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00:00 Good morning. Thanks so much for tuning in to Trade Setup. Before we delve into the Fed,
00:05 here is the big thing that came out on the political side as well, if you will. Prime
00:10 Minister Modi in a mention or in a message or in an address mentioned, oops, I don't
00:17 know where this has gone, but yep, here it is. India will be amongst the world's top
00:22 three economies in BJP's third term, as per Prime Minister Modi. Well, this is, you could
00:28 argue that mathematically, a logical promise as well, but this is a big one coming in from
00:32 the man himself. So read up on it. The story is there on our website as well. But this
00:38 is interesting. So from an India perspective, I thought this was important. From a world
00:42 perspective, what the Fed has said is also very, very interesting. That they, of course,
00:49 I mean, they've hiked the rates. They've quote unquote stayed hawkish, but I thought in some
00:54 fashion, also dubbish in that they said that we will not hike the rates at every term.
01:01 Somebody who analyses this very, very closely and gives us his version of what it in fact
01:07 would be on risk assets is Geoffrey Dennis. And as usual, it's our appointment with him
01:12 on this. Geoff, thanks for taking the time out. Good evening to you.
01:17 What did you make of the Fed commentary and the action, of course?
01:22 Well, the the most important thing was, of course, the the commentary, not the action.
01:27 I mean, it was widely expected the Fed would raise rates by 25 basis points. And they've
01:32 done that. I think the market was probably somewhat unhappy at the lack of clarity about
01:40 what the Fed really said. The Fed certainly kept all their options open. J-PAL basically
01:47 saying they might raise rates next time, they might not. And therefore, a lot of uncertainty
01:52 as to whether the hopes that have been generated in the last two or three weeks that this might
01:57 be the last rate hike. I think that's now a little bit put into doubt simply because
02:04 the Fed has said, look, we have to watch to see how the data develops. And my thinking
02:10 actually, and perhaps we'll delve into why that should be, my thinking is that probably
02:15 is one more rate hike to come after this one. But, you know, basically, the Fed is leaving
02:22 everybody guessing at the moment. Yeah, that it is. But just I just thinking
02:27 about it, Geoff, we've been told by people who just visited the US that the economy is
02:32 not looking all that bad. We might skirt a recession, but it's not a full blown uptick
02:36 out there. Do you reckon that the markets will be happy with probably just one more
02:41 hike because any of these people were talking about two rate hikes and then an extended
02:45 pause? Do you think if that's the outcome, then risk assets will take it well?
02:50 Oh, I do think risk assets are going to get through this anyway, because come what may,
02:55 we are close to the top of the rate cycle, even if we're not at the top. And clearly,
03:02 you know, I say I think clearly the the good things about what's what is going on in the
03:09 US right now is, first of all, the economy is proving itself to be very resilient, perhaps
03:14 more so than people thought. We're going to get the second quarter GDP numbers tomorrow.
03:19 It'll be interesting to see what that comes up with. And at the same time, although my
03:26 numbers tell you that the inflation rate at 3 percent in June headline may well have hit
03:33 the trough for the year, it may well not go down any further this year because the comps
03:41 or the base effects with the second half of last year get more challenging now. Nonetheless,
03:48 you know, rates are sorry, inflation is clearly much lower and is will eventually move down
03:55 towards the 2 percent level. So I think markets will continue to do well through all of this.
04:04 And I think the thing that would put the markets off would be if you saw a substantial acceleration
04:10 of inflation, which I don't think you'll get, which would mean the Fed would have a lot
04:14 more work to do. And I just don't think that's the case. The key here is that interest rates
04:20 are either at their peak now or they're extremely close to their peak. And I think that represents
04:26 a good outlook for equity markets going forward. What would you watch out for the most? I mean,
04:33 people are talking about how it's been a narrow rally and in the US you might not see a buckling
04:38 down because while the Nasdaq may falter because it's gained so much, some of the others will
04:43 come to the fore. Do you expect the second half to be more like that? I think so. Yes.
04:47 And of course, as your viewers will know, you've had this extraordinary, I think it's
04:54 11, 12 day gain in the Dow now, which is not very relevant these days, the Dow 30. But
05:00 still, it's the longest winning streak for the Dow since I understand 1987. That itself
05:05 is telling you there's a bit of a broadening out. And of course, the Nasdaq has lagged
05:09 a little bit recently. So you are getting something of a broadening out, which I think
05:14 is going to be very, very helpful for the longevity of the bull market anyway. But I
05:20 think what is getting lost in the shuffle here, which is very, very important, especially
05:24 for an EM guy like me, is that the emerging markets have really had a very good month
05:30 in July. They're up about 5% in July. We're up over 8% on the year again now. And I do
05:38 think this is a very, very good environment now for emerging markets because the US economy
05:45 looks like it's going to skirt recession. The dollar, I think, as the Fed gets towards
05:51 peak interest rates, is going to start to drift low, which is always good for EM. And
05:57 we may be about to get another big stimulus out of China. The Chinese market's flat on
06:02 the US. There's been a big drag on the performance. So I see EM equities doing very well. In fact,
06:07 my core remains that EM equities will go up 20% this year in dollars. And we're up about
06:13 8% to 8.5% currently. And so I do like equities here. The US looks good. To me, a broader
06:20 US rally. But I think EM looks particularly good here.
06:25 That's music to the ear. Jeffrey Dennis, thanks so much for taking the time out and giving
06:29 us your thoughts. Really appreciate your time this evening. Have a great one.
06:33 Thank you.
06:34 Well, that's our usual appointment with Mr. Jeff Dennis. Now, move on to what could this
06:40 mean for India? So firstly, what the US markets did, right? Precious nothing. And they kind
06:44 of stayed, the futures are also kind of stable. So no big changes there. The gift nifty should
06:52 be indicated. The yields may have moved a little bit. So that is fine, 3.87. But the
06:58 gift nifty is probably showing a start, which is again, some bit of consolidation. I must
07:04 say that yesterday I was a bit surprised with the kind of move, right? So the nifty 50,
07:10 the key starts up yesterday, nifty 50 ended higher to close at about half a percent or
07:15 thereabouts at 19.778. This is a bit of a surprise for me, to be honest, because I was
07:19 expecting more of a consolidation move. The PSU banks were the best gainers, 1.5% PSU
07:25 bank, nifty PSU bank, followed by the nifty realty, which was up about 1.19%. And we saw
07:30 strong buying in L&T, we saw strong buying in cement stocks, poseidon stocks, the smaller
07:36 names. So it's quite a bit of movement out there that is happening in select pockets,
07:43 even periods of consolidation. Now it's an expiry day today. So can that change? That
07:48 remains to be seen. So what's the trade setup for the day to day viewers? Here's the deal.
07:52 I think upbeat results help the markets exhibit resilience ahead of the Fed. Banks are uncertain,
07:58 but large domestic investors and smart names are still very constructive on the private
08:04 banking space. Now, it'll be interesting because Mihir Gupta, for example, the day before yesterday
08:08 said also that he still believes that instead of the private banks, it's the NBFCs that
08:14 he likes more. But hey, we're getting your session with Utpal Sheth and Ramesh Tamani
08:20 soon sometime next week. It'll be interesting to see what they are saying. But there are
08:25 people who are saying that private banks still give you a big bang for the buck. Analysts
08:29 have largely remained constructive on building materials post the conflicts. That remains
08:33 a pocket to watch. If you just see what the brokerage notes are talking about Asian paints
08:39 in the session today, that tells you the story or that tells you the piece that I'm trying
08:43 to tell you about. So do watch out for what's happening at that end of the market, particularly
08:49 building materials. Lastly, the US numbers for all the pharma companies are looking strong
09:00 along with very constructive commentary. Dead rate doctor in the CIPLA is looking very strong.
09:06 I suspect that today could well turn out to be a pharma day of sorts. So do watch out
09:11 for that as well. Foreign investors bought about 922 crores, 922.84 crores. DI has bought
09:17 about 470 crores. So the institution buying seems to be OK. Results, not too many. I mean,
09:25 even if they're not too many large caps, I mean, with the Bajaj FinServer and Nestle
09:30 being the ones, a lot of important ones like Bharat Electronics, Railtel, Indian Hotels,
09:37 IEX, Westlife, Loris Labs, Shyam Metallics and Gudadi Power. So Sona BLW. So a bunch
09:45 of very important names to watch out for in the session today. What about stocks to watch?
09:50 Well, first, an update that some of these stocks might, they are going ex-dividend.
09:56 So please keep them in mind if there is a kind of a move out there and that some of
10:02 it could also be because of going ex-dividend. But the stocks to monitor, well, RBL Bank
10:08 and I'll add Mahindra and Mahindra to that too. So M&M gave out the formal release yesterday
10:13 that they've acquired 3.53% stake in RBL Bank as an investment. May consider further investment
10:18 subject to pricing, regulatory approvals and required procedures. Companies take in RBL
10:23 Bank will not exceed 9.9%. So they don't want a controlling piece. It will remain at 9.9%,
10:28 in which case people will wonder why is it that Mahindra and Mahindra is going out and
10:32 doing, you know, putting cash to work in pockets which are, quote unquote, unrelated, unless
10:39 there is a thought of M&M financial and a bank, etc. Why do this? So very likely M&M
10:45 could have a bit of a corrective move. Very likely RBL Bank, which was in an F&O ban until
10:50 yesterday because a lot of longs out there. You know, the market had a whiff of something
10:55 like this happening, maybe, I don't know. But there were a lot of longs for the last
10:59 few days and not just yesterday. And RBL Bank, and because M&M very likely, yes, is saying
11:12 that they might want to up the stake, but not really go out there, make it their own
11:16 subsidiary if you, I mean, not subsidiary, but, you know, their own game, if you will,
11:21 is could that disappoint the street? Let's see. So it'll be interesting to see. RBL Bank
11:26 ended up about 7% yesterday. Could it see a bit of a pullback too, is the key question.
11:31 Let's wait and watch. RBL, the government will sell about 5.36% stake in the company
11:37 via OFS. The offer for sale opens Thursday. It's today for non-retail investors. The floor
11:44 price for the OFS will be 190 rupees per share. So do watch out for this one. Then the other
11:51 big one, right, asset management companies will be in focus, could be a sentimental impact
11:56 today. Let's see, because Jio Financial Services and BlackRock have inked a joint venture pact
12:01 to foray into the asset management space. A 50-50 JV, Jio BlackRock will deliver tech-enabled
12:08 access to affordable investment solutions. Read passive, read ETF. That's the way US
12:14 went. That's the way India seems to be going. We already have Zerodha saying that they want
12:18 to do something like this too. A clutch of other existing AMCs are also rolling out passive
12:24 products in a meaningful way. So, you know, can this, you know, both parties will invest
12:32 $150 million, which is 1230 crores, which is not a chop, which is not a chop change,
12:36 right? Nearly 2400-2500 crores for a venture like this. So they're serious about this.
12:43 Could this bring about a sentimental impact in some of these stocks? Very likely. So watch
12:48 out for these. Then Tech Mahindra, not a good, not a good set of numbers. I mean, look at
12:54 that. Revenue is down 4%, 13159 versus 13579. So you could argue that in some sense, this
13:00 pullback was anticipated. They've come in much worse, which is a problem. The below
13:05 the revenue line numbers are even horrible, right? 32%. I use the term horrible because
13:10 Tech Mahindra doesn't quite deliver something like this. Usually 32% downtake in EBIT. When
13:15 did you last see that happen? I think this must be the sharpest EBIT fall for TechM in
13:19 a long, long time. 891 crores, 1435 crores. Big miss, really. EBIT margins, big miss.
13:26 Net profit, big miss. Deal wins at multi-quarter lows. So, you know, there's a problem that
13:32 Tech Mahindra has encountered in quarter one. It's not been a strong start to the season.
13:36 But there's a new management and put the market's bet on that is the question. So Morgan Stanley
13:40 says that they are equal weight, target price of 1060. They believe that Q1 performance
13:46 will rebase consensus estimates for FY24 with downside risk to FY25 as well. But investors
13:53 will not give up hope of a margin recovery, especially with new management in place. Now,
13:58 you know, that's the key thing. Morgan Stanley lowers the FY24 EPS by 19%, going to a 31%
14:06 over-earnings miss. They cut their FY26 and FY25 EPS as well, not by a big number. They
14:15 see better risk reward in NCL Technologies. Now, you know, other brokerages are mixed.
14:20 Jefferies underperformed, target price cut to 900. Nomura buys with a target price of
14:25 1316. So it depends how you look at it. I suspect that TechMahindra could see a start
14:30 which is soft today. Can it recover from that? Maybe. I like Morgan Stanley's argument of
14:38 how look at that across the board and are there other players which are priced similarly,
14:43 so to say, on the valuation front and you want to bet there because there might be a
14:46 bit more certainty, if you will, on those pockets. So, if we get out from this plate.
14:56 Yeah. So, you know, the thing is this, IT is under a bit of a cloud. You've got to pick
15:00 the best horse. There are a bunch of companies which are delivering. Maybe you want to look
15:05 there. That's the key point. Then Dr. Reddy's is the other one. Revenues up 29%. It did
15:12 well, much better than estimated. Ibita, 119% higher. Operating profit margins 30.5 versus
15:19 expected 25.5 net profit of 18% 1405 versus 1008 crore. The stock is up 9% in the last
15:27 one month. But boy, has it done well? Yes, it has. And which is why I think brokerages
15:31 are constructive. So Jeffries, for example, has a buy. The target price has been raised
15:36 to 63.0 from 5600. They say that the Q1 pat beat Jeffries estimates by 22% due to various
15:44 factors. The strong outlook for the US in the near term and steady growth in base business
15:49 keeps us constructive on Dr. Reddy's. Not surprised there. So it's up 9%. Could it be
15:54 a bit more serious than what it otherwise would have been? Maybe. But I still think
15:58 these are good numbers. And mostly, you know, pharma stocks seem to have done really well.
16:04 You know, if you look at the Nomura note on Cipla, sorry, can we jump there before we
16:07 come to Axis? If you look at the Nomura note on Cipla, they've done the same thing. I mean,
16:12 you know, the buy target price raised to 1229. 1Q ahead of estimates. US and India ahead
16:17 of estimates. Management has raised their FI24 EBITDA margin guidance to 23 from 22.
16:22 And the intensity of price erosion in the US declined as per the management. Nomura
16:27 has raised the FI24 EBITDA margin by 3% and 17%. Sorry, that's a bit of an error at our
16:34 end. Effectively, there are two separate sentences plugged into one. But you get the drift, right?
16:40 Dr. Reddy's, the US generic exposed companies are talking really constructively about what's
16:48 happening there. And I think that should be a bit of a leg up. So watch out for Dr. Reddy's
16:52 and Cipla in the session today. Pharma, good going there. Then Axis Bank, the numbers came
16:57 on. I thought the Jefferies note summed it up well. So I thought I'll bring that to you.
17:01 Buy, they have a buy with the target price of 1200. But they say that the Q1 earnings
17:05 were ahead of estimates with higher NII and lower credit costs. NIMS held up better with
17:09 nine basis points Q2 fall in Q1 and NIMS. But the growth trends in the balance sheet
17:13 were weaker. But asset quality held up as well. They see a 16% CAGR and Axis amongst
17:19 the top picks given a favorable risk reward at 1.8 times 12 month forward adjusted price
17:24 to book. So that's the view on Axis. So those are some large caps. Very quickly, some mid
17:29 caps, general stainless numbers. Revenues up 25% marginally ahead of estimates. EBITDA
17:35 margins 11.7 versus 10.5 on that base. By the way, these are good numbers. Net profit
17:40 of 45% at 737 versus 479 crores. All in all, looks solid, may react positively. Colgate
17:48 Parmalim I thought was marginally ahead of estimates as well. In fact, on the margins
17:52 fund at 31.6 versus estimated 29% versus actually delivered 27.2%. These are very good set of
17:59 numbers. Who knows, may react positively as well. So do watch out for Dr. Reddy's too.
18:04 Now have I missed out on something? Let me just try and see if there are any brokerage
18:10 notes that I may have missed out on. Morgan Stanley is an underweight on PNB, target price
18:17 of 55. So watch out for that very quickly before we wrap up. Yeah, I said brokerage
18:24 is a constructive. Macquarie on supplies and outperform. Then Asian Pains, like I said,
18:29 Macquarie outperformed target price 3900 UPS by target price 3700. Brokerage is a constructive
18:35 on Asian Pains as well in the session today. HSBC by target price raised to 4000. So there's
18:40 some traction there. So do watch out for that as well. So lots of things to focus on in
18:47 the session today. Lots of earnings as well. Mahindra and RBL, a bank as well, and the
18:54 asset management companies. Watch out for all of these. Lots of conversations. Kenneth
18:59 Andrade, I think joins in today. TechMindra at 8.35. Yes. So that is to be watched out
19:04 for. Alpha Muggles at 10.30am today. Kenneth Andrade in conversation with us. So this is
19:09 a very, very neat conversation. You might want to tune in for that as well. And a clutch
19:13 of earnings conversations a bit later on to try and tune in for some of those. Thanks
19:17 so much for tuning in to the Trade Center.
19:18 Thanks for having me.
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