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Has Nifty Metal still got the firepower or is it sell on the rise scenario?

Has Nifty Metal still got the firepower or is it sell on the rise scenario?
by 5paisa Research Team 22/11/2021

The NIFTY Metal Index comprises of maximum 15 stocks that are listed on the National Stock Exchange (NSE). 

The NIFTY Metal Index is designed to reflect the behaviour and performance of the Metal sector. The NIFTY Metal Index comprises of maximum 15 stocks that are listed on the National Stock Exchange (NSE). These stocks are APL Appollo Tubes Ltd, Coal India, Hindalco, Hindustan Copper, Hindustan Zinc, Jindal Steel, Jindal Steel and Power, NMDC, JSW Steel, Moil, Ratnamani Metals, Steel Authority of India, Tata Steel, Vedanta, and Welspun Corporation Limited. The index heavyweights are Tata Steel and Hindalco with 25% and 16% weightage respectively.

Since the Covid pandemic and China’s overdependence on metals, the metal sector has been the talk of the town. Some stocks of this sector have quadrupled their value since March 2020 lows. The YTD performance of Nifty Metal stands at 67.44% which is far better when compared with the 26.06% YTD performance of Nifty 50. However, the three-month performance of Nifty Metal is modest with mere gains of 2.13%. The three-month performance of Nifty 50, on a contrary, stands at 7.14%. Nifty Metal hit a high of 6312.20 on October 19. Since then, it is in correction mode falling about 13.6%. It is currently trading just 8% above its 200-DMA. We have also seen Nifty Metal consolidating for a few months when the other indices were scaling newer highs. So, now the question remains, “Has the Nifty Metal still got the firepower in it or is it a sell on the rise scenario?”

Currently, Nifty Metal is taking support at 5400-5350. The next support lies near the level of 5250. It is trading below its 20,50 and 100-DMA showing signs of some weakness. The 200-DMA continues to be the key moving average for the longer term and hence, it is likely to act as crucial support to the index. Thus, 5000-level is a crucial level for Nifty metal. RSI is weak at 39 and the Direction movement indicator shows no signs of reversal. It is forming a Doji candle near its support zone and it would be interesting to observe the follow-up candles in the coming days for some indication.

Any strong green candle can be a sign of reversal, till then traders must wait for some clarity.

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An overview of Gold Mutual Funds

An overview of Gold Mutual Funds
by 5paisa Research Team 22/11/2021

Currently, there are various gold investment options available for investors. In this article, we will have a look at gold funds.

Conventionally, Indians have an eternal love for the yellow metal. In India, every type of individual possesses some quantity of gold. Presently, there are various modes through which an individual can invest in gold such as gold mutual funds, Gold ETFs, Sovereign Gold Bonds (SGBs) and the last mode, also the most popular one i.e, physical gold. Nevertheless, physical gold has many drawbacks like storing gold safely in a safety vault or bank lockers, which adds extra cost, no flexibility in investment amount, purity issues, etc. Investors can avoid these drawbacks by investing in gold digitally.

In this article, we are going to take look at Gold Mutual Funds.

Gold mutual funds are open-ended funds. The value of the fund is directly dependent on the price of gold. Even a slight change in gold’s global market price can cause changes in the prices of gold and the funds investing in gold. This scheme mainly invests in Gold ETFs, which in turn, invests in physical gold of higher purity.

What should investors know before investing in gold funds?

Returns: Returns are quite low as compared to equity. These funds offer higher returns when the market is facing drawdown whereas higher returns when the market is high.

Dynamic portfolio allocation: Ideally, investors should choose to invest in gold but you should just allocate a little part of your portfolio towards gold as it is considered a hedge against inflation. Investors should change asset allocation according to the behaviour of the market. When the market is facing depression, then investors should allocate a higher proportion towards gold, and when the market recovers, then investors should switch to other asset classes, which will reap better returns.

Safer than owning physical gold: It is safer than physical gold as by investing in these funds, you don’t have to worry about the storage. You can invest small amounts as low as Rs 500, which allows even those individuals to invest, who cannot afford to purchase physical gold.

Taxation: Any capital gains arising on these funds vary depending upon the term of the investment. If any capital gains arising are less than three years, then it will be short-term capital gain, which will be taxed as per Income Tax slabs. If capital gains arising are more than three years, then it will be long-term capital gain, which will be taxed at the rate of 20%. 

Following table depicts the best performing gold mutual funds on the basis of three-year along with its AUM and Expense ratio:

Fund Name  

3-Year Return  

AUM  

Expense Ratio  

Kotak Gold Fund  

16.54%  

₹1,098.30  

0.18%  

SBI Gold Fund  

16.12%  

₹1,198.00  

0.10%  

Nippon India Gold Savings Fund  

15.63%  

₹1,437.10  

0.10%  

HDFC Gold Fund  

  

15.63%  

₹1,261.10  

0.15%  

Quantum Gold Saving Fund  

15.43%  

₹70  

0.06%  

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Moving against the tide: Trident

Moving against the tide: Trident
by 5paisa Research Team 22/11/2021

Interestingly, the stock is seen going against the tide on Monday, where it has outperformed the market hands down.

Trident Limited is a terry towel, yarn, and wheat straw-based paper manufacturer. It is a midcap company with a market cap of Rs 24,180. The company has witnessed an increase in its market share from 2.89% to 3.95% over the last 5 years. It has also reported higher than industry revenue growth over the same period. Certainly, the company means business and it is also evident from its stock price.

Its YTD performance stands at a whopping 379.29% while its three-month performance, alone, contributed 134.9%. As these figures tell us, the stock is extremely bullish in the medium to long term. Interestingly, the stock is seen going against the tide on Monday, where it has outperformed hands down. The promoters hold a significant stake in their company for about 73%. The FIIs hold just about 2% while the rest of the part is held by the retail segment. Recently, the company reported good results on a quarterly basis with double-digit growth. Strong positive commentary from the management boosted the investor’s confidence in the company.

Currently, the stock is trading at its fresh all-time high of Rs. 47.45. For a few days, the stock has been scaling newer to fresh highs. The stock has been witnessing above average volumes, and the volumes on Thursday (November 18) were the highest single-day volume recorded since October 14, which indicates increasing participation from the market participants. The stock trades well above its key moving averages showing extreme bullishness. The RSI, too, lies at 77 displaying strong strength. The +DMI has just crossed its -DMI indicating more room for the upside. Market participants are showing interest in this stock, as is evident from the above points.

Considering the performance Trident has shown, one can expect the stock to continue its momentum on the higher side. Traders can expect some good returns for the short to medium term as the technical analysis validate our point.

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Technical analysis: BSE Limited gives an ascending triangle breakout

Technical analysis: BSE Limited gives an ascending triangle breakout
by 5paisa Research Team 22/11/2021

BSE Limited on weekly charts gave ascending triangle breakout. Read on to find out more.

Post its listing in the last week of January 2017, BSE limited was in a bear run for almost three years. It was in the month of March 2020, when it made its all-time low of 256.45. In July 2020, the stock gave a long-term trendline breakout and also pulled back to take support on its long-term trendline in August 2020. This was followed by a good rally of higher tops and higher bottoms. During this rally, BSE Limited gave a lot of opportunities for market participants to make an entry.

Having said that, those who have missed all the previous opportunities to enter the stock can cheer now. This is because the stock is showing signs of one more such opportunity. On the weekly charts, the stock is depicting ascending triangle chart pattern. Moreover, the stock has already completed its pullback journey on lower timeframes such as 5-minutes and 15-minutes. However, is presently moving in a range-bound fashion between 1,575 to 1,640 levels on lower time frames.

An ascending triangle is a continuation bullish chart pattern. It is formed when the price moves in a somewhat horizontal line by connecting with the swing highs, and an ascending trendline connecting the swing lows. These two lines form a triangle like pattern, which is rising in nature. Breakout from this chart pattern, suggests the continuation of the bullish move.

The Relative Strength Index (RSI) witnessed a divergence when compared with the price action. Moreover, it is presently trading in an overbought region. The RSI on weekly charts is presently trading at 77.26 which is above its 9-Day Exponential Moving Average (EMA) of 74.44. MACD (Moving Average Convergence Divergence) is still trading above its signal line in positive territory. Bollinger Bands, on the other hand, is signalling a minor pullback that already has been initiated. To give you an idea, on weekly basis, the price is still trading above the upper band of the Bollinger band.

At the time of writing the price was trading at 1,543.65.

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Paytm gets big bear hug again. What are brokerages saying?

by 5paisa Research Team 22/11/2021

Paytm chief Vijay Shekhar Sharma might have envisioned a dream debut at the bourses, as his digital payments and financial services company listed on India’s stock exchanges on Friday. 

But what followed was a horrific anti-climax, at least from Sharma’s and Paytm’s standpoint. The stock plunged 27% on Friday from its issue price of Rs 2,150 per share, and closed the first day of trade at Rs 1,564 apiece.

In the wake, it wiped Rs 35,000 crore off investor wealth in the space of a few hours. 

Paytm's big bust?

Paytm had mopped up Rs 18,300 crore in India’s biggest initial public offering (IPO) till date. But the bears, it appears, are not yet done hammering the stock down. 

On Monday, its second day of trading, the bludgeoned scrip fell another 18.7% in intra-day trading to Rs 1,271 apiece before paring the losses to climb above Rs 1,300.

What went so horribly wrong?

If news reports and the general commentary around the listing are anything to go by, Paytm’s was a classic case of valuation over-reach. Essentially, Sharma and Paytm wanted a blockbuster listing that would surpass that of the state-owned Coal India Ltd, which was India’s single-biggest IPO earlier. 

But while Paytm and its bankers, the likes of Morgan Stanley and Goldman Sachs, talked up the IPO and sought to build a sense of euphoria around it, brokerages and analysts were not convinced about a loss-making company, which is unlikely to turn the corner for several more years, commanding such steep premiums. 

Macquarie

International brokerage house Macquarie, for instance, gave an underperform rating, and said that Paytm’s parent One97 was a cash guzzler, and lacked focus. Macquarie gave its investors a target price of Rs 1,200 a share. 

“Dabbling in multiple business lines inhibits Paytm from being a category leader in any business except wallets, which are becoming inconsequential with the meteoric rise in UPI payments. Competition and regulation will drive down unit economics and/or growth prospects in the medium term in our view,” Macquarie said in a note.

“Therefore, [we] question its ability to achieve scale with profitability. We value the stock using a 0.5 times PSG multiple on December 2023 annualised sales to arrive at our target price of Rs 1,200, implying 44% downside. The key game changer could be an ability to monetise UPI, which could completely swing the investment case. A 10bp fee on UPI provides a fair value of Rs 2,900-3,300 based on PSG/DCF,” it added.

Prabhudas Lilladher

Macquarie isn’t the only brokerage to talk the newly listed stock down. “Paytm share prices will remain subdued in the short to medium term as IPO investors will try to exit the stock at every possible rise, and new investors won't touch it till sentiment changes,” said Piyush Nagda, head of investment product at Prabhudas Lilladher.

“It's difficult to give a fair value for any loss-making company, but at around Rs 1,250-1,300 levels, Paytm could witness some buying interest from institutions and family offices in their long-only portfolios as an allocation towards digital and fintech theme in a fast-growing market like India.”

Ansid Capital

“I would not even be comfortable at less than 50% discount to the current price because I do not see a path to Paytm's market domination and the kind of dreams that are being propelled,” Anurag Singh, managing partner at Ansid Capital, told ET Now. “History tells us that at 45 times sales, it is very hard to make money from this point."

Corporate governance issues?

A report in The Economic Times said that some analysts had raised questions on a host of resignations at Paytm, leading up to the IPO. 

“Paytm does not have a single mature segment (with leadership having a stable revenue model),” the report cited a leading wealth management firm, as saying in a note to clients.

“Vijay Shekhar Sharma has seeded too many business segments chasing the chimera of the walled garden without building a capable team to scale up anyone into a stable revenue model," the report added. 

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Bharti Airtel surges after announcing tariff rate hike

Bharti Airtel surges after announcing tariff rate hike
by 5paisa Research Team 22/11/2021

The revised tariffs shall enable the company to provide a reasonable return on capital, and enable it to procure investments required in networks and spectrum.

Bharti Airtel Ltd, an Indian multinational telecom service provider, announced a revision in its prepaid tariffs today. The revised tariffs, which shall come into effect from 26 November, would provide customers with additional benefits, albeit with a price increase.

While providing an explanation for this increase, the company said that it has always maintained its stance that the mobile Average Revenue Per User (ARPU) needs to be at Rs 200 and ultimately at Rs 300. The reason is that at this ARPU, the company can generate a reasonable return on capital, and subsequently lead to a financially healthy business model.

Moreover, the company believes that this level of ARPU will enable the substantial investments required in networks and spectrum. Most importantly, it will provide the company with the elbow room to roll out 5G in India.

Earlier this month, the company had announced a collaboration with Oracle to cater to the rising demand for cloud services in India. As a part of this collaboration, Airtel announced to offer Oracle Cloud solution to its customers.

Let’s take a look at the company’s performance in Q2FY22:

In the recent quarter Q2FY22, on a consolidated basis, Bharti Airtel’s net revenue went up by 13% YoY to Rs 28,326.4 crore. The PBIDT (ex OI) grew 24.76% YoY to Rs 13,810.5 crore, while its corresponding margin expanded by 458 bps to 48.75%. The net profit came in at Rs 1399.3 crore, as against a net loss of Rs 367.6 crore in the corresponding quarter last year. The PAT margin during the quarter stood at 4.94%. 

Reacting to the revised tariffs announcement, at 1.16 pm, the share price of Bharti Airtel Ltd stood at Rs 735.65, which was an increase of 3% from the previous week’s closing price of Rs 714.2 on BSE.

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