Explained: SEBI’s new margin rules and what all the fuss is
The new peak margin rules unveiled by capital markets regulator the Securities and Exchange Board of India (SEBI) have caused much consternation among not just retail investors but also stock brokers, several of whom have voiced their concerns publicly. Even as these new rules kicked in on Wednesday, investors took to Twitter in anger, targeting the market regulator and alleging that it was against their interests.
So, what exactly is margin?
Margin is essentially a facility that traders use to buy shares they cannot yet afford. They basically pay a part of the money to buy those shares with a marginal amount of the total value. The remainder of the money has to be paid in two days’ time.
What do these new SEBI rules say?
The new rules essentially apply to the futures and options (F&O) segment of the stock market and to intraday traders. They stipulate that the traders punting on the F&O segment or doing intraday trades will need to have 100% of the margin money in the linked bank accounts, to be able to trade—buy or sell shares—as against a minimum 75% requirement till the end of August.
The margin rules apply both to buying and selling of shares you may hold as a trader. This will require both buyers and sellers to keep extra cash aside or pledge shares of equivalent amounts, for their trades to go through.
The actual value of the 100% margin requirement though is not the same for every script. It is based on what is called the ‘value at risk’ (VaR) margin.
The VaR is different for shares of bigger companies, as compared to those for smaller ones or penny stocks, for which it is significantly higher.
Also, the ‘Buy Today-Sell Tomorrow’ (BTST) facility has been closed. This means you can only sell a share after you have received its delivery, two days after closing the trade, not the next day, even before you have received it in your demat account. Moreover, for the cash segment, funds from a sale cannot be used the same day, but only on the next day.
But were these SEBI rules not introduced a year back?
Yes, these rules around peak margins were first introduced a year back. Since then, SEBI has been ratcheting up the margin thresholds in a phased manner. It had first mandated traders to keep 25% of the margin money between December 2020 and February 2021. This was upped to 50% between March and May this year, and then to 75% from June to August. Now, the limit has been raised to 100%. So, these rules have not hit the market out of the blue and were expected to be enforced.
Then, what is the hullabaloo over the new SEBI rules really all about?
The new rules will require traders and brokers to keep more margin money aside to punt on intraday and F&O trades they consider lucrative. Moreover, if they fall below the stipulated thresholds during the trading day, they will be penalized. These changes have them up in arms.
What is SEBI’s rationale behind the move?
Simply put, SEBI wants to lower the leverage being taken by traders while betting on shares, thereby lowering their risk.
Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and Kisan Credit Card (KCC) linkage
In this article we would explain all about Pradhan Mantri Kisan Samman Nidhi or PM-KISAN scheme and Kisan Credit Card or KCC.
What is Kisan Credit Card ?
To provide Indian farmers with timely monetary assitance and credit support the government has launched multiple schemes. One such scheme is the Kisan Credit Card (KCC) scheme. Kisan Credit Card is a central government scheme which offers farmers with timely credit access. The scheme created by National Bank for Agriculture and Rural Development (NABARD) in 1998 provides farmers with short-term formal credit. It was created by the National Bank for Agriculture and Rural Development (NABARD).
What is Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme?
Pradhan Mantri Kisan Samman Nidhi or PM-KISAN scheme under which a financial benefit of Rs. 6000/- per year is provided to the eligible beneficiary farmer families, payable in three equal 4-monthly installments of Rs.2000/- each. The fund is transferred directly to the bank accounts of the beneficiaries. In this scheme, Samman Rashi of over Rs. 1.15 lakh crores has been transferred to farmer families so far.
Kisan Credit Card has now been linked to the Pradhan Mantri Kisan Samman Nidhi Yojana
Now the Kisan Credit Card scheme has been linked to the Pradhan Mantri Kisan Samman Nidhi Yojana (PM Kisan). Due to this linkage now benificiaries can seek a loan from KCC for up to Rs 3 lakh at 4 % rate of interest. The KCC scheme was introduced to ensure that the credit requirement for farmers in the agriculture, fisheries, and animal husbandry sector was being met. This was done by helping them avail short-term loans and provide them with a credit limit to purchase equipment and for their other expenses as well.
How does it benefit farmers?
Under this scheme farmers avail loan at significantly lower interest compared that offered by banks. The interest rate for KCC starts as low as 2% and averages around 4% and farmers can repay loans depending on the harvesting period of their crop for which the loan was given.
Farmers can also apply for Kisan Credit Card through the State Bank of India. SBI started this online service to facilitate KCC Review.
5paisa share market strategy for next week | September 6 - 10
Indian stocks had a stellar run last week when Sensex and Nifty rose over 3.5% to scale new highs. Nifty50 recorded its fastest 1000 points upside ever in just 19 trading sessions underlining the exuberance. Most market experts believe that on derivatives front market is not yet overheated. Broader market is likely consolidate with positive momentum bias helped by domestic economic uptrend and as vaccination drive picks up. Ample liquidity in the Indian stock market will also contribute as a driving force.
Sensex and Nifty at new highs
Indian stock markets touched new highs on Friday, with the 30-stock benchmark BSE Sensex crossing 58,000 for the first time as the investor euphoria continues unabated. The new milestone comes barely three days after the Sensex climbed past 57,000 on Tuesday, marking the shortest period for the Sensex to add 1,000 points. The Sensex hit a high of 58,115.69 in morning trade on Friday and ended at 58, 129.95. The National Stock Exchange’s Nifty 50 also created a new record, going past 17,300 for the first time. Nifty ended at 17,323.60.
The Sensex has now soared 126% since crashing to 25,638.90 in March 2020 due to concerns related to the Covid-19 pandemic. The non-stop rally has prompted many analysts to sound a note of caution and warn about a possible correction.
In the current year so far, funds raised through IPOs have risen about 2.2 times over previous year. As of this week 11 upcoming IPOs are waiting to hit the market to raise over Rs. 11,600 crore. While, about 40 more companies are waiting SEBI approval to raise about Rs. 89,000 crores. Chinese regulatory crackdown in start-up and tech space has also facilitated inflows to Indian capital market, which is contributing to this sustained uptrend in Indian equities.
Indian stock markets give thumbs up to GDP data
Indian stock markets have another reason – health macroeconomic numbers – to stay bullish. India’s gross domestic product (GDP) grew 20.1% in the April-June quarter of 2021-22 from the low base of last year when the country was under a strict lockdown for almost two months to control the Covid-19 pandemic. The GDP had contracted 24.4% in the first quarter of 2020-21, the deepest quarterly contraction India ever recorded.
The GDP print for the first quarter is on a par with estimates in a Reuters poll of 41 economists, which had projected a 20% expansion. But it was a tad below the Reserve Bank of India’s projection of 21.4%.
According to data released by the National Statistical Office on Tuesday, the real gross value added for Q1 rose 18.8%.
Not only the markets but other macros also showed signs of recovery with the Q1GDP numbers rising in terms of personal consumption, exports and capex albeit on a low base, GST collections surpassing Rs. 1 lakh crore for the second consecutive month and manufacturing PMI data staying in expansionary territory from July.
Midcap, Small cap gains may continue, Bank Nifty in focus
In the broader markets, the BSE Midcap index was 0.44% higher while the BSE SmallCap index gained 0.68%. Among sectoral indexes, the BSE Auto Index was up 1.4% while BSE Consumer Durables gained 1.2%. The FMCG index was flat, weighed down by losses in Hindustan Unilever share and Nestle share.
Comparatively Bank Nifty underperformed last week. However, market experts believe Bank Nifty index is likely to see some upside in the short-term. Technically our expert believes that bank nifty index needs to close above 37000 then 37,450 and 37,950 levels will become open. The Bank Nifty index will be in focus for rest of this month.
Exclusive 5paisa stock strategies for September
Every Saturday at 11 am 5paisa YouTube channel brings you a live webinar with our stock market expert Dhaval Vyas. He answers your stock queries during the live session. You can watch the live session Next Week's Trading Strategy with 5paisa Expert Dhaval Vyas here https://www.youtube.com/watch?v=bKOm7azT69Q
While he has answered over 60 stock strategies, here we will discuss some of them. You may watch the video to find all the strategies he discussed and plan your weekly strategy better.
Many investors have asked us about trading strategy SBI share for the short-term. SBI is India’s largest bank in terms of asset size and bank network and has been a favourite buy for investors in the recent past. In the long-term it remains a buy for sustained wealth creation.
Technical strategy in short term for SBI share
If you look at the short-term, SBI stock faces resistance at around Rs438/440 levels and if the break those levels the next targets are Rs 453 and Rs 461 respectively. The PSU banking stocks see selective buying and one need to be careful while trading.
CarTrade share, which made a weak stock market debut two weeks ago is one of the most discussed shares in the investor community. We have received many queries regarding the same on whether to sell or hold the stock. CarTrade, founded in 2009, is a platform for potential buyers and sellers to register and buy and sell used cars as well as new cars. The founder Vinay Sanghi, is a veteran of the secondary car market, having spent a long time with Mahindra First Choice. In India, the used car market is estimated at $27 billion (or over Rs.200,000 crore) and growing 15% annually.
The CarTrade platform runs 2 sub-portals. CarTrade.com caters to the consumers in buying and selling used and new cars. The B2B CarTradeExchange.com helps car dealers source leads and fulfil client requirements using the ecommerce channel more effectively.
Technical strategy in short-term for CarTrade share
As per our expert the selling pressure on the CarTrade share continues and is unlikely to see any big buying soon. Technically unless CarTrade stock crosses Rs 1500 levels we would not see any significant support. Also, there are other fundamental reasons at play.
IRFC share listed on bourses in January 2021 and has since then has moved mostly sidewise and missed the rally many other similar stocks have achieved. There are many investor queries on whether to buy sell or hold.
Indian Railway Finance Corp. (IRFC), registered with RBI as a systemically important NBFC (ND-IFC), is the dedicated market borrowing arm of the Indian Railways (IR). Its primary business is to finance the acquisition of rolling stock, leasing of railway infrastructure assets & national projects of the Government of India and lending to other entities under the Ministry of Railways.
Technical strategy in short-term for IRFC share
The IRFC share has shown sidewise movement for quite some time, we are likely to see similar behaviour in the stocks movement as per technicals. Our expert sees good support at Rs 23 levels and there are high chances once this level is crossed it could reach Rs 24/25 targets. One can sell at Rs 25-27 levels. There is strong resistance at Rs 27. This is not a momentum stock from trading point of view.
HDFC Life Share
HDFC Life Share was in news last week due to its acquisition of Exide Life Insurance. HDFC Life Insurance announced the purchase of the life insurance unit of Exide Industries for a consideration of Rs.6,687 crore or nearly $916 million. The consolidation in the life insurance sector has just started picking up as the large private players look to consolidate their market share through rapid inorganic growth. The idea is to tap an ever-growing insurance market. Life insurance penetration in India is very low at 2.82%.
Strategy for HDFC Life stock
HDFC Life stock is a long-term wealth creator. There may be some immediate selling pressure due to the Exide Life but, but one must avoid short-term view in this stock and aim for at least medium-term investment. Our expert sees Rs 870-890 levels for the stock in 1-2 year period. The stock is currently trading at Rs 734. Must hold stock. Our expert also recommends investment in ICICI Prudential Life share in the Rs 650 - Rs 670 range with a 1-2 year target of Rs 930 levels.
IOC share short-term technical strategy
Many investors have asked about IOC share for short-term trading. Our expert believes energy stocks will be in focus this week. For IOC the short-term structure looks good, and one may invest or hold with expectation of first target of Rs 116 and second target of Rs 119. The stop loss should be placed at Rs 111.
Stock Market Holiday on Friday
The trading week will be truncated as markets will remain closed on Friday on the occasion of ‘Ganesh Chaturthi’ festival. Among key data - industrial production data will be released on Friday.
Best share to buy 2021: Power Mech Projects
Power Mech is an integrated infrastructure services company incorporated in 1999 that provides comprehensive erection, testing and commissioning of BTG, BoP, industrial units, civil works and operation and maintenance (O&M) services. It is the largest O&M service provider to po wer plants in India, with 110 ongoing projects. In the civil works domain, Power Mech undertakes various civil, structural, and construction works. The company has diversified into other sectors like Railway works, electrical distribution works, Oil & Gas piping work, mechanical works at steel & other non-power sector as well. Recently, Power Mech won a large coal mining MDO project for 25 years. Sajja Kishore Babu is the Chairman and MD.
Power Mech Projects stock has a market capitalisation of USD 170 million and is considered as a capital goods company. The promoter shareholding is 63.7% without any pledging. Foreign Institutional Investor (FII)s hold 2.9%, while Domestic Institutional Investors (DII)s hold 10.2% in the company. The company has given over 96% return in the last one-year period. The earnings per share (EPS) has grown 26.6% on compound annual growth rate (CAGR) basis, while the same is 9.5% when calculated rom a 5 years perspective.
Why to buy Power Mech Projects stock?
Power Mech Projects is well placed to deliver 13% revenue and 14% PAT CAGR over FY20-23ii, backed by the current Rs70.5bn order book (3.2x book-to-bill) and improved execution seen in the past few quarters. Diversification into new sectors (metals, railways, electricals, material handling) is paying off in terms of order wins, further aided by technology partnerships. While margins will moderate, better execution and WC focus will support FCF and deleveraging going forward. At 6.4x FY23 PER, the stock should see rerating on strong delivery.
Recommendation: Power Mech Projects (Current Market Price – Rs 845, 1 year target - Rs 1063, upside potential -26%)
Power Mech’s solid order book to boost growth
Power Mech Projects ended 1QFY22 with a core order book (OB) of Rs70.5bn – 3.2x trailing 12mth revenue. Given execution period of 2.5-3years, this provides strong growth visibility for FY22-23. Company targets ~Rs40-45bn worth of further order wins from metals, railways, electrical & road sectors which will grant added visibility. Key highlights include Company’s first public-sector O&M contract win, from Singareni Collieries, and strong traction in the non-power sector (metals, railways, electricals, O&G pipelines, material handling, etc).
Power Mech sees good revenue and profit growth expected
While Covid-19 took a toll on FY21 revenue, quarterly revenue of ~Rs7bn seen in 4Q21/1Q22 lends comfort on execution capabilities and supports our FY20-23 revenue Cagr expectation of 13%. We expect consolidated Ebitda margin to be lower than historical levels, as civil works from new segments contribute a larger share to revenue. Overall, we estimate Ebitda Cagr of 10% over FY20-23. We have not built-in any contribution from the recently-won, Rs93bn, 25-year mining MDO contract from CCL, as initial years would entail spends on development.
Power Mech's execution likely to better last six months performance
With easing of Covid19 related restrictions, Power Mech’s execution sharply improved to Rs7.55bn (+27% YoY) in 4QFY21. The healthy momentum sustained in 1QFY22, with revenues of Rs6.23bn (+126% YoY). We are building in 36.7% YoY revenue growth (on low base) to Rs25.8bn in FY22, followed by Rs31.3bn (+21.6% YoY) in FY23ii. This builds in healthy execution of the expanded order book. Power Mech has established necessary infrastructure as well as management bandwidth to execute Rs6-8bn worth of projects on quarterly basis. Power Mech has also established credentials and pre-qualifications to execute large projects without partnering with other contractors. This should aid future project wins as well as improve margins to some extent.
Power Mech's mine development contract with Coal India to help revenues after 2-3 years
Power Mech Projects has won the 25-year mine development & operator (MDO) contract for Kotre Basantpur Panchmo OCP from Central Coalfields (a Coal India subsidiary), worth Rs92.94bn. The project has been awarded to a consortium in which Power Mech will have 74% share while AMR India will have the balance 26% share. The SPV (KBP Mining Pvt) will have material handling expertise of Power Mech and greenfield project development skills of AMR India.
The MDO contract comprises of mine infrastructure development, removal of overburden, extraction of coking coal, processing, crushing and transportation of coal to CCL’s washery along with carrying out R&R and other incidental activities. A total of 105mt of coal would be extracted over the 25 years, with peak annual output of 5mt along with a take-or-pay contract. Total overburden removal during the project phase is likely to be over 539MBCM.
Of the 1,100ha of land requirement, 840ha has already been acquired, with the balance likely to be acquired soon. Management expects to receive all approvals and commence ground activity in 6- 8 months. The 25-year concession period includes 2 years of mine development, with an option of extending it by another 10 years. Management estimates total capex of Rs2.8bn over the next two years and will be funded through debt and equity at the SPV level. Equity contribution by the SPV is likely to be ~Rs800-850m, of which Power Mech will contribute 74%.
At peak, it is expected to add annual revenue of Rs4bn, with a healthy Ebitda margin of ~18-19%. Overall, we see gradual deleveraging Power Mech’s net debt stands at Rs3.3bn as at end-1QFY22. While healthy cash generation should support some deleveraging, incremental investments in the coal MDO project over the next two years (development phase of the mine) would limit overall debt reduction. We expect net debt to witness marginal reduction in FY22 on YoY basis, before rising in FY23ii, to fund coal MDO capex.
Nifty PE ratio below 5-year average even as index hits new highs
Nifty price-to-earnings (PE) ratio was at 26.54 multiples even as the Nifty 50 share index hit a new high of 17,378 on Monday, September 6, 2021. The Nifty 50 helped by positive Asian sentiments and boost in Reliance Industries share, the key index contributor.
Indian stocks markets have been on a stellar track helped by ample global liquidity, easing lockdown regulations on the back of accelerated vaccination drive and improved domestic economic growth. Weak US jobs data also seemed to have raised hopes that US government will continue with its liberal policy and economic support.
Nifty PE ratio is still below 5 year average
Nifty PE ratio at 26.54 is lower than the 5-year average of 27.43. The Nifty PE ratio is also lower than the 1-year average of 33.55 and 2-year average of 29.88. Nifty PE ratio is a key indicator to read while understanding the valuation of Indian stock market. PE is short for the ratio of a company's share price to its per-share earnings. To calculate the P/E, you simply take the current stock price of a company and divide by its earnings per share (EPS). P/E Ratio = Market Value per Share/Earnings per Share (EPS).
Nifty PE ratio moved between a high of 42 and low of 25.21 during the past one year. While on a 5 year basis, Nifty 50 PE ratio moved between a high of 42 and low of 17.15, data from Trendlyne showed.
Does Nifty 50 PE ratio indicate just valuation?
Many market watchers use the Nifty PE ratio to decide on whether the market is overvalued, cheaper or just right. In that sense we have seen a high Nifty PE ratio of 42 in February 2021 when the index reached 15000 levels for the first time. Since then Indian companies have seen good growth on earnings and we see the Nifty PE ratio more reasonable around 26 multiples. There is also a methodology change in the calculation. Now Nifty PE ratio is calculated based on consolidated earnings of companies from standalone EPS earlier.
At this stage the market watchers are divided on whether Nifty PE ratio indicates just valuation. Many believe, accelerated economic recovery and ample global liquidity will help both markets and companies to see positive upside. The other camp believe, from now onwards there will be moderate returns from Indian markets and in case of any global risk off event liquidity will dry up.
Investors should not consider Nifty PE ratio as the only indicator to calculate market valuation but rather look at multiple factors and ratios while deciding on Nifty 50 valuation.
Mukesh Ambani enters $100-bn club as RIL shares hit new high
Mukesh Ambani, India’s richest man and chairman of Reliance Industries Ltd (RIL), has entered the coveted club of people with a net worth of more than $100 billion after the energy-to-telecom conglomerate’s shares hit a new high.
RIL shares touched a high of Rs 2,479.85 apiece on the BSE on Monday. The shares later cooled off a tad on profit-taking to Rs 2,427.30 apiece, giving the company a market valuation of Rs 15.39 trillion ($210 billion).
Overall, his family’s 49.14% stake in Reliance Industries Ltd (RIL) is now worth $103 billion.
RIL is India’s most valuable company, ahead of IT major Tata Consultancy Services. RIL is, in fact, miles ahead of HDFC Bank, Infosys and Hindustan Unilever Ltd, which make up the top five of India’s most valuable listed companies. Insurance behemoth, the Life Insurance Corp of India, arguably the country’s most valuable firm, is not yet listed.
RIL shares had slumped by a third in March 2020, touching a low of Rs 875 apiece, in line with a stock market crashed after the Covid-19 pandemic engulfed the world. Since then, however, the shares have soared almost 180%, outpacing the benchmark BSE Sensex’s 125% gain.
Ambani is not only the richest Indian, but also Asia’s wealthiest person. The next Asian on the list is also an Indian, Gautam Adani of the Adani Group, who is ranked a few places below Ambani with an estimated net worth of $70.7 billion.
The $100-bn club
Ambani may have also vaulted into the top 10 of the world’s wealthiest people. Amazon chief Jeff Bezos, who is worth $201 billion, tops the list, according to Forbes magazine.
Bezos is followed by Tesla and SpaceX boss Elon Musk, Bernard Arnault and his family that control the luxury brand Louis Vetton, Facebook’s Mark Zuckerberg and Microsoft founder Bill Gates.
Ambani’s Reliance has businesses spanning dozens of verticals and domains from oil and gas, to telecom and retail.
Even as the Saudi Arabian energy giant Aramco is reportedly looking to pick up a significant stake in his refining business for as much as $25 billion, Ambani has also tied up with top Internet companies like Google and Facebook, which have bought significant stakes into its digital arm Jio Platforms.
On top of that, Ambani now says he wants to invest $10 billion into India’s renewable energy sector, which has seen significant growth in the last six years, since the Narendra Modi government began pushing solar power auctions aggressively.
If Ambani’s RIL does become a significant player in India’s green energy space, it will open up a new sector for a conglomerate that began life in 1965-66 as Reliance Textile Engineers Pvt Ltd, a synthetic fabrics mill.
In later years, the company would expand its business into sectors such as refining and fuel retailing, oil and gas exploration, telecom, retail, media and entertainment, fashion and e-commerce.