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Ashok Leyland Q2 earnings grew 56% YoY with expectation of higher volumes and expansion in operating margins in near term

by 5paisa Research Team 22/11/2021

In Q2, Ashok Leyland reported a 56% YoY and 50% QoQ jump in net sales at Rs. 44,262mn primarily on account of recovery in volumes and revived economic and industrial activities. In exports, M&HCV volumes grew 63% YoY to 1,526 units, and LCV volumes grew 26% YoY to 701units. In the quarter, M&HCV volumes grew 71% YoY to 13,514 units and LCV volumes, 22% YoY to 14,029 units.

However, the PAT improved from a loss of Rs. 2823 to a loss of Rs. 830, and the PAT margins also saw improvement from -9.6% to -1.9%. The Q2 FY22 gross margin contracted 257bps QoQ due to higher RM prices and high discounts. The EBITDA stood at Rs. 1,347mn, up 67.5% YoY but down 196.1% QoQ. 

With strong economic recovery, in near future it is believed that a strong replacement demand would pick up in tillers and tippers in H2 FY22 and with shift from BS3-BS4 to BS6 technology and an expansion in operating-leverage-led margin supported by expected volume growth and effective cost-cutting efforts. Hence, 5% margin is expected in FY22, and 10% in FY23 An estimated growth in sales stands at 49%, in FY22, and 27% in FY23 and revenue growth of 19% YoY, and the margin to be11%; hence, we expect earnings to grow 44% YoY to Rs18bn and a revenue CAGR of 31% over FY21-24.
 

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India’s strong recovery is steadily pacing with GDP expected to grow at 7.8% In FY23 and 7.2% in FY24

by 5paisa Research Team 22/11/2021

Consumption is expected to pick up in a broad-based manner from 1Q22 as vaccination rates cover the entire eligible population. Improvement in end demand (consumption and exports) can push capacity utilization rates higher, along with a conducive policy environment which could increase private capex from 2H22. Thus, GDP is expected to grow at 7.8% in FY 2023 and 7.2% in F2024

Headline CPI is expected to increase around 5.8%Y in QE March 2022 as the base effect dissipates and the trailing impact of higher commodity prices feeds in. However, inflation is expected to decelerate from there on account of easing commodity prices on a sequential basis. Thus, CPI inflation is expected to remain steady at 5% YoY in 2022. A persistent cost-push increase related to the supply side and/or a higher increase in demand which creates risks of generalized price pressures all lead to upside risks. Core PCE inflation was 3.9% YoY at the end of FY2021. While core PCE inflation continues at 2.4%Y in December 2022(2.3%Y in 4Q22), the path between now and then is meaningfully higher. Core PCE inflation begins to glide off of its peaks after February next year, 3 before slowing sequentially. By May, core PCE is forecasted at 2.9%Y,2.3%Y, and 2.2%Y on a 12-month,3-month, and 6-month annualized basis, respectively. In 2023, core PCE inflation would moderate further to 2.0%Y by year-end.

The next step in policy normalization following calibrated management of excess liquidity would be narrowing of the policy rate corridor to pre-pandemic levels through a reverse repo hike (15-20bp) in the December and February policy reviews. In a bid to create a business-friendly environment, policymakers have initiated several structural and institutional reforms.

 In addition to the measures taken over the last few years with the implementation of Goods and Services Tax, the Insolvency and Bankruptcy Code, and an inflation-targeting framework include approval of production-linked incentive schemes for all 13sectors, abolition of the retrospective tax on indirect transfer of assets, the national infrastructure pipeline, national monetization pipeline, etc.
Further, with growth recovery gaining traction, it is anticipated that the RBI will hike the repo rate in 1Q22 in base case. It is expected that the RBI will follow up with rate hikes (25bp) in each of the subsequent meetings in 2022. Risks to a delayed start hinge on the pace of growth recovery. The improvement in growth in gross tax collection has been marked by the onset of economic normalcy from pandemic blows. In this regard, it is expected that the fiscal deficit is to be in line with the government's estimate of 6.8% of GDP, as higher tax revenues could provide some offset to potentially lower divestment receipts and loss of revenue from recent fuel tax cuts.

Risks are expected to emanate from management of Covid, the pace of reaching full vaccination for the adult population, threats from new variants, and/or vaccine efficacy. Prolonged supply-side disruptions leading to a further surge in global commodity prices may accentuate upside risks to the inflation outlook, which may in turn impair growth projections. On the external front, apart from Covid-related disruptions, risks could emerge from a slowdown in global growth, and risk aversion in capital markets in response to faster-than-expected changes in global inflation and the monetary policy trajectory.

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F&O Cues: Key support & resistance levels for Nifty 50

F&O Cues: Key support & resistance levels for Nifty 50
by 5paisa Research Team 22/11/2021

Today the Nifty F&O action for November 25 expiry shows support has come down to 17,000 now from 17,500 earlier.

The Indian equity market closed in red for the fourth consecutive day in a row. The frontline equity indices though opened in green, but soon slipped into the red. Nifty 50 saw the biggest single-day drop in the last seven months. At one point in time, Nifty 50 had even breached 17,300 level, however, the last hour of buying helped Nifty to recoup some of the days' losses. The main culprit for today’s action was negative news flow for Reliance Industries and FIIs selling on the back of higher valuations.

Activity in the F&O market for the weekly expiry on November 25, 2021, shows 18,000 to continue as a strong resistance. The highest call option open interest (164637) for Nifty 50 stood at a strike price of 18,000. In terms of the highest addition of open interest in the call options front, it was at 17,600 in the last trading session. A total of 90,900 open interest was added at this strike price.The next highest call option open interest stands at 17,800 where total open interest stood at 131,855.

In terms of put activity, the highest put writing was seen at a strike price of 17,000 (26,711 open interest added on November 22), followed by 15,500 (21,217 open interest added on November 22). The highest put open interest unwinding was seen at a strike price of 17,500 (9094 open interest shed on November 22).

Highest total put open interest (80,894) stood at a strike price of 17,000. This is followed by a strike price of 17,400, which saw a total put option open interest of 69,030 contracts.

Following table shows the difference between call and put options at strike price near to max pain of 17600.

Strike Price  

Open Interest (Call option)  

Open Interest (Put option)  

Diff(Put – Call)  

17,300.00  

17363  

55516  

38153  

17,400.00  

41664  

69030  

27366  

17,500.00  

67369  

51620  

-15749  

17600  

95557  

30904  

-64653  

17,700.00  

99714  

30191  

-69523  

17,800.00  

131855  

47473  

-84382  

17,900.00  

92715  

16964  

-75751  

 The Nifty 50 put call ratio (PCR) closed at 0.50 compared to 0.68  in the previous trading session. A PCR above 1 is considered bullish while a PCR below 1 is considered bearish.

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Rising demand lifts refined soya oil futures

22/11/2021

New Delhi, Nov 22 (PTI) Refined soya oil prices on Monday rose by Rs 5.1 to Rs 1,240 per 10 kg in futures trade as speculators raised their bets.

On the National Commodity and Derivatives Exchange, refined soya oil for December delivery moved up by Rs 5.1, or 0.41 per cent, to Rs 1,240 per 10 kg in 46,730 lots.

Analysts said widening of positions by traders mainly helped refined soya oil prices to trade higher in futures market.PTI SRS SHW SHW

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Chart Busters: Top trading set-ups to watch out for Tuesday

Chart Busters: Top trading set-ups to watch out for Tuesday
by 5paisa Research Team 23/11/2021

On the first trading session of the week, the Indian market has witnessed a fierce sell-off as the benchmark index Nifty has tumbled by nearly 2%. The Nifty Midcap 100 and Nifty Smallcap 100 as underperformed benchmark indices. The overall advance-decline was tilted in the favour of the decliners. The Indian Volatility Index (VIX), a gauge for the market’s short-term expectation of volatility, surged by nearly 18% to end at a 17.52 level.

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

Elecon Engineering Co: The stock has formed a Hammer candlestick pattern on the last week of March 2020 and thereafter marked the sequence of higher tops and higher bottoms. From the low of Rs 16.20, the stock has gained over 1100% in just 87 weeks.

On Monday, the stock has marked a fresh 52-week high along with robust volume. Also, the stock has relatively outperformed the frontline indices on Monday. The Relative strength comparison with Nifty 500 and Nifty 50 has also marked higher tops and higher bottoms. As the stock is trading at a 52-week high, all the moving averages based on trade set-ups are showing a bullish strength in the stock. The stock is meeting Mark Minervini’s as well as Daryl Guppy’s multiple moving averages rules. These two set-ups are giving a clear uptrend picture in the stock.

Interestingly, the leading indicator, 14-period daily RSI has given a downward sloping trendline breakout, which is a bullish sign. The daily RSI is currently quoting at 72.70 and it is in rising mode. The daily MACD stays bullish as it is trading above its zero line and signal line. The MACD histogram is suggesting a pickup in upside momentum. 

Considering the robust technical structure of the stock we believe it is likely to continue its upward journey. On the downside, the 20-day EMA is likely to provide the cushion in case of any immediate decline. The 20-day EMA is currently placed at Rs 171.10 level.

Tata Chemicals: The stock has formed a Gravestone Doji pattern as of October 18, 2021, and thereafter witnessed a correction of over 24% in just 10 trading sessions. After registering the low of Rs 876.50, the stock has witnessed counter-trend consolidation for 14 trading sessions, which resulted in the formation of a Bearish Flag pattern.

On Monday, the stock has given a breakdown of a Bearish Flag pattern on the daily chart along with relatively higher volume. Additionally, the stock has formed a sizeable bearish candle on breakout day. Currently, the stock is trading below its short-term moving averages, i.e. 20-day EMA and 50-day EMA levels. These moving averages are edging lower. The leading indicator, RSI is currently quoting 40.30 and it is in falling mode. The fast stochastic is also trading below its slow stochastic line.
 

Technically, all the factors are currently aligned in support of the bears. Hence, we would advise the traders to be with a bearish bias. Any sustainable move below its 100-day EMA level will lead to a sharp downside move in the stock. The 100-day EMA is currently placed at Rs 871.05 level.

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Can we see another rally of Nifty midcap index in the coming days?

Can we see another rally of Nifty midcap index in the coming days?
by 5paisa Research Team 23/11/2021

The NIFTY Midcap 100 Index comprises 100 tradable stocks listed on the National Stock Exchange.

The NIFTY Midcap 100 Index captures the movement of the midcap segment of the market. The NIFTY Midcap 100 Index comprises 100 tradable stocks listed on the National Stock Exchange (NSE) and rescheduling of index constituents happens bi-annually every year. The index heavyweight is Tata Power comprising 3% of the index value. In March 2020, Nifty Midcap 100 made a low of 10750 and ever since, the index has been scaling newer highs and its record high stands at 33243. That’s a stupendous rally of about 209.23% in a matter of 21 months.

The index performance is unmatchable as it delivered returns of 46.89% YTD overperforming Nifty whose performance lies at 24.30% YTD. The three-month performance lies at 13.85% while Nifty delivered a mere 5.35%. Interestingly, the index on Tuesday is up by 1.07%. Thus, we see that the Midcap index has outperformed the Nifty in every aspect.

The index is respecting its long term trendline that started from December 2020 and has taken support multiple times. Currently, the index lies at 30619 and is down by about 8% from its all-time high. It lies near to its trendline and 100-DMA which is at 29400. The last trading session closed below its 20-DMA and 50-DMA. The RSI is at 41 which indicates weakness. Despite the persistent selling pressure in the overall market, the index hasn’t breached its short-term low of 29800. The index is forming a double bottom pattern at around 30000 as it looks to bottom out and gain momentum.

As it trades near its support, any strong bullish candle can mean that the reversal is on cards from hereon. Currently, the next hurdle for the index is to close above its 20 and 50-DMA along with the short-term resistance of 32000. Once done, we can witness some good momentum in the market participant favourite index.

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