Trade Setup | Inflation data constructive, could help sentiment on rates in the medium-term. #BQLive
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00:00 Good morning and thanks so much for tuning into the trade setup after a day of some serious
00:05 correction in the mid cap and the small cap end of the market, particularly on the PSU
00:10 side.
00:11 But first, the global news flow.
00:13 NASDAQ closed lower by about a percent on Tuesday as Apple slid and tech suffered.
00:18 Oracle too shed about 13%.
00:20 Remember, Oracle was down about 10, 11% in pre-open since day before yesterday.
00:26 Taiwan is born.
00:28 China will ratchet up.
00:29 The military pressure after record number of warships sail nearby Taiwan.
00:35 Oil jumped 2% to near 10-month highs as OPEC predicted tight supplies.
00:40 And Apple raised prices of iPhone 15 Pro Max by $100 to $1199.
00:46 It was an interesting event.
00:47 I've read some of the reviews, but the team at BQ Brown has done some fabulous work.
00:52 And if you go to our social media pages, you will see a bunch of activity from there.
00:58 So could be interesting information for you.
01:00 Nevertheless, US stocks, like I said, Apple was probably one reason and then some others
01:05 as a result of which NASDAQ in particular was down about a percent.
01:09 The Dow was flattish, S&P 500 down about half a percent.
01:13 Ears have stayed steady 4.29, 4.28 or thereabouts.
01:16 So no big changes there.
01:18 4.28 S&P 500 Wicks went up a little bit.
01:23 The dollar index too, steady at about 730 AM.
01:27 The GIFT-NIFTY indicates a start which is marginally in the green.
01:31 Now that may happen, may not happen.
01:32 The inflation numbers are positive.
01:34 So sure, the headline numbers may look OK, because frankly, let's bring up the trade
01:38 setup plate as well.
01:39 If you just look at what happened yesterday, the NIFTY and the NIFTY Bank were both flat.
01:44 The NIFTY Bank was down about 0.13%.
01:46 So both the major indices were flattish and great.
01:49 They didn't buckle.
01:50 It seemed like a very bad market because mid caps and small caps really cracked.
01:56 More so the small cap end of the market, which is down 4%, and more so the PSU basket, which
02:01 was certainly, certainly lower.
02:03 Some sharp cracks that came in into the PSU names in particular, you know, I mean, 10,
02:08 11, 12% is not a normal day's play.
02:11 And as a result of which it looked slightly wobbly at the broader end of the spectrum.
02:15 The inflation data is constructive in India, could help the sentiment on rates in the medium
02:20 term.
02:21 But the mid cap crack, remember, had fundamental reasons beyond valuations too.
02:26 And these factors, now, whether it's of personnel in a global fund and a lot of rumors doing
02:37 the rounds, lots of talks doing the rounds, as mainstream media, I don't want to kind
02:42 of dwell upon too many things of it, but I think it could settle in the next few days.
02:46 So remember, you know, when cracks come in at the broader end of the spectrum, if the
02:52 valuations are supportive, then the cracks get easily absorbed.
02:56 If they were any trading at premium valuations, then there could be some bit of a downtick
03:00 that could follow in the next few days before there is a bit of sanity.
03:04 Now it could happen today, it could happen over the next few days.
03:06 So bear that in mind.
03:09 Two important data points that came out yesterday, CPI and IP.
03:12 Now, CPI was the important one, right?
03:14 So Nomura's note on CPI, Sonal Verma and colleagues write that the underlying inflation pressures
03:19 continue to ease.
03:22 They expect a sharp fall in CPI inflation to circa 5.5% YOY in September, which brings
03:28 it back within the RBI's target range.
03:31 They see continued fall in vegetable prices, an impact of cut in LPG cylinder prices and
03:37 capped for inflation pressures leading to this.
03:41 Inflation risk spike amidst stable growth could and according to them should solidify
03:46 RBI's policy hold.
03:49 They expect the first rate cut in February with about 100 basis points of easing through
03:54 2024.
03:55 You know, there's not a bad inflation print.
03:59 And I remember Michael Patra, Dr. Michael Patra clearly saying that they are not worrying
04:05 too much about the vegetable prices because they hope, he used the term hope, because
04:09 he's careful, right?
04:10 He used the term hope that the prices will come off.
04:13 And I think we've seen the signs of that.
04:15 Hopefully in the next couple of months, this whole vegetable inflation, especially around
04:19 the festive season, eases and that only aids the rural side meaningfully.
04:30 Certainly hope that happens.
04:31 The other thing that will happen today is RR Cable's IPO.
04:34 It opens today.
04:35 The wire and cable manufacturer plans to raise about 180 crores via Fresh Issue and 1784
04:41 crores via OFS.
04:44 The price band is fixed at 983,2035 a piece.
04:48 Analysts recommend subscribe for listing gains as well as holding for the longer term.
04:52 Now, you know, a lot of people argue that when an IPO comes in, the other companies
04:57 in the in the listed space also get a boost.
05:00 You know, Polycap doesn't require a boost.
05:02 Their stock is trading at premium valuations nevertheless, and that's the leader.
05:07 And some of the others will be followers.
05:09 But yeah, watch out for RR Cable, DPG backed, a solid company, products being used on an
05:15 everyday basis at multiple homes.
05:19 This one could see some fanfare.
05:21 So be mindful of that.
05:22 But remember, the IPO or the issue is not that high.
05:26 It's only 180 crores.
05:27 The point is the OFS is the larger portion.
05:30 So bear that in mind.
05:32 OK, now I was talking about PSUs among stocks to watch those come top of the mind.
05:39 And what we've done is we've tried to take the percentage cuts that happened yesterday
05:44 and the delivery percentages or the quantum of stock mark for delivery.
05:49 As you can see in a clutch of names, and I've only included five because I can't include
05:53 everything.
05:54 But in a lot of these names, Cochin, Shipyard, RVNL, BHEL, their delivery percentages are
05:59 very, very low.
06:00 So it's not that a lot of people came in to buy because the stocks were down 10, 11 percent.
06:05 It happened maybe in an EIL 44 percent mark for delivery, which is pretty good.
06:09 The otherwise just came off.
06:13 And therefore, that is a problem that's happening in the PSUs as well as the small caps.
06:17 Now there's a viewer query that should we invest in small caps with reasonable valuations?
06:24 I think that's a query that is coming on the show.
06:27 You know, here's the deal that in the way I think about it, Vasu, good morning, is that
06:34 when the tide turns, even the good ones take a hit.
06:39 Sure, in yesterday's session, ITI, for example, PSU, small cap, but went up, clocked in a
06:46 high of 175.
06:47 So there are these anomalies, but largely stocks will probably come off lower.
06:52 And therefore, let's see how the trade stabilizes, whether it does today, whether it does tomorrow.
06:58 It is better to buy a stock which is falling after it stabilizes and moves up a little
07:04 bit.
07:05 It's OK to buy it 5 percent higher.
07:06 That's what all the wise men tell me.
07:08 So Vasu, small caps with reasonable valuations is a great pocket to look at.
07:13 The timing you've got to figure out.
07:15 I mean, you can buy it right now as well, provided you are OK with seeing the stock
07:20 drift down a little more if indeed the wider small cap space comes down.
07:23 So just bear that in mind.
07:25 An SIP is not a bad idea if you know the stocks that you want to buy in the small cap universe,
07:31 because you don't know when they will stabilize.
07:32 They could stabilize today, they could stabilize five days from now, or they could stabilize
07:36 maybe later as well.
07:37 So maybe do an SIP.
07:38 At least you buy it at all price points and don't have to grumble later on.
07:44 So I hope this helps.
07:46 Nevertheless, stocks to watch in the session today.
07:49 There are not too many, but watch out for the oil upstream companies because OPEC has
07:56 signaled a supply crunch as a result of which crude prices have only inched higher.
08:00 So maybe ONGC and Oil India could be in focus today.
08:04 So watch out for them.
08:05 KEC International has secured new orders worth 1000 crores.
08:08 Maybe that stock could be in focus.
08:10 Now normally for an announcement like this, the rights would have shot up.
08:14 They signed an MOU with CFM Angola for cooperation in the development of railways and related
08:19 infrastructure, including the supply of rolling stock.
08:22 Remember, there is no financial tangible benefit that has been announced.
08:26 But this is good because it's a large company in Angola with which this has been signed.
08:32 So this is more Indian companies helping other states or other countries get up to date on
08:40 development and infrastructure.
08:41 This could be potentially beneficial for rights, whether that is captured in the price or not,
08:46 anybody's guess.
08:47 But like I said, railways, defence, PSUs under the eye of a storm currently, maybe this sees
08:55 some positive reaction today.
08:57 Maybe it just doesn't.
08:59 Like I said, it's anyway a great statement of intent.
09:01 Don't quite know when the financial benefits coming.
09:04 Vari Renewable has received a letter of intent.
09:06 So it could be interesting.
09:08 The other piece is there were new banking norms that were announced yesterday.
09:19 And I just thought I will get to you what Jefferies has to say when it comes to that,
09:23 the new investment norms.
09:24 According to Jefferies, it lowers the earnings volatility and opens the door to MTM gains.
09:31 So they say that the new norms on classification of investment aim to take India closer to
09:36 IFRS with limited disruption.
09:39 So across three classifications, various things being mentioned, but the new point is the
09:45 third line as the MTM changes in AFS will be, changes in AFS will be via reserves, volatility
09:53 in P&L may fall.
09:58 So logically doesn't seem to be too negative.
10:03 But this is the view from Jefferies.
10:05 We'll try and get what has to be, what a banking analyst has to say sometime during the course
10:17 of the day.
10:18 So please be mindful on that as well.
10:21 So that's a few things.
10:27 What else?
10:28 PNC Infratech, HDFC, MFS, hike the stake.
10:33 Like I said, Oracle was down and therefore OFSS would be in focus as well.
10:39 So do watch out for that one.
10:44 Then largely, these are the set of things that IOL Chemicals has said that they may
10:52 increase the prices as well as per some media reports.
10:55 So these are two or three names that I thought I should bring to your notice.
11:01 OK, viewers, thanks for tuning into the Trade Setup.
11:04 Have a great day.
11:05 I thought it's best with the Nifty at 20k, but the Midcap is doing what they are to try
11:10 and get in a large global view.
11:12 Mark Matthews of Bank Julius Baer, Johnson on Talking Point today to give his view on
11:18 life beyond 20000 for the Nifty.
11:20 Do try and tune in for that.
11:22 The Mutual Fund Show today at 4 with Rishabh Desai and Vrind Agarwal to tackle a couple
11:30 of important topics you might want to tune in for this one as well.
11:33 And of course, the normal trade talk conversations happen at 8.30, 11 and 3.50.
11:38 Hope they help you in your trading.
11:42 Thanks so much for tuning in to the Trade Setup.
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