On the first day of the week, the benchmark index Nifty has marked the fresh all-time high of 18543.15 level. On Monday, the index has gained 138.50 points or 0.76%. The index has formed a small body bearish candle, which indicates indecisiveness near the all-time high level. Going ahead, the upside opening gap of 18350-18445 is likely to act as strong support for the index.

Here are the top trading set-ups to watch out for Tuesday. 

Aarti Industries: The stock has given a downward sloping trendline breakout as of October 04, 2021, and thereafter witnessed nearly 18% upside in just six trading sessions. After registering the high of Rs 1131.80, the stock has witnessed consolidation for the next three trading sessions. During the consolidation, the volume activity was below the 50-day average volume. Hence it should be viewed as a routine decline after a robust move. On Monday, the stock has given three days of consolidation breakout along with robust volume. All the moving averages based on trade set-ups are showing a bullish strength in the stock. Daryl Guppy’s multiple moving averages is suggesting a bullish strength in the stock. The stock is trading above all the 12 short- and long-term moving averages. The averages are all trending up, and they are in a sequence. The leading indicator, 14-period daily RSI is in the super bullish zone, and it is in rising mode. Considering the robust technical structure of the stock we believe it is likely to touch new highs. On the upside, the level of Rs 1213 will act as minor resistance for the stock. While on the downside, the zone of Rs 1100-Rs 1088 will act as support for the stock.

Rail Vikas Nigam: The stock has formed a doji candlestick pattern as on the weekend of March 27, 2021, and thereafter marked the sequence of higher tops and higher bottoms. After registering the high of Rs 35.55, the stock has entered into the contracting consolidation for 39-weeks. This resulted in the formation of a symmetrical triangle pattern on the weekly chart. On Monday, the stock has given a symmetrical triangle pattern breakout. Interestingly, on the first day of the week, the stock has witnessed nearly 9 times of 50-days average volume. The 50-days average volume is 47.04 lakh while today it has witnessed 4.09 crore volume. This indicates strong buying interest by market participants. Additionally, the stock has formed a strong bullish candle on breakout day. Currently, it is trading above its short and long-term moving averages. These averages have started rising higher, which is a bullish sign. The weekly RSI has surged above the 60 mark for the first time after the second week of July 2021. The weekly and daily RSI is in rising mode. The weekly MACD line just crossed the signal line, and the histogram became green. Technically, all the factors are currently aligned in support of the bulls. Hence, we would advise the traders to be with a bullish bias. As per the measure rule of the symmetrical triangle pattern, the first target is placed at Rs 41, followed by the Rs 43 level. On the downside, the 20-week EMA is likely to act as strong support for the stock, which is currently placed at the Rs 30.40 level.

Open Demat Account

Enter First Name & Last Name

Enter Mobile Number

Submit

Enter correct otp

Please enter referal code

Start Now

Start investing in just 5 mins
Free Demat account, No conditions apply

• 0%* Brokerage
• Flat ₹20 per order

The bull run in the Indian market continued for a seventh consecutive session on Monday, and shows no sign of slowing down today as well.

The Indian markets enjoyed a strong run in the last trading with Nifty and Sensex both closing at a fresh record high. On Tuesday morning, the SGX Nifty is indicating the bull’s buying spree may see no signs of abating as SGX Nifty is trading up by 81 points at 18,567.50 levels. So, it is highly likely that we see a fresh all-time high at the opening bell. Certainly, with the kind of movement we are witnessing in the benchmark indices lately, it's too good to be true! Commanding attention in today’s session would be Nifty FMCG as Nestle and Hindustan Unilever are scheduled to report their earnings today and hence, Nifty FMCG could be in limelight.

Cues from Asian markets: Asian markets were seen trading in green on Tuesday. Hong Kong’s Hang Seng advanced 1.09%, while Japan’s Nikkei 225 and China’s Shanghai Composite rose 0.67% and 0.27%, respectively.

Overnight cues from US markets: On Monday, the tech-heavy Nasdaq and the S&P 500 ended in positive terrain, while the Dow managed to rebound from lower levels, but ended the day marginally below the neutral line. Nasdaq soared 0.8% and it managed to outperform its counterparts. The S&P 500 gained 0.3% and the Dow slipped 0.1%. In the economic news, industrial production declined the most in seven months in September.  

Last session summary: Indian markets continued their up-move for the seventh straight session on Monday with Nifty and Sensex advancing 0.76% and 0.75%, respectively. The broader markets also ended the day in green with Nifty Midcap and Smallcap adding 1.17% and 0.70%, respectively. Among the sectoral indices, Nifty PSU Bank and Metal were the top two gainers. On the flipside, Nifty Pharma and Media were top losers. 

FII’s and DII’s activity on Monday: The same trend has been witnessed for the third straight day in the flow from FIIs and DIIs. The DIIs continued to be the net sellers to the tune of Rs 1,703.87 crore, while on other hand, FIIs were net buyers to the tune of Rs 512.44 crore.

Important events to watch out for: On the earning front, Hindustan Unilever and Nestle will be in focus.

Open Demat Account

Enter First Name & Last Name

Enter Mobile Number

Submit

Enter correct otp

Please enter referal code

Start Now

Start investing in just 5 mins
Free Demat account, No conditions apply

• 0%* Brokerage
• Flat ₹20 per order

"TFCI wants to play the role of an investment catalyst for Indian tourism sector"

In conversation with Anirban Chakraborty, Managing Director and CEO, Tourism Finance Corporation of India Ltd(TFCI).  

TFCI’s Q1FY22 net profit stood at Rs 21.20 crore, up by 27.96% from Rs 16.57 crore in Q1FY21. What factors have contributed the most to help you outperform?   

At TFCI, we have focused on expanding our well-diversified portfolio, which has continued to yield good results over the years. Our Net Interest Income increased by 10% YoY to Rs 32 crore from Rs 29 crore with an additional income of Rs 2.4 crore during the quarter, which had mainly driven the net profit of the company. A combination of a broad-based economic revival, substantial decline in active Covid-19 infections and a large segment of the population getting vaccinated across the country has helped in significant recovery for the hospitality sector. Though Q1FY22 was a challenging quarter, owing to partial lockdowns due to the second wave, the gradual reopening saw improvement due to pent-up demand, especially in leisure destinations during the latter part of the quarter.   

Can you throw some light on your plans to utilize the funds (Rs 65.18 crore) recently raised via preferential allotment to marquee investors?  

TFCI being a specialized institution and an industry leader in its segment, is well-positioned to witness a multi-year credit growth. Hence, the raising of Rs 65 crore via preferential allotment to promoter group and marquee investor entities led by Anurag Bagaria (Chairman & CEO, Kemwell Biopharma Private Limited) and P.S Jayakumar (ex-MD & CEO, Bank of Baroda) will go a long way in the strategic expansion of the company. This displays the confidence of the investor community in the business model of TFCI. These funds will be utilized to boost the company’s strong position in the lending ecosystem and to accelerate its strategic priorities. TFCI provides a long-term line of credit to projects in the hospitality segment and the company has the vision to play the role of an investment catalyst for the Indian tourism sector, while also diversifying into other promising segments.   

What are your top strategic priorities for business expansion?  

With the help of large-scale vaccination programs and relaxations being rolled out, the tourism sector is inching its way back to recovery. Various segments of the tourism sector are witnessing a surge in bookings due to pent-up demand from travellers. Also, events like weddings, etc, which were postponed due to lockdown are also driving revenues in a big way. Our foremost priority is to lend to those businesses which have a strong asset cover and steady cashflows which helps us to avoid delinquencies and ensures recovery, even during unexpected events like this pandemic. Also going ahead, the company plans to further diversify its book by lending to the education and healthcare sector as these sectors usually tend to face lesser disruptions in a situation like COVID. These initiatives will help TFCI in building a well-diversified loan book.  

What are your growth levers?  

As per the JLL’s Hotel Momentum India report, the hospitality industry in India witnessed a growth of 84.7% in terms of Revenue Per Available Room during Q2 2021 (April-June) as compared to Q2 2020. With several states across the country adopting relaxed lockdown measures and no quarantine requirements, we expect a further boost in demand for domestic travel.

During the last year, we have also witnessed a structural shift in demand from unorganized hoteliers to larger organized institutions. This was mainly driven by their inability to sustain their operations due to the long Covid-19 induced lockdown, a shift in consumer preferences towards better hygiene, and unavailability of extended credit lines to carry business as usual. These factors have created a demand-supply mismatch in the sector. We expect this supply gap to be met by the larger and steady players, and TFCI being one of the largest lenders to such organizations is poised to grow in the coming future.   

Furthermore, going forward, with economic activities gradually getting back to pre-covid levels we expect improved disbursements activity in various sectors. As of June 30, 2021, our CRAR stood at 41.95% and our recent fundraise will help us to boost our adequacies and aid in further credit dissemination.  

Open Demat Account

Enter First Name & Last Name

Enter Mobile Number

Submit

Enter correct otp

Please enter referal code

Start Now

Start investing in just 5 mins
Free Demat account, No conditions apply

• 0%* Brokerage
• Flat ₹20 per order

Merck, also widely known as MSD, and its partner Ridgeback Biotherapeutics reported robust results for Molnupiravir Phase 3 trials from the interim analysis. The drug is said to reduce the risk of hospitalization or death by 50% in patients suffering from Mild to Moderate Covid-19. The study gave viral sequencing data which showed its consistent efficacy across viral variants Gamma, Delta and Mu.

The companies plan to get approval from FDA EUA (Emergency Use Authorization) and other global regulatory agencies for the drug. If it succeeds in this, Molnupiravir will the first ever oral COVID-19 drug which can be taken from home without any healthcare facility support.

This would play a vital role in Divi’s Labs’ growth as it is the authorized manufacturer of Molnupiravir API for MSD in India. It has a completely fully integrated manufacturing process, hence could be one of the key suppliers, effectively impacting the company’s revenue growth.

With global players looking to diversify their suppliers and reducing dependency on one sole source for generic APIs, provides a positive outlook for Divi’s Labs. Divi’s has proven itself to address any growth concern positively and has highlights its six growth engines.

Upon EUA approval, MSD wins a supply contract worth of $1.2 Bn with the US government to produce 1.7m course of Molnupiravir at a price of $700 per course. It is believed that both the companies have begun stockpiling of the drug in anticipation. MSD expects to deliver a quantity of 10m courses by 2021 end and Divi’s Lab is expected to produce 1M courses in FY22e and 0.7M in FY23e for the US.

Divi’s Lab would generate a whopping revenue of $53M and $44M in FY22e and FY23e respectively. An ROE of 23%-25% can be expected for FY22-23e, EPS estimated to increase by 0.4-4.4% and adjust the operating costs and items below the EBITDA line. These estimates are in respect to the contract with the US Government alone and would likely to increase if the companies can sign supply agreements from other countries.

With the Voluntary License agreement between Divi’s and MSD, Divi’s labs would supply Molnupiravir in India and other low-middle-income countries (LMICs) while MSD retains its API supply rights in the US, EU and other regulated markets. Divi’s Labs received a custom synthesis project for Molnupiravir API in 2QFY21 with incentives for expedited completion and invested CAPEX of 4bn for three supply streams (two for exports and one for MSD’s VL partners in India). It has started operations of one of the export streams while the other two are assumed to start soon. A strong net cash position of cINR21bn and consistent cash generation allow it to comfortably invest for future drivers.

With such impressive future business expansion plan, some drawbacks may spurt out. Risk such as delay in pick-up of supplies which would impact the revenues, higher input costs and operating expenses, failure of compliance at the plants and weakening demand.

Open Demat Account

Enter First Name & Last Name

Enter Mobile Number

Submit

Enter correct otp

Please enter referal code

Start Now

Start investing in just 5 mins
Free Demat account, No conditions apply

• 0%* Brokerage
• Flat ₹20 per order

The retail giant, DMart’s bullish momentum spills into Q2 and there seems to be no looking back. This is proved with the stock price zooming 94% in one year and outperforming the Nifty50 benchmark which only grew 54% in the same period.

The retail giant vows to its winning business model which has resulted in a whopping 46% sales growth in Q2, year on year basis, giving a tough competition to its competitors. The company successfully added 8 more stores in Q2, reaching a new total of 246 stores.

With such success, one may also question its high valuations. Is the high PE of 239 justifiable? Or is the 106x FY23e PE fair in correlation with its fundamentals? Can this affect the company’s ratings in the future?

So far, the company seems to have a clear positive outlook on the long-term view and would continue to do so.

DMart’s business model earning profits through scale and lower costs makes a strong case for its future valuations. This is evident with the company’s performance throughout the disruptive times caused by a deadly worldwide pandemic. While majority of the industries and companies suffered painful losses and shutdowns, DMart managed to rise above the crowd.

With its own pace of the network roll-out and increased in-store demand, DMart has managed to expand its business by opening 8 more stores. Since the grocery market is dominantly captured by “mom and pop stores” (about 95%), it gives immense space for the retailer to grow 10x than what it is today. 

To defy the argument of expensiveness, if the company continues to grow at the current pace, then the market would assign and price in a 16% long-term earnings compounding, which the company can successfully achieve over a decade’s time.

On the stock front, the stock behaves like a defensive stock when the bear market strikes and outshines when the bull market comes into play.

The above-mentioned points support the arguments for the expected higher valuations of the company and also justifies the potential high growth and an estimated revenue CAGR of 26-27% over a decade.

However, an investor must also factor in the drawdowns the company may face. The price-based competition from ecommerce competitors can put stress on the SSSG and gross margins, keeping up with the pace of network roll out each year and the effect of Covid-19 on the macroeconomics leading to the slowdown of demand.

Open Demat Account

Enter First Name & Last Name

Enter Mobile Number

Submit

Enter correct otp

Please enter referal code

Start Now

Start investing in just 5 mins
Free Demat account, No conditions apply

• 0%* Brokerage
• Flat ₹20 per order