Countdown: Richard Harris On Global Markets & More

Good afternoon, thanks for tuning in. You're watching Countdown on Bloomberg Quint Live, India's first digital live-streaming business news service, and that's me, Lucha de Souza. These are the top headlines we're tracking at this hour: Indian equity benchmarks hold on to gains; Nifty and Sensex trade a third of a percent higher. MSCI adds HDFC Life Insurance to its global standard index and removes Union Bank of India from global small-cap index. Tata Steel is the top Nifty loser today after the company's quarterly profit comes in at a two-year low. What's also weighing is the delay in selling its Southeast Asian business. Infosys Technologies on the other hand is the top Nifty gainer after the management sticks to the 14 to 16 percent revenue guidance target. Ultratech posts a 100 percent jump in profit, beating street estimates. Good afternoon. The arena with some respite coming in, I think for majority of this session now we've sustained the gains. The early morning gains being held on to. You did see a brief period post opening where the markets actually dipped and fell down into the red, but post that you've seen a good recovery, but it's been pretty volatile as you can see, lots of peaks and troughs through the day. And now we're back up towards the highs of the day, about half a percent higher for the Nifty 50.

Taking a quick look at India VIX before we move on to the Nifty Bank. In terms of the index, India VIX has actually come off today, about three to three and a half percent lower. Global snapshot: remember Asia today was positive as well, Europe and US yesterday were positive. Europe should come up today. Right now on your screen, you could see the CAC and the DAX; they're trading more mixed, but it's more positive. So third of a percent higher for DAX, CAC trading higher by about three quarters, and Footsie absolutely flat. Coming to the internals of the index itself, in terms of the gainers and the losers, the heatmap will come up on your screens. Not many more gainers this afternoon. It's Neotech for one, that big 5 and a half percent move on the counter. You've seen them day two move on the upside on the revenue guidance of 14 to 16 percent. Tata Motors is doing well, holding that up about two to two and a half percent. Hindalco is up 1.9 percent. Other IT stocks, in fact TCS, also follow suit. And then you've got a heavyweight like HDFC Bank up about one and a half percent.

Yes Bank today continues to gain some ground, but they're not at those levels of 90 that it was in early morning trade, but just somewhere around there. Amongst the losers, Tata Steel is down about five percent. Back numbers? Supply is down 3.7%. UPL, Axis Bank, and the same Bank are losing out as well. I just want to see Ultratech Cement and where that counter is trading. That could come up on your screen. They just reported their numbers just a few moments ago. Standalone profits at 1199, EBITDA was also much higher than street expectation at 2515 in terms of standalone EBITDA. But the stock actually came off 1.6 percent lower for Ultratech after staying stable through the trading session.

In terms of the mid caps and small caps, the MR function will show you exactly what's been moving up and down in today's session. So from the Nifty Midcap 100, while the larger index is doing well, the mid caps not so much. So down a quarter of a percent for the Nifty Midcap 100 index. The losers stacking up: the biggest losers are Reliance Infrastructure down about 11 percent, following that is Cummins India, Dewan Housing Finance, and some of the smaller names, Sterlite Tech is also down about 4 percent. Gainers: Dish TV takes a breather today, up 2.5 percent, PVR, Punjab National Bank, and Escorts up about 2 to 1 percent in this session. So all in all, still a large-cap driven rally in today's session, mid caps not contributing all that much.

But what's been happening in the futures and options space considering today's weekly options expiry? Niraj will highlight that for us. So, as you rightly highlighted, the gains are led by large caps and it looks like it is a short covering bounce because Nifty is now almost at the high point of the day, 10,918, where it's trading. No major build-up when it comes to the VIX. Futures premium intact at about 23 to 24 points for the Bank Nifty, which did witness some bit of fresh shorting in yesterday's trade. We have seen open interest surging by about 6 percent for this. Let's see by the end of the day. Remember, these could be intraday positions also which tend to get unwound towards the end of the session on weekly options expiry days. If you look at the options data, the maximum open interest in the call side is at 11,000, on the put side it is at 10,800. So that was a wide range that we were looking at. But remember, the combined premium on the 10,850 which was the at-the-money strike when we started the day today was suggesting a range between 10,762 to about 10,940 on the upside. So probably now on the upside we can watch out for the mark of 10,950 which will be in focus. Let's see where the closing comes about.

Very quickly on the stock futures side: Infosys Technologies, which is your table gainer in the Nifty, on the technical side some positives as the stock has crossed its 150-day moving average. On the futures side, we are seeing fresh long positions coming about, and even on the cash side the move has been led by higher volumes. As you can see on your screen, the white line is projecting today's volumes versus the average volumes that we've seen in the last many sessions. On the other side, you've also got Aurobindo Pharma which has reacted quite positively to the numbers which did beat street estimates. The operating performance was good. This one too, by the way, is trading very close to its 50-day moving average, and on the cash side the volumes have been higher. The stock has been trading with good gains of about 7 percent. In fact, it did touch a 52-week low on Monday and bounced back from there, and today on back of a good set of numbers we are witnessing fresh long positions here. And Cummins is the stock in focus after cutting the guidance for both export as well as domestic business. The stock has seen a big, big fall. Remember, the guidance cut came in the conference call today. The stock has fallen on quite high volumes. It's also down by the way 30 percent on a year-to-date basis, and the futures indicating a lot of short positions being taken even at current levels as the stock touches its 52-week low.

Alright, that's a quick wrap on what's been happening to individual stocks within the derivatives space. Let's take a conversation slightly more global and get a perspective from Richard Harris, Chief Executive at Shelter Investment Manager, who's joining us on the show right now. Richard, thanks very much for taking the time. You know, have you been making sense of all the various moving parts globally in terms of all the news flow that we've been witnessing? What's been happening with regards to the trade tensions, currency manipulation, and the effect of all of that on emerging markets?

Turning though to the question on everybody's mind: with the PBOC doing what it is doing, and today's move of pricing the midpoint, your reference rate, at 7.039, which is the lowest since 2008, how, if this process continues or doesn't reverse, how materially negative could it be for sentiment around the Asia-Pacific region, if not a larger region?

Okay, by having said that, irrespective of whether the labeling is right or not, if the yuan pricing is allowed to drift above or below the seven mark, how much do you think it will have an impact on sentiment? Because then the world probably believes that the spat, slash war, is not coming to an end any time soon.

Hi Richard, good afternoon to you from India. Well, the impact has definitely been felt for the emerging market currencies after the Chinese yuan crossed that important threshold of seven, which has also led to a lot of selling into equities in a couple of the markets. What I want to understand is, are you witnessing a trend where money is now flowing into safe haven assets like gold, because the gold prices have been inching higher?

Richard, the important question then is: do you see this trend continuing now for the remainder of this calendar year, that is, depreciation of yuan and money now flowing into safe haven assets like gold?

So one last question from my side. You know, we're in an interest rate regime where most of the central banks have been talking about being slightly more dovish and bringing down interest rates. The Indian central bank cut the rates by about 35 basis points yesterday. The other central banks have been following this path of easing. Do you feel that this is somewhat in a way also supporting global equities, and that could probably mean the backlash that we're seeing on the back of slower economic data could start to turn a little bit from now?

Okay, but should we leave it at that? Thanks much for taking the time out and being with us today. Your thoughts, appreciate your time.

Well, that's the global view on the show. Now, Ultratech numbers came a while back. Standalone numbers are better than estimates, simply because one, the EBITDA per ton up about 52%, much much better than what the estimates were. I think the estimates were about 1206 and the number is at about 1474. So that's part one. Margin stood up 26% versus 19%. But somehow the stock has taken a beating, I would reckon maybe in part due to revenue numbers just about okay. Well, 979 was the expectation, 9794, so they're about 15% growth, but the stock is taking a bit of a beating. Remember yesterday a couple of experts had come and said that somehow this cement cycle doesn't quite look as strong as some of the other companies are saying. But I can't quite fathom, really, something that I'm missing, because the numbers, at least the standalone numbers on all counts, seem to be better than what the estimates were, and it's not that the stock really went into these numbers on an extremely strong parameter. So pretty much, I think Nifty is always showing a volume figure of 19.7; they've reported a volume of about 17.8, which is pretty much a weak demand environment, everybody's been talking. And higher operating performance is owing to the prices because it's a pan-India player, realizations will definitely be higher, back to a good price, and also cost efficiencies seen, pet coke prices were lower and you're on your basis. So operationally good, but miss on volume I guess. Well, maybe that's the reason, I mean because you probably take these volume growth numbers as an indication of how the demand is, and maybe the quarters ahead could also throw in such numbers only. That's probably likely. The verdict on very high volumes, I might add, four and a half percent down now for Ultratech Cement. So quite different from what some of the mid-cap numbers had thrown up, both on the volume and the operational front. Operational numbers still okay, but volume numbers not quite there. In fact, the stock one that went up the way it did, it almost made highs of closer to 4900 thereabouts, from there it's been just a glide down for Ultratech since the last one month or so. Yeah, that and other Tata group stocks somehow not having the best of times, or the Tata group overall, and Grasim as well, getting beaten down, and now Ultratech finding no favor.

Well, again, a global local rocket boys? Shivani Sarkar from Kotak Mahindra is on the sidelines again of the conference, the MK Confluence conference. Shivani, we're having you, thanks much for joining in. Well, we'll have the data out points out today. I reckon that the flows into the equity funds at least would have continued. I don't quite know about the debt side. But my question to you is: if the monies continued to come in, has stock picking been relatively easy because there are opportunities presenting themselves, or is it relatively difficult because the stuff that you want to buy is not quite correcting?

Hi, a pleasure to be here. So good afternoon everybody. So yes, if you look at the markets today, the markets are volatile because it's a conjunction of both global as well as domestic events which are driving market forces at this point in time. We've been maintaining for a while that in these volatile markets, the best opportunities present themselves. So if you're looking at stocks from a bottom-up perspective, looking at stocks which have strong cash flows and balance sheets, in this kind of a scenario where there could be some correction in some of these names, this is possibly the opportune time to buy. From an overall market perspective, clearly the market polarization towards large caps has been continuing and mid caps have been taking a beating. However, as we have been also stating, the opportunity in the mid and small cap space, if you have a two to three year kind of time horizon, is great, and that's what we are doing essentially across our portfolios. We are looking at stocks which have corrected within the mid cap space, however keeping in mind that these stocks clearly have to have strong cash flows as well as strong balance sheets and therefore present an opportunity. So I think we would look at this kind of a correction and volatility in the market more as an opportunity, and therefore it presents itself to take positions in some names. Of course, it has to be more bottom-up in nature. Sectoral calls at this point in time, given large-cap mid-cap kind of a scenario, it's more mid-cap and small-cap, and therefore more bottom-up stock picking. That's what we are doing across our portfolios.

Okay, so when you're talking about looking at mid caps and small caps right now, the entire gamut of the pain that we've been seeing since a year and a half now, I mean that doesn't seem to be going away. While most of these stocks are at really attractive valuations, which in any normal course of business, if this wasn't a time where we are witnessing global slowdown, would have been used as an opportunity to invest and it would have made a beeline for these stocks. But investors still seem to be shying away from there. What do you think is happening still?

So I think a lot of factors. Of course, there is a significant amount of risk aversion that has set in. The mid cap valuations, when you look back a couple of years ago when the mid caps clearly outperformed the large caps, there was a sharp run-up that happened, so some degree of froth was also created at that point in time. The froth has corrected now, it's more than corrected. It usually is the case that when things start correcting, they tend to correct a little bit more than what is required. What we've been seeing essentially, if you look at mid cap versus large cap now, valuations are even lower on a one-year forward basis than what it was in the beginning of 2014. And we've clearly seen, if you look at history over the last 10 years or so, whenever that kind of situation arises where mid cap valuations fall beyond a certain level, there is usually a retracement that takes place. So that's what we are seeing, both in terms of valuations. And like I said, valuations is not the only thing that you need to look at when you are picking stocks within the mid cap space. Quality and governance is something that cannot be compromised. If stocks have fallen because there is an issue in terms of governance or balance sheet related issues, these are not the stocks to be nibbling at. We are clearly looking at good quality stocks, as I mentioned, strong cash flows and balance sheet, low leverage, which are presenting themselves at reasonable valuations, and therefore looking at stocks. Okay.

Any sectoral bent that you have, Shivani, right now?

So from a sectoral perspective, one sector where we continue to remain positive is financials. Within financials, our preference continues to remain with the private corporate banking space. While we have seen stress emerge in the last few months with some fresh names coming up and possibly some slippages as well, some of these private sector corporate banks where the larger stress which emerged over the last three to four years, those stress levels have been dealt with. Their provisioning coverage now is significantly high and therefore they are well positioned. Some of these banks will also benefit as and when the resolutions take place on the IBC side, and they clearly have balance sheets which are less granular, which are more annular in nature, less chunky. As a result, that's a segment that we are positive on. The second segment that we are looking at, maybe not just immediately but with a slightly longer term view, is the capital goods space. While this is clearly a beaten-down segment and one can argue that there are no immediate signs of recovery, our belief is that two things: one, public capex will start once again, something that has been absent over the last six to eight-month period. Government spending in terms of infrastructure, specifically roads, affordable housing, water, etc., will emerge and that will be a driver of growth. Capacity utilization levels have also started inching up, and as a result, once you get through this near-term phase of uncertainty and you take a slightly longer term view, capital goods could be a space where opportunity presents itself. A corollary to that in terms of infrastructure, cement is also a segment that we like. While given the monsoon period, you've seen some of the price hikes that some of the cement companies had taken have been retraced, however, as I said, once the public capex picks up with specific emphasis on roads as well as affordable housing, the volume growth pick up should also start over a period of time. Structurally, we believe that cement companies, because of the cost benefits that they are enjoying at this point in time, as volume growth picks up, the operating leverage also flows through and that results in better profitability. So these are some of the sectors that we like across our portfolios. Okay.

Okay, that's the call on cement. Well, cost efficiency is definitely visible in the numbers that we've been seeing, but in terms of operational leverage, the volumes seem to be not picking up because of the weak environment. Sure, honey? Just a word. I know you mentioned you are bullish on capital goods space, but the numbers which we've got, the commentary has not been encouraging. In fact, the private capex is missing from the system.

Yes, I would agree with you. So if you look at capex and you look at the investment cycle, clearly there has been a deficiency on part of the private capex cycle, really not picking up. Our view is that it is still going to take some time for the private capex cycle to revive because the ingredients of revival are still not fully in place. However, our bet is more on the public capex, which has been absent actually for the last eight to ten months with the government spending coming under pressure. That cycle will start to pick up slowly, and therefore that is a part of the overall sector that we are more positive on. Private capex is still some time away, I would agree. And once that starts to improve, we will possibly see a better trajectory. However, right now what we are saying is that the public capex and improvement on that front is something that we will watch out for. And therefore, like I said, one of the sectors which is a corollary to the infrastructure revival story is cement, which is largely geared to demand coming in from road construction as well as affordable housing.

A word on IT, which has been resilient with the markets witnessing relentless selling pressure in the last one month, but Nifty IT still managed to register gains of about three percent. And the numbers have not been bad, at least from the large cap IT companies, though mid caps have definitely disappointed. This trade, do you see money moving to that side also because now rupee depreciation seems to be creating a tailwind for them?

So IT, I think as a sector has been more of a defensive read across for most market players. Our view on IT has been that we prefer large caps over mid caps. The kind of growth acceleration that you saw in mid cap IT companies last year, that growth has clearly shown signs of deceleration, and the quarter numbers are there for everyone to see. Even within the large cap space, while first quarter has shown that deal momentum has been fairly strong, what is really missing is now those large transformational deals that we saw last year which drove growth. Right now, the deal wins are there but mostly centered around digital, and therefore there is some shift that is happening away from spends in the traditional segments towards more digital. Only those players who have capabilities are able to capture this kind of an opportunity. So while on the growth front we are still okay, we're still seeing growth, one needs to really watch out for how things trend in the second half of the year, specifically with respect to BFSI and US large BFSI, large banks in the US, and what kind of spends these banks actually incur for the remainder of the year. If there is a large pullback, then the kind of growth that you've seen now could see a slowdown towards the second half of the year. Structurally, on the margin front, we do believe that most of the IT companies have been facing margin pressure because the inherent cost of doing business has clearly gone up, and as a result, margins are under pressure even if you look at our...

Long-term basis despite the depreciation of the currency, margins have structurally come down for most IT services players. While in the near term, because of the currency depreciation, you may see some relief in terms of margin decline, but structurally we do believe that margins are on the way down. So our preference within IT as a sector has been large cap over mid cap, but within the entire sector as a whole, we've been slightly cautious overall given the uncertainties that are building in from a macro environment on growth as well as the possible margin pressures that could remain.

Okay, we live with the Dutch body. Thanks much for taking the time out and being with us today and giving us your thoughts. The view from Shivani Sarkar Korean on the markets at lunch. Yeah, just going back to UltraTech numbers because of the way the stock has fallen, down two and a half percent now, not as low as 4% but certainly under pressure. Before we get an analyst, Nikki Merchandani, our expert Johnson right now to give us a sense of what stood out there. Nikki, the volumes I guess haven't shown an uptick.

Yeah, clearly operational performance is better than what the street was estimating, but if you look at volume growth, the number is 2% higher, and we were expecting a growth of 8%. So there is a clear sense of disappointment creeping in from volume numbers. But if I address the basic numbers first: revenue we've seen a 15% uptick, net profitability is shot up 100%, EBITDA is up by 57%, and margins have come at 26% compared to 19%. The volume figure you would like to note: domestic volumes are up by 3% at 17.2 million tons, and exports have actually come down by 7% at 0.6 million tons. Overall the numbers are around 17.9 million tons, we were estimating a number of around 19.7 million tons, which implied a growth of 8%, but it's just a 2% uptick. What essentially contributed to better-than-estimated operational performance is the higher revenue and lower costs. Power and fuel expenses, freight and forwarding – all of these expenses have come down in the range of around 3.5% to 6%. Higher other income contributed to bottom-line performance. In terms of EBITDA per ton, logistic costs declined 5%, energy declined 2%, and raw material cost came down by 2% to 489 rupees per ton. If I look at the EBITDA per ton value, it's also better than what the street was estimating. It's clearly the disappointment creeping in from the volume figures which is weighing on the counter right now.

Thanks to that, Nikki. Organized garage check our Johnson with a quick perspective. In Osh, just not one word on the volumes because otherwise everything else in the numbers is okay. How negatively would you take the miss on volumes?

I think the volume growth is definitely amiss, but I would believe that realization growth has been pretty good. More importantly, input costs have actually come down and that has helped the overall profitability to grow both at the operating level and at the net profit level. I think volume growth is something one would like to hear from the management as to what kind of growth numbers could pan out in the coming quarters. But I think the volume growth number clearly markets were expecting a slightly better number. The number is coming slightly below what the street expected. But clearly on the realization front, the volume drop has been more or less compensated. So I think it's a fairly good number on the bottom line, but yes on the volume side there is a fair bit of disappointment.

Avinash, the 2% growth also which is seen in volume could be owing to the Binani assets which have come under UltraTech now. And 15% top-line growth, out of which 13% is coming on back of higher prices, which may now not last in the second quarter. Now?

Yeah, I think pricing is definitely going to be a key element. And I think the management should be factoring in stronger volume growth considering that Binani capacity would also contribute. But clearly in terms of blended realizations, if you look at the top line and the realization growth in this quarter, realizations have definitely gone up. And to stay at these realizations I think, hopefully, since the second quarter could be a slightly sluggish quarter considering it's a monsoon-related quarter, we could see a little bit of moderation in realizations in the coming quarter.

All right, I will let you go on that. No, thank you so very much for joining us. Appreciate you taking out the time. Monkish from IDBI Capital Services also joining us on the show right now. Engage, thanks very much for taking out the time. Quick look at the operational performance: just that slack has been in line with street expectations, but the big disappointment is the volumes. Do you think that this is something that could be a pain point for them going forward into the coming few quarters?

What the company have mentioned is that they had a plant which was under shutdown in Kota. In my opinion, probably that's what affected the ability to deliver volume for the quarter. Generally, the volume decline is in line with what we have seen for other companies. You can notice that ACC, Shree, and various other companies, barring a few regional companies, have reported volume which is in line with what the industry has done. In anticipation of this, because I think there was a change in accounting which resulted in relatively lower volume growth, compared to that it has come down like 2%. But new of that, the pricing and operational performance has been really good, so I wouldn't be too concerned. Volumes are around 72% which is much more than what we...

Monkish, point well taken. I would also agree with the point that volumes is something that seems a little miss, but then the operational performance is being fairly decent. What I really want to understand right now is the fact that cost-saving measures essentially have led to higher prices that we've seen in quarter one, which have led to a strong set of numbers at least on the operational front. Do you expect that continuing in quarter two? Do you expect cost reduction to come through again in quarter two? And clearly pricing power seems to be a miss, so can we expect lower margins going forward?

You know, September is a monsoon month. This quarter what you see is that volumes are the lowest in a year, so definitely volume should be down. And what we have in realizations that have been around to some extent is a decline in pricing till now, so that is going to happen. But why the numbers are going to be fairly robust the way we have in this quarter, I think post this quarter results, as well as the next quarter's results, we are going to see upgrades on earnings of a sudden.

I'm English, we'll leave it at that. Thank you so very much for joining us this afternoon. A quick dissection of UltraTech numbers and what the stock would be going forward from here. The stock has recovered from the lows of the day and so have the markets. We're now on the brink of breaking past that 11,000 mark. Six points away, 10,994. That's a big spike coming in the last five minutes of trade. I just want to quickly look at the contributors and what's leading to this charge in the markets. The Bank Nifty is now up about 280 points. Starting off with the big movers on the index, first off hardly any losers now. Talking about the gainers, you've got Bajaj Auto, Bharti Airtel, the likes of HCL Technologies is up 3%, Reliance Industries – that's a big move, up 2.5% at the highest point of the day. HDFC Bank, a similar spike. These two heavyweights really aiding the index. Infosys also adding to the bandwagon, up about 2.1%. Probably reckon that some of the higher FII holding stocks would have the better move in the last five or ten minutes of trade. Let's wait and watch if that lasts. Positioning of stock access with us – wonder if he is going out and buying this. Vish, are you doing any trade on the Nifty or Bank Nifty right now?

We're trading almost throughout the day. Broader indices saw no doubt Nifty only after making the high, rose formation, and seeing the validity, but the oscillators have been giving a positive divergence, which indicates the pullback. Right now, this pullback rally which I am witnessing might at least go to the level of 11,140 or even try to go beyond 11,200. When I posted my strategy for Nifty, once Nifty goes below 10,900, because I won't be looking if it rates below that, then my strategy would be in my favor. One can look to buy Nifty below 10,900 with a stop loss of 10,840 and target of 11,050. But if someone has missed it, still there are chances. If in this later half Nifty trades below 10,950 or 10,940, one can go for a buy call with a stop loss of 10,890 and target of 11,000 or even 11,140. So right now, what I mean is chances are that Nifty might go and touch the level of 11,140. What about individual stocks? I have buy calls in my list. Number one: ACC. After the index, even we have seen a sharp correction in cement stocks, but what I am witnessing is the stock after making a triple bottom formation at 1,475-1,480, the stock has given a pullback and it was trading firmly above short-term moving averages. Now, if it trades below 1,580, my strategy would be to buy with a stop loss of 1,530 and target of 1,622. Another buy call is TCS. TCS on a shorter-term to longer-term timeframe of the charts has been trading in a channel formation with overall bullishness. So I was looking when I posted this call, it was trading somewhere around 2,240-2,245. Now it's trading around 2,270. If it trades below 2,260, then one can go for a long side with a stop loss around 2,200-2,230 and target of 2,290. If I am not mistaken, the previous high is around 2,290-2,292. If it gives a closing above 2,292, then we might see a sharp rally towards the level of 2,372-2,390 zone.

Since you have a buy call on TCS, the other IT player which is doing well and is the top gainer on Nifty on back of earnings today, it's up 6%. I'm looking at the exchange data: out of the total quantity which has been traded, almost 50% of that is being marked for delivery. 6% higher, 1,083. I believe it's also crossed its 50-day moving average today. If somebody is holding long, what should be the target on the upside for HCL Technologies?

Yeah, see now if the overall trend is being bullish, the stock after making a high of 1,187 and got corrected, and after making a base in the 990s zone, it has moved up. What you have said is absolutely right: the volume breakout is doing exactly that. Today the stock has moved up with significant volume, which indicates overall strength. Suppose someone has bought at the lower level or wants to buy at present, I would say till the stock doesn't trade below 1,040, as a trailing stop loss can be 1,040. As a trader, if someone wants to play at the present rate, with a stop loss of 1,040, chances are that the stock might try to touch a level of 1,120. The previous swing high is there, and once that is surpassed, the stock might even touch the level of 1,170. So present rate can be used for accumulation, with a target of 1,125 and above, with a stop loss of 1,040.

Some respite for the markets, and for a change it's green across the board besides the India VIX which is down. The Nifty IT index is up 2% in trade, FMCG is gained about 1%, Bank Nifty is now trading above around the mark of 28,000, and Nifty has touched the 11,000 mark after a while in today's session, up about 140 points in trade. Let's bring in our next guest, Lancelot Hakuna of Value Ex joins us on the show now. Lancelot, good day. Some bit of recovery seen after a while now because the markets have witnessed relentless selling in the past many days. How are you approaching the markets? Are you finding value anywhere after the sharp correction that we've seen?

Yes, we are finding value in some of the areas that have got beaten down, especially some of the banks and the NBFCs. I think the stronger NBFCs will benefit from this situation where liquidity will move to the strong NBFCs at the expense of the weaker ones. So while maybe for a short while all NBFCs would get impacted, I think as the next six to eight months play out, we'll begin to see these stronger NBFCs actually be able to improve their net interest margins, expand their loan books, and maybe grab a larger share of the business. So that has been an area where one can look at, identifying the good quality and stay invested with them or even buy them at these levels. Similarly with banks, we've seen PSUs etc., and now banks like IndusInd Bank, to an extent ICICI, Axis have also come off their highs and we could begin to look at these banks as beneficiaries of the trend of lowering of interest rates, which would spur them on to greater growth going forward. So I think the short-term opportunity lies here for the next six months. The recovery in sectors like auto and pharma will take a little longer time. Maybe auto we get some indications as to how the festive season pans out in the back of a good monsoon. So with rural demand picking up, we could see an improvement in festive sales, and that is an indicator to watch out for whether the retail recovery is going to show some green shoots or take a longer time. So based on that, one can look at investing in those sectors.

Okay, got that. I just want to focus back on the movers on the index right now. It's just the Nifty which has made that 11,000 mark. I don't know whether the midcaps and small caps have participated equally because at the start of the show it was stark underperformance, marginally higher, but yes they have picked up from the lows of the day. Joining us right now is RJ Berger, he's on the phone line with us. RJ, thanks very much for taking out the time and speaking with us. You were recently here with us and you spoke your mind pretty freely. What's been happening to the equity markets? Some signs of relief right now, but nonetheless extremely volatile almost on a daily basis. What's the sense that you're getting with regards to how does one tread this way forward for the equity markets, and particularly investing in the more high-quality Nifty 50 names which suddenly seem to be in flavour yet again?

Yeah, I would still say wait it out. The good news is our studies and talks to people are also showing that the PMO itself is very seized about the condition of the economy. Both the Economic Advisory Council and NITI Aayog have been tasked with suggesting ways to tackle the slowdown, and we are expecting strong measures to be announced in the almost immediate future. So if this tax goes, it gives a sentimental boost, and even if the FII selling slows down, that's a huge positive for the markets because that has been a big drag on the markets and the sentiments. When we're talking about one-and-a-half to two billion dollars of foreign money which has been pushed out of the system post the budget, the equity markets have corrected about 9% since then. If that money, and if by what your conversation suggests there's anything meaningful that comes about on this ground which suggests some positivity with regards to the foreign money coming back to Indian shores, how much of a bigger amplified move on the upside can be anticipated? All that money will not definitely come back altogether, so it will take time, but yes the market is very heavily short, especially the FII positions are very hugely short, so there will be some struggle to take the market through those very heavy shorts. But I think it can move up quite strongly based on this. But I would wait and watch until the notifications come through. That would be a better time. No problem losing a bit of the upswing, that's not an issue. But this is not a market to be jumping in because fundamental issues are there, and hopefully our news is that the government is very serious in now trying to address it. So suppose a package comes for auto, a package comes for real estate, that will be immediately very positive for the markets.

Okay, in fact I was coming to that topic of auto. It's clear now the market is waiting for government's intervention to revive investor sentiment which has been dampened in the recent past. Talking about auto, I think the representation has been already made to the PMO. What sort of package can move the needle now? Of course, the industry has been demanding lower GST from 28% to 18%, also there are talks of higher depreciation being provided for these companies. So according to you, what will move the needle for autos?

Yeah, it would be a combination that we would look for: right from incentivizing a scrappage policy to giving some kind of a tax cut like in 2008, the Indian government moved very fast in cutting the excise almost overnight, and that was very positive. So I think something on those lines would be what the auto industry would look forward to: a GST drop or some positive stimulus into the economy, and telling the banks not to pull back loans both to retail as well as to auto dealers, and funding.

Okay, okay. Thank you so much for taking the time out and joining us, Mr. Berger. I really appreciate you taking the time out. Thank you. That's a quick word from Mr. Berger. Well, let's see if indeed what the Economic Times reported this morning or last yesterday about the FPI surcharge rollback happening this week happens or not. Very quickly, the other big factor that is working in India's favor is the pullback in crude prices. I think it's important to address that as well because irrespective of what they're doing on the demand front or on the supply front, the low demand is helping the prices of crude. They've come off today's session might be marginally higher, but certainly up in trade. Let's ask Lancelot: because of the falling crude prices, are you going out and making any investment decisions? I mean, wondering if this may not be really sustainable, but for now it looks like the upside is capped.

Well, I think yes, at one point it may be difficult to sustain this fall in prices for a longer period of time. And at the same time, because of the slowing global growth, you may see the demand for crude globally also begin to taper off, and that would mean that the upside on crude prices could be limited. So I think in a sense, since we are importing significant amounts of crude, it actually is good for our economy because our input costs would remain low, the subsidy that the government bears for some of the fuels would also be lower, so the burden would be lower. But it's very difficult to go and buy stocks solely on one thing. What is more important is the demand for these products. While crude derivatives would go as raw material costs in various industries, the cost of raw materials would be kept at a relatively low level. I think the major issue with our economy and corporates is that demand has slowed down from the consumer, and that is affecting the great growth engine which was in place for so long. Now we see this as a cyclical slowdown because of buildup of overcapacity. To some extent, it needs to absorb a bit of slowdown. But I think this coming festive season would be an indication as to whether it's just a temporary thing or more long-drawn-out. So at this point of time, it's better to just wait out, see how things are moving, and then after that really commit significant amounts of money.

Okay, well today though, some of these stocks, the usual suspects, have moved up. Despite the fact that crude prices are higher than what they were at the start of the trading day, yesterday's fall certainly helping. Reliance is up 3%, I'm not saying that's because of crude, but it's up. Some of the OMCs have gained in trade as well. So crude coming off is a big positive, and if indeed some of the other technical factors are taken care of, it's positive for India for sure. Let's get in a voice line right now to Emmett Johnson to talk about this precise move. Emmett, good having you. Thanks much for joining in. Now Saudi Arabia may be trying to urge some of the participants to try and ensure that there are supply-side constraints at a heightened level as well, but the demand picture seems so bleak right now. Almost everybody that we speak to or read about says that crude is headed lower. Are you in the same camp?

I think it will depend a lot on what happens to the US-China talks or the trade war, whether there will be any possible resolution to the trade war. Because right now, as we saw over the last week, oil prices have been trending lower, and that was really after US President Trump announced that he was going to impose more tariffs on China on 4 September. So that really pushed the market lower because it added to the growing worries about demand growth. So I think there is the prospect of oil prices going down, but if the tariffs are imposed on 4 September and there are no indications that the China-US trade war can be resolved anytime soon, I think prices will be vulnerable on the downside. But as you mentioned, the supply side has been quite compliant in the OPEC output production restraint, so we're not really swimming in crude supplies at the moment, especially with Iran and Venezuela output still out. So right now, yes, it is still the demand picture that the markets are focused on, and the market is getting quite concerned about demand, which is putting pressure on oil prices.

What's the near-term trajectory? I know it will depend on a lot of factors, but with the data that you have at hand, crude lower from here or higher from here?

I don't know. I mean, I think the things that we've also seen is that overnight, while the prices fell, during Asian trade it recovered about half the losses. So I think it's not going to go much lower unless something more bearish or something negative is announced by the US or China. I think we're pretty much near the lows. I don't think we're going to see Brent at the $50 level in the short term, as I said, unless there is really some bearish news regarding the US-China trade war. I think prices have slipped quite a bit, and at some point the market may start looking at the supply and realize that there is some constraint in supply, especially with the OPEC output cut.

Okay, we leave it that. Thank you so much for taking the time out and joining us, and giving us that perspective. That says Emmett Johnson with his thoughts on what would happen to crude going ahead. By the way, some stocks which are a bit under pressure include one, Endurance Technologies. Numbers came in at about two o'clock, and post those numbers the stock has only gone down, wondering that is down - lost on a 20% circuit right now. Clearly the market not impressed with what they've delivered. Will of course talk about that in a bit. Remember again, an auto-exposed company, and therefore not surprised that that has happened. A lot of stuff looking wobbly right now. Before we take that break, one name on which there is a slide down is Cummins India, and that of course is because Cummins has announced a guidance cut, and I think that is what is weighing on the stock in the session today, 8% lower currently. Let's wait and watch if this were to drift lower during the course of the day. But yes, just one quick thought: comments in the eyes are traded right now. He's been quoting at 600, should have not broken the previous swing low of 652 or 653. Now that, with increase in volume, but at present rate I would not be going short. It can be used for going short, so if it trades up around 620, one can play for a short side with a stop loss of 650 and target of 575, first target followed by 550 and the next target. All right, I think the max number is flashing on your screen. Just watch out for that one. 62.76 cross in terms of its profits versus 48.97 cross, and that's seen a big spike. The stock there now is up about 6.5%, volumes slightly thin on this one, but you know we've spoken to the management of multiple locations, and they've really spoken about at least pre-budget, his views were that there's to be a lot more that comes in from the government side in terms of a push to make sure that the sector can revive in terms of the total orders that they give out. But not bad for their revenue numbers. Also 1392 cross, and the stock is up 6%, 50,000 shares have been traded there. There is a very short break right here.