Month: August 2020

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Global stocks lower ahead of US Fed chair’s speech

Global stock markets and US futures declined on Thursday as investors looked ahead to a speech by the US Federal Reserve chairman. London and Frankfurt opened lower while Tokyo, Hong Kong and Seoul declined. Shanghai advanced.

Fed chairman Jerome Powell’s speech is part of the US central bank’s annual Jackson Hole symposium. Officials in the past have used the meeting, being held online this year, to make market-moving announcements.

This year, forecasters expect Powell to talk about inflation and the importance of Congress delivering more economic aid after its last round of stimulus expired. Partisan disagreements have prevented an agreement. While the Fed keeps interest rates near zero, Powell has said Congress needs to take action. Investors, “they may be a little disappointed, Craig Erlam of Oanda said in a report.

Barring fine tweaks, I don’t think central banks are going to have much to offer for the foreseeable future,” Erlam wrote. In early trading, the FTSE 100 in London fell 0.4% to 6,022.16 and Frankfurt’s DAX declined 0.2% to 13,160.96. The CAC 40 in France shed 0.5% to 5,022.67.

On Wall Street, the futures for the benchmark S&P 500 index and Dow Jones Industrial Average were off 0.2%.
On Wednesday, the S&P 500 index hit another high, closing up 1% on strong gains for tech stocks. Most other companies in the index declined. The Dow rose 0.3% and the Nasdaq composite climbed 1.7%.

In Asia, the Shanghai Composite Index gained 0.6% to 3,350.11. The Nikkei 225 in Tokyo sank 0.3% to 23,208.86 and Hong Kong’s Hang Seng lost 0.8% to 25,281.15. The Kospi in Seoul lost 1% to 2,344.45 while Australia’s S&P-ASX 200 advanced 0.2% to 6,126.20. India’s Sensex gained 0.2% to 39,153.36. New Zealand, Bangkok and Jakarta gained while Singapore retreated.

Markets have recovered most of this year’s losses, driven by gains for big technology companies investors expect to do well despite the coronavirus pandemic. Forecasters warn, however, the rebound might be too big and too early to be sustained. The latest data show US economic activity has slowed following its initial rebound from the pandemic.
The Fed has been a primary reason for the stock market’s return to a record.

Benchmark US crude oil lost 15 cents to $43.24 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 4 cents on Wednesday to $43.39. Brent crude, which is used to price international oils, shed 5 cents to $46.11 per barrel in London. It fell 22 cents the pervious session to $45.64. The dollar rose to 106.03 Japanese yen from Wednesday’s 106.00 yen. The euro edged up to $1.1839 from $1.1831.

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Jhunjhunwala invests crores of rupees in this BSE 500 firm; share price doubles in less than a month

VA Tech Wabag share price has nearly doubled so far in August, rising 96 per cent from Rs 120.20 apiece. The company on Tuesday informed that its board has approved raising of Rs 120 crore from investors including Rekha Jhunjhunwala, wife of Rakesh Jhunjhunwala. VA Tech Wabag will issue up to 75 lakh shares on a preferential basis at a price of Rs 160 per equity share. Rekha Jhunjhunwala has invested Rs 80 crore for 50 lakh shares of the company on a preferential basis. The other two investors, Basera Home Finance bought 15 lakh shares for Rs 24 crore, and Sushma Anand Jain along with Anand Jaikumar Jain invested Rs 16 crore for 10 lakh shares of the company.

VA Tech Wabag shares hit a 52-week low of Rs 73 apiece on BSE in April this year, since then the stock price has skyrocketed 222 per cent. In the noon deals, the company’s stocks were trading 4.22 per cent down at Rs 217.50 apiece, as compared to a 0.12 per cent fall in the benchmark S&P BSE Sensex. VA Tech Wabag shares had hit a 52-week high of Rs 311.90 on September 12, 2019. This is the first the company has proposed to raise equity capital since its IPO in 2010. “We believe that this well-timed equity infusion will provide the necessary growth capital for the company to scale greater heights,” said Rajiv Mittal, MD & Group CEO, VA Tech Wabag.

VA Tech Wabag on July 31, 2020, had informed stock exchanges that the company’s board is considering growth plans, newer business opportunities which would fuel the next phase of growth of the company. It also informed that the board had approved the proposal of fundraising up to Rs 400 crore, by either share sale or issuing debt papers. “The company with its technology focus, asset-light model and global presence is well-positioned to consolidate its leadership in the water technology sector. In the backdrop of growing awareness and need for sustainable businesses, across the world, we believe that the company is an ideal destination for global investors, especially for ESG focused investors,” Mittal added.

The company also informed that its board has also approved to hold an annual general meeting (AGM) on September 23, 2020. Earlier this month, analysts at research and brokerage firm Philip Capital noted that the current pandemic will only accelerate investments in sanitation and water treatment. The brokerage firm added that the key monitorable would be VATW’s ability to collect long pending dues from AP and TS gencos (30% of capital employed) and 2) structurally reduce ex- genco receivables from current 360+ days.

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Titan shares a long-term growth story, but here’s why two brokerage firms are giving a ‘Hold’ call

Titan Company shares might be a long-term growth story that is likely to march higher with gold prices but at this juncture a leading domestic brokerage firm and an international one are not convinced enough to buy the stock. Titan shares have slipped 2% in the last five days to now trade at Rs 1,130 per share on BSE Sensex. The favourite stock of ace investor Rakesh Jhunjhunwala finds both Jefferies and ICICI Securities agreeing on its long-term growth potential, but both are advising investors to ‘hold’ the stock at the current levels, citing two different issue that in their view could put near-term pressure on the company’s performance.

In a recent note analysts at ICICI Securities said that for them Titan stock is about “when to buy” and not “why to buy”. The brokerage firm is sceptical about Titan’s shift towards fixed price making charge structure from the percentage of gold price model. “Introduction of fixed making charges, even though a small proportion currently, is something that we will watch carefully given that a potential shift to fixed price making charge could significantly reduce operating leverage and limit the business’ gross profit expansion,” ICICI Securities said in a note.

According to the company management, the shift comes in the view of customers not being aware of the percentage of gold price model. “…in many markets, and especially small towns, people are still used to getting a making charge in terms of fixed rupees per gram and they are expecting Rs 400 – Rs 500 per gram. Now suddenly, when the gold price has gone up and they start seeing Rs 1,000 a gram because of the percentage basis, to that extent,” Titan’s management said the earning call post April-June quarter results explaining the shift. The fixed making charges mode, ICICI Securities said, could limit long-term benefits from operating leverage of the company.

Meanwhile, Jefferies’ argument while putting a ‘Hold’ call on the stock is that it is eyeing equal odds for price performance. In a note Jefferies said that Titan structurally remains a growth story, but at this juncture, keeping in mind the coronavirus pandemic, Titan could face headwinds. Jefferies in a note said that the odds are evenly balanced for Titan’s stock price. Being a large organised player Titan is benefiting from the shift towards organised players from the unorganised market, however, lower footfall in the non-jewellery segment could hurt the company.

The surging gold prices help Titan company inch up revenues but Jefferies noted that a esser number of festivals in the current fiscal year will be an issue. Being a non-essential product seller, Titan stores faced a longer lockdown and the resurgence of lockdown to control the virus spread could hit the company further. “In our base case, we forecast 11% annual growth in revenue over FY20-22E with flat Ebitda margins, which factors in a strong double-digit back-ended recovery in FY22 after a steep ~30-35% volume decline across jewellery and watches divisions this fiscal year,” said Jefferies. In the bull case scenario the annual revenue growth climbs up to 15%.

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Gold prices fall as investors await US Fed policy minutes; may touch Rs 54,500 per 10 gm in the coming week

Gold prices fell on Wednesday as investors awaited minutes from the US Federal Reserve’s last policy meeting. Analysts believe that an intermittent profit booking cannot be ruled out on signs of easing US-China trade tensions and optimism around COVID-19 vaccine. At 10 AM, gold October futures were trading 0.60 per cent or Rs 321 down at Rs 53,250 per 10 gm, while silver September futures dropped 1.62 per cent or Rs 1,128 to rule at Rs 68,377 per kg on MCX in Wednesday’s session. Yesterday, news reports came in that Senate Republicans are planning to introduce a scaled-back coronavirus relief package. The slimmed-down bill will provide a $300 a week in federal unemployment benefits, which supported gold prices. “US lawmakers remain locked in a stalemate over a potential new coronavirus stimulus deal and any breakthrough in reaching another stimulus deal would lead to a decline in precious metals. Any positive development on the vaccine front would also boost risk sentiment and keep the pressure on gold prices,” Bhavik Patel, Senior Technical Research Analyst at Tradebulls Securities, told Financial Express Online.

Patel added that as long as yields stay below 1%, gold prices will remain positioned to the upside. Bouts of volatility and pullbacks in gold prices will occur from time to time. Globally, gold prices were trading firm with spot gold up 0.1 per cent at $2,002.12 per ounce, while US gold futures eased 0.1 per cent to $2,011.60 per ounce. Among other precious metals, silver rose 0.6 per cent to $27.82 per ounce, platinum gained 0.2% to $958.33, and palladium edged 0.1% to $2,190.98. “A direct break of $2020 is required to continue the bullish outlook, else intraday bias is largely on the downside. However, major downside moves are likely only if prices break $1970,” said Hareesh V, Head of Commodity Research at Geojit Financial Services.

Gold to touch Rs 54,500 level in coming week

On August 7, 2020, gold prices hit a record high of Rs 56,191 per 10 grams, while silver touched an all-time high of Rs 77,949 per kg. While, in the following week, gold fell below Rs 50,000 per 10 gram. In today’s session, it is hovering around Rs 53,250 per 10 grams. “After corrective move in recent past gold has taken support near to physiological support level of 50000 and shown buying action and retraced 50% of recent fall from 56190,” Rajesh Palviya, Head Technical & Derivatives, Axis Securities, told Financial Express Online. Palviya added that technically gold is in the bullish zone for the long term time frame. “We expect gold can show furthermore bullishness and it can scale up towards 54000-54500 in the coming week. However on the lower side 51500-51000 are likely to act as a good support area for minor corrective action,” he added.

Bhavik Patel said that the rally in gold and silver this week was helped by a weak US Dollar (lowest since 2018) and 10 year US Treasury yield which was trading around lowest in a week. “$2000 seems to be a strong hurdle for gold and if prices close back to back above $2000 this week then the rally will be enough to test $2089 resistance but if gold fails to close above $2000 this week, we may see another potential decline,” Patel added.

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