are looking at not too much traction with respect to an increase in the nifty futures, the bank nifty futures.
21:39 Again, well, again, very flattish movements there and very little change in open interest.
21:44 Even in terms of the options market, what you may realize is that there is a continuation of writing around the 22,500 mark, as you can see here.
21:55 Well, with an increase of calls inputs and a little bit of unwinding around the 22,600 calls inputs as well.
22:03 Let's move on and talk about how things are panning out as far as your overall open interest distribution is concerned.
22:08 And well, surprisingly 22,500 call is the one which continues to remain well active at the moment.
22:16 Of course, on the lower end, you'll have plenty of other strikes, including something like a 22,000, 22,100 puts, where there is a little bit more of a support building up.
22:26 In terms of the fin nifty, which where we have a lot of options expiry, that is also something that we're going to be tracking.
22:32 But that's also largely flattish.
22:34 Coming down to stocks, we are looking at shorts in Indiamart as well as Gujarat Gas, ABFRL.
22:39 It probably is the stock of the day or one of them, at least, because that's up nearly 12 percent.
22:45 A lot of longs building in there, longs for Ramco Cement and Havels as well.
22:49 And in terms of stocks, which see unwinding, that's where we do see short covering for JK Cement and Emphasis.
22:55 And of course, Infoedge Edge, ABB as well as Speedlight.
22:58 Even though the underlying is not declining by a significant amount, we are looking at some amount of longs and winding coming through there as well.
23:06 All in all, it's a very, very quiet day of trade.
23:08 And well, it's a wait and watch whether or not tomorrow's Bank Nifty expiry also shows similar characteristics.
23:15 Well, watch out for these for sure.
23:19 Agam, thanks for putting that into perspective.
23:21 So that's some sense of the derivative space as it stands right now and some select pockets out there reacting the way they are.
23:29 You know, you look at the F&O activity, you look at the volume uptake that is coming in into some of the stocks that have moved around today.
23:39 And there is the other distinct fear of PSUs catching up.
23:43 So it's not just restricted to a BEL, which is up today on very high volumes.
23:49 But if you look at the Nifty 50 gainers as well, a clutch of PSU names have done rather well for themselves.
23:55 Dharmesh, maybe for a brief while, it seemed that people will not want to touch PSUs.
24:01 Is that changing? I mean, rather be bottom up.
24:04 And if so, are there PSU businesses that you like?
24:08 I mean, PSU businesses, the trade is very clear.
24:12 It's the high-influx space which you talked about and the defense space.
24:15 So these are the two spaces which have been doing fairly well and the outflow has been great.
24:20 Valuation wise, since we are not used to the P multiples or EV by EBITDA multiples, most of the PSUs looking historically.
24:28 And then it becomes very difficult to justify the current valuation multiples.
24:32 But look at the growth trajectory where these companies are heading to.
24:36 Like BEL had never had that great order book, which they are sitting on now.
24:41 HAL, 94,000 orders of order book. RVNL closing in on 1 lakh order book.
24:47 So these are the sizes which these companies have not seen.
24:51 Almost 3x book to bill ratio is what they are sitting on.
24:55 And the visibility getting very strong. Also, in front defense players, are they out there?
25:00 Apart from that, I mean, the public sector banking space, which many people talked about earlier,
25:05 I don't think there's enough juice left out there. So much of the trade has split out.
25:09 And one can look at companies in the power play like NTPC, PowerGrid, and from the metal mining space, NMDC.
25:18 So that is, these are the select pockets where still, I mean, if you look at NMDC or NTPC or PowerGrid,
25:25 the valuations are not that high if you compare them to their private players.
25:29 So there's still juice left out there with strong ROEs and return ratios in place.
25:35 So this basket will be there. I think next one year, when I do see a turbulent and difficult market,
25:42 in that turbulence and difficulty and volatility, these are the sectors in the public sector
25:47 and the techies with such businesses will do fairly well.
25:50 All right. Well, let's get in one more wise. Arvind Chari, CIO, Q India UK.
25:56 A keen eye on macros, but with equal aplomb on what teams and sectors might work.
26:01 So I think you have a good idea about what the global activity is looking like.
26:03 Arvind, good having you. Thanks for joining in.
26:05 Well, the growth numbers across the world seem to be picking up. India, BMI numbers also looking strong.
26:11 Yes. Is it a good time to bet on manufacturing if it wasn't for the last 12 months, that is?
26:17 If you take a very long view, I think India kind of lost its way on the overall global manufacturing piece.
26:24 So if you look at value added manufacturing as a share of GDP, all the large countries, China, Korea, Japan,
26:32 they had a very high share of manufacturing when they were growing.
26:35 And India has always remained between that 14 to 18 percent.
26:38 So from a global supply chain perspective, we kind of missed out on that.
26:42 We made up in software services where India's share in global soft service is very high, but manufacturing less so.
26:49 But it looks like it is coming back in the sense that there is geopolitics in play because there is this aspect of
26:56 broad-based globalization, which was part of 1990s and 2000s, that has kind of, it's kind of giving way to
27:03 countries which are seem to be friendly, more strategic. And I think India is very well placed in that perspective, right,
27:11 where India is a democracy, India is not sided with anyone, but India is not allies, but also friendly with all countries.
27:18 India is not China, basically. India is not China as well, right. I mean, we know that from very, a lot of respects, India is not China.
27:24 And maybe we are getting into some aspects of that, of that manufacturing value chain as we speak.
27:30 So I think Apple is, as you know, is a big test case. And yesterday there was a report that it had created,
27:36 it has created the most amount of jobs as in that, that entire Apple ecosystem.
27:40 So that's, and I had written a piece last year saying that we need many apples a day to keep unemployment at bay.
27:47 Right. Because India's demographic dividend is subject to manufacturing and getting people jobs.
27:53 And that is one aspect. The way we see as investors on where we see a lot of government intervention.
28:00 So if you look at the electronics manufacturing chain, be it mobile phones, laptops, consumer electronics, or even semiconductors,
28:12 there is a government capital subsidy and there is a government policy deciding who will, who are the winners and who are losers.
28:20 In that you, as a, as an investor, long-term investor, you need to be a bit more careful in terms of how you price those opportunities
28:27 and, and, you know, the valuation comfort. Also in terms of the policy comfort, if government changes,
28:32 will that dramatically change the way India looks at, you know, these picking winners and losers in this entire manufacturing consumer electronics.
28:40 But otherwise, from a, from a global perspective, sitting out, giving, thinking about where India lies in the overall supply chain,
28:47 global value supply chain, especially in electronics, we seem to be in the right direction.
28:53 If you look at the government semiconductor capital subsidy program, I think almost $20 billion of capital subsidy,
28:59 seems that they have really thought it out and laid out in terms of design, chips, which is a later part, and then packaging.
29:07 And there will be companies which will, are listed, there are some of them already listed,
29:12 maybe the valuation is, is not comfortable from a, from a valuation perspective.
29:17 But there are enough opportunities to play. But by and large, I think India has missed the, you know, global long manufacturing chain.
29:24 We were a services play. We were a services play, maybe we are shifting now.
29:28 But I'm curious to know two things. One is you talked about government pushed CapEx. What about private CapEx?
29:37 Are you sort of in wait for when that fires and then what happens then?
29:42 Yeah, I mean, it's, it's been a story that everybody is waiting out for, right?
29:47 I mean, if you look at the balance sheets of corporates and banks, which are the two aspects which you need to get the private CapEx,
29:54 it's been pretty good for the last two, three years. Corporates have delivered, banks have written off or cleared off and cleaned off the balance sheet.
30:01 So both the balance sheets are ready. But we still don't see a lot of private, maybe this elect, import substitution led CapEx.
30:10 So India does not want to import and mobile phones. So they have a tax on the end, but then mobile phones gets manufactured.
30:17 We're seeing those kind of CapEx going through, but and some amount of steel and cement, but broad CapEx is still, is still not visible.
30:27 My sense would be one could be that it is an aspect of the consumption and the income growth.
30:33 We still seem to be lagging on the consumer demand and consumer and the income part.
30:40 And maybe companies which should have put in CapEx do not see that sustained demand over a long period of time.
30:47 And that's why they are kind of shying away. They may be doing some working capital, some ground field, but you know, you're not seeing very large greenfield activities.
30:55 That second is, I think, in that in this aspect of trying to get manufacturing done in India, both for India, make in India and then make in India and export.
31:06 You've seen an increase in import duties for many categories. In some sectors, it is beneficial.
31:13 Maybe in some it is not, where if you are an intermediate producer, where you're importing some commodity and then you're value adding and exporting.
31:22 Because of that import duty, if the cost of your production is higher, you might not be able to compete.
31:27 Maybe this is one more reason why you're not seeing that private CapEx here.
31:31 I'm tempted to ask you in your portfolios, manufacturing is not present.
31:35 It is there. But as you know, we are like a, we desire that discount to fair value.
31:41 So we will play some amount of industrials, we play some amount of manufacturing.
31:46 But if as it gets expensive or over our period of cycle of how we think about long term revenues and earnings, if it goes expensive, then we sell.
31:55 So we are not themes, we are not constrained to only want to play a theme.
31:59 We are liquidity cherishers, we value governance, and then we value the fact that we need a margin of safety to play.
32:05 So we cover all this. The one place where you're seeing some opportunities, consumer durables.
32:11 Again, getting manufactured in India, it's a manufacturing plus consumption theme.
32:16 There we are seeing a bit more valuation comfort and a bit more opportunity.
32:20 But in like electronics manufacturing, for example, it's great opportunity but expensive.
32:26 Sector of the day today. Yeah. Consumer durables, at least the cooling solutions.
32:30 Consumer durables, yeah, symphony, volt hours. You know, you mentioned valuations a couple of times.
32:38 Now, this is a losing battle as far as India is concerned. I mean, it's seemed expensive to many for a while.
32:46 How do you come to terms with that? And where are you still finding those pockets of opportunity which don't seem obscenely overpriced?
32:54 We keep getting asked this question, saying that what is a value manager doing in a country like India?
32:59 But value means different things to different people. And as I explained on my, I think,
33:04 your Money Manager show, that for us, it's just a discount to a two year forward valuation.
33:09 So we value companies over two, two and a half year forward. And we cherish a 25 percent discount to that.
33:15 And you'll be surprised or not surprised that enough companies and enough sectors come and go to the valuation.
33:21 Because India is essentially a mean reverting market. You would see that across time periods,
33:25 across time cycles, where you will see some two quarters are disappointing and the markets kind of lose a bit of confidence
33:33 and derate those companies. And we are slightly more longer term in terms of how we look at companies and we are able to buy in.
33:39 Or when there's too much optimism, we will kind of trim out and sell out.
33:42 So as a value manager, we'll kind of buy early, as a value manager, we'll kind of sell early.
33:46 But you, we keep getting, we have a 23 year old track record which shows.
33:51 Any sort of direction on what's on that list of where you're finding value?
33:54 So right now, financials, and for us financials means banks, private banks, insurance, general insurance,
34:01 asset management, booking, all these, especially private banks seem pretty good in valuations.
34:07 IT, society services, we've had reasonably large with. Consumer discretionary, predominantly two wheelers,
34:13 where we have had that position for long. That has done well for us.
34:17 And as I said, consumer durables is one space, not consumer staples.
34:21 Although consumer staples are underperformed, but it's still not in our valuation band.
34:24 But consumer durables is something that we are, that we are seeing some, it's very name specific.
34:29 It's not a broad sector, but there are opportunities everywhere.
34:33 And as I said, we have a 23 year old track record where we keep finding values or what we define value and margin of safety and,
34:41 and you know, our horizon. So my last question, yes, metals. Are you finding favor there?
34:47 I as a as a cyclical play, we have a lower valuation threshold when it's a cyclical play.
34:56 A couple of names are getting interesting for us, but but nothing as of now.
35:02 But we have we've been running as if I can give one name, Tata Steel has been there in our portfolio for some time.
35:07 But two, three other names are getting interesting. But you talked about IT.
35:13 IT is, I think, lost favor for a while right now. Are you seeing, you know, a change in that momentum or anything specifically that, you know, you can point us?
35:24 I think we've seen this time and again. I think just go back to 2015, 17 period when digital was supposed to be the big thing.
35:31 And there was a view that digital will be like IT services will miss out on the digital play. But it so happened in the next three, four years that they were the biggest beneficiaries of the entire digital mode because they were the ones who were implementing digital services across different organizations.
35:45 Maybe I is today that that aspect of fear plus the global, just the global slowdown from a from a long term valuation perspective and from the long term cost benefit analysis of, you know,
35:58 is is the Indian IT services or the Indian IT coder cheaper than a Western coder or, you know, or a same resource investment that that argument remains right.
36:09 And there is so much more. AI will also require so much more digitization and software and services and maintenance, which is what we play.
36:19 We play IT services. This is the bread and butter of these entities. So from a valuation comfort and from a from a, you know, from a growth perspective, we are we are OK.
36:27 We know it goes again. It goes through a lot of cycles because it is also global sector. It gets determined a lot because of global cycles.
36:34 Yeah, we're happy to hold it over a period of time. I mean, we leave it at that. Thanks so much for taking the time out and being with us in our studios today.
36:42 Thank you so much. Thank you so much. I've been Charlie there, you know, with that big picture and definitely I.T. is in that picture, though it might not be a current favorite.
36:53 All right. Just a few minutes to go for closing. Let me go across to Sony for any last BDST calls.
37:02 Right. Tamanna for BDST, we can look at MCX. MCX is looking quite strong. It has given a very good breakout. It's hovering somewhere on 3600 as of now.
37:12 So keeping a stoploss of 3500 and a target of 3700, 3730 can be seen as BDST trade.
37:20 OK. And Dharmesh, before we let you go, anything in the recent news flow that has stood out and made you contemplate investments?
37:34 Yeah, we have come out with an initiating coverage on small companies, 3,300 crore market cap, DCX system limited, primarily into system integration of the PCBs,
37:46 catering to the Indian defense services or DRDO, BEL, HL are their clients.
37:52 And they have also a tie up with Israeli companies who are into defense equipment manufacturing.
37:57 Recently, they have tied up with Lockheed Martin of the US. So it's not sure it's up to 200 crores is the revenue they do as of now,
38:05 with around 6% kind of an operating margin with a pat of 70 crores.
38:09 We are expecting this revenue topping to go from 1200 crores to 2000 crores in next two years' time frame,
38:15 with these tie ups coming into play, with an operating margin improvement of around 100 basis point and a pat of around 122 crores.
38:23 So these are very conservative estimates. I do expect this company to do much better.
38:27 They have also been developing a system called DR for the railway safety thing,
38:33 and that's around one and a half kilometers of object is there on the track. The system can identify that.
38:39 And that's a mandate given from the railway ministry itself to them to develop some kind of project.
38:43 So there are many multiple triggers which are happening and playing out there.
38:47 Primarily system integration is around 80-84% of the top nine.
38:51 Cable harness wise around 6-7%, and 3-4% is the kitting, which is also picking up in a big way.
38:57 So 60% of an offset close for this company, which the Government of India maintains for any defence equipment to be manufactured in India,
39:04 offers well for this. So this is an interesting play. As of now it's around 300 kind of a stock price.
39:11 We have come out with our target price of 379, which is likely to be revised and reiterated going forward.
39:16 Yeah. You know, Dharmesh, just one quick take on what I think is clearly the stock of the day, ABFRL.
39:23 Looks like it's going to end also on a strong note. How much value do you see in this demerger plan?
39:30 And would you take a bet on it right now?
39:34 Yeah, Tamla, just from the trading perspective and the relative value play, if you compare this with Trent,
39:40 there's definitely a value in the offering around 60-70% kind of an upside can still be there based on this demerger.
39:47 Because if you look at Trent, it's primarily a business driven, not on bands, but for quality and value proposition for the pricing of their products.
39:56 So that is where the entire trigger was there. And through this demerger, this is likely to happen because Pentelun and the other non-branded items will come into one segment
40:06 and the Louis Philips of the world will come into one. So let's see how scalable and per unit ROC and ROE is this ABFRL is able to do it.
40:16 That is still to be checked. But I do think financial leverage and the operating play will definitely set in.
40:23 And this relative concept of valuation will give it a further upside of around 40-50% from the current levels.
40:30 But business wise, I am not at all bullish on this segment, be it Trent or be it ABFRL.
40:37 Got it. Soni, Dharmesh, thank you so much for taking the time out and being with us throughout the show today.
40:43 Really appreciate the time, both of you. And as we wrap up the markets, a quick snapshot of the nifty heat map just to show you how we are ending.
40:51 We are ending flat. And that's why, in fact, you could argue marginally in the green, if you will.
40:56 But the heat map should come up on your screen. And some gains to autos in particular, because you're seeing Tata Motors, Bajaj Auto and BPCL right there in the top draw.
41:06 There is some flavor of FMCG because Tata Consumer and Nestle are also amongst the top gainers.
41:13 Not too many losers, but private banks certainly sulking with Kotak Bank as well as ICSA Bank in the red.
41:19 IT sulking a little bit, which is why you have that pressure on the index.
41:23 But the market breadth has stayed solid and the broader markets, Tamannaah, have better action.
41:28 Absolutely. Nothing too much happening here in terms of the key indices. I think auto IT, as you said, is a real pain point.
41:38 But look at the mid cap index, about 1% up. I want to pull up small cap as well and see what's happening there.
41:45 Yes, absolutely. 1% up. Let's pull up your sectoral breakdown and see what's worked.
41:50 Public sector companies in focus today, should be close to the top. Media for second consecutive session has done well.
41:59 Metals also continue to show that kind of a strength. The auto index overall has not done too badly.
42:06 Actually, I wouldn't say they're massive losers today, save for an IT.
42:11 But specific stories that we should also pick up and see at close, I would say in ABFRL, Atanla, some of the buzzing stocks today.
42:18 Let's see how they've closed. ABFRL finally 12% up. Symfony, another stock that has done well today.
42:25 I'm curious to see how Tata Tech finally closed. It had a fair bit of news flow, a positive order flow, actually, which showed action there.
42:34 Actually, Neeraj, with the exception of TCS, the entire Tata pack has had a pretty decent day.
42:39 If I add in Tata investments as well, so TCS is the exception there, but Tamo, Tata Steel, Tata Consumer.
42:47 And I don't know if you can show all of them together or one by one.
42:50 It's a good day for the Tata Group companies in that sense, when Tata Consumer up about 4%.
42:56 And most of them have news, especially Tata Tech, but the others too.
42:59 But it's looked at interesting day in the market breadth as we wrap up.
43:02 Just show the market breadth because I think that was important yesterday.
43:05 We had fabulous market breadth. I think today too it's not been too bad.
43:09 It's pretty much been this way since the start of the trading day.
43:12 So, therefore, two days of very strong breadth. May these last.
43:16 Yeah, yeah. We'll wait and watch how opening trade is tomorrow.
43:20 So, you know where you have to come back for that.
43:22 Back to NDTV Profit and we'll see you back on India Market Open at 8 a.m. tomorrow.
43:27 But in the interim, from Neeraj, me and the entire team that put this show together, thank you so much for watching.
43:33 Stay tuned. A lot more coming up on the other side on NDTV Profit.
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