If a money manager cannot explain in plain English what their investment principles are, they probably don’t have any. And if they cannot explain their process for finding and researching an investment idea, they probably don’t have that either. – Chris Browne
The season of block deals continues to be in bloom. Promoters of CreditAccess Grameen and TD Power will be selling a part of their stake, reports CNBC-TV18, quoting sources. The Street is divided on whether the flurry of share sales by promoters and large institutional investors indicates a market peak around the corner, or if it is a vote-of-confidence on the India story from incoming investors.
The strength in the US economy, despite high interest rates, signals a new normal, say some players, and partly that rate hike as a tool to tame inflation is losing its potency. Others argue this is the calm before the coming storm when interest rates would finally show up in weaker consumer spending and slower corporate earnings growth.
There will be a stampede for the exit today as the extension of the technology contract with 63 Moons will blow a big hole in the bourse’s
earnings for this year. The two-quarter contract will cost MCX Rs 250 crore, nearly 70 percent more than its net profit of Rs 149 crore for FY23. Besides the stock being heavily owned by institutions, many HNIs had piled on over the last month, hopeful that the transition to the new trading platform would help the company save costs.
That story may take a while to play out now. To make matters worse for MCX, the penalty clause in the agreement with the new technology vendor MCX will not cover the additional expenses that MCX will have to pay 63 Moons.
63 Moons
The stock has risen 28 percent on heavy volumes in just four trading sessions to a 52-week-high closing of Rs 217 even before news of renewal of the its contract with Multi Commodity Exchange became public. Did some savvy traders get a whiff of the deal ahead of the market?
HDFC Asset Management, UTI AMC, Nippon, Aditya Birla Sun Life
AMC shares could be the flavour of the day, with Sebi saying that the old draft Total Expense Ratio proposal will undergo a significant change. More importantly, the regulator has also indicated that the mutual fund industry will be pleased to see the new draft TER regulations. Concerns of a hit to earnings because of changes to TER was the main reason for asset management company stocks underperforming over the last many months. Question is if this is enough of a trigger for rerating or will the market still want to see the contours of the new draft TER proposals.
The political factor
Crude prices are on the decline, but shares of oil marketing companies may still not be the best bet, according to Kotak Institutional Equities. The broker is bullish on upstream players ONGC and OIL India, but has retained its bearish views on IOC, HPCL and BPCL even while raising earning estimates for oil marketing companies. Why?
“We prefer Upstream on stable crude pricing, rising gas prices and less concerns on downstream subsidies over OMCs, as we expect oil markets to tighten in 2H and there would be no pricing freedom until the 2024 elections,” says the Kotak note
Contra view
There are plenty of bullish reports on the stock market rally doing the rounds. So, this one from CLSA caught our attention. The broker has retained its cautious view on India for the following five reasons:
* Relative valuations, though less extreme, remain very unappealing
* Margin erosion may further deplete India’s relative profitability
* Projected EPS growth remains too optimistic versus delivered
* Other EM central banks are likely to ease policy ahead of the RBI
* Our India regression model signals the market is 14 percent overbought
Confusing trend
Talk about the data not being clear, and the banking sector is a prime example of that right now. Put-call ratio (PCR) for Bank Nifty is above 1 as of now, which is a sign that put writers are very active and thus the index may move higher, PCR is a contrarian strategy which believes that option buyers will typically lose money. Thus, if more puts are being bought – meaning PCR is above 1 – the index may move on contrary to what option buyers believe. Traders buy more puts when they have a pessimistic view.
On the other hand, key banking stocks – SBI, HDFC Bank and ICICI Bank that have highest weight in the Bank Nifty – have all PCR significantly below 1, meaning more calls have been written in them – signifying a supply pressure.
So, when data shows that key constituents are seeing supply pressure, and the index is in demand, traders seem to be at a loss at how to position themselves on banks.
Chip on the shoulder
More bad news for China at a time its economy is making headlines for all the wrong reasons. The US and the Netherlands are set to further restrict sales of chipmaking equipment to China’s chipmakers, as part of the countries’ ongoing effort to prevent their technology from being used to strengthen China’s military, reports CNBC. While the Dutch are planning to curb certain equipment from national champion ASML and other companies, the US is expected to go one step further and use its long reach to withhold even more Dutch equipment from specific Chinese fabs.
Some good news for the dragon
Argentina’s central bank will allow the country’s commercial banks to open customer accounts in yuan, as it seeks to address an acute shortage of dollar reserves and encourages local companies to make payments abroad in the Chinese currency, reports Bloomberg.
According to a statement published on its website, the central bank on Thursday said it had granted banks permission to take deposits in yuan, while it’s increasing its yuan sales almost daily to finance imports.
Counter attack
54-year-old Roger Anderson has devised an AI bot based on Chat GPT-4 to frustrate and waste the time of telemarketers and scammers, reports WSJ. The bot stalls for time at the start of phone calls, talking about random stuff to give a couple of minutes for GPT-4, to process the telemarketer’s spiel and generate responses. Once ready, the AI text is fed into a voice cloner, which carries on the conversation. Anderson has several thousand customers paying $24.99 a year for use of his call-deflection system, called Jolly Roger. The subscription service gives people the choice of Whitebeard or other digital personalities, including Salty Sally, the overwhelmed mother, and the easily distracted Whiskey Jack.
Shubham Raj contributed to this article
