Nifty, Sensex may remain range-bound in near term; Cipla, India Cements among stocks to buy

By Shrikant Chouhan

On last Tuesday, the benchmark indices NSE Nifty 50 and BSE Sensex witnessed range bound activity. Among Sectors, IT continued the positive momentum, rallied over 1 percent whereas profit booking were seen in Media and PSU Banks stocks, as a result, both the indices shed over 1 percent. Technically, after a strong uptrend rally, the indices witnessed range bound activity.

Oberoi Realty Ltd

BUY | CMP: Rs 1054 | TARGET: Rs 1110 | SL: Rs 1030

The counter is trading in a rising channel constantly on the weekly scale. The higher high and higher low chart formations are apparent in the counter. Additionally, trend indicators such as MACD and ADX are showing bullish strength. Therefore, upward movement from the current level is very likely to remain in the near future.

CIPLA

BUY | CMP: Rs 1030 | TARGET: Rs 1080 | SL: Rs 1010

The stock has shown a remarkable rally from the lows in the last few weeks and the trend of the stock is still in the rising direction. The higher high and higher low series on weekly chart formation is evident in the stock. Hence, the formation is indicating a bullish continuation pattern to continue in the coming horizon.

India Cements Ltd

BUY | CMP: Rs 210.25 | TARGET: Rs 222 | SL: Rs 205

The stock has underperformed in the past few weeks and it has witnessed a downtrend. After the sharp correction from higher levels, the stock is currently trading in a range bound mode, which indicates accumulation at these levels. Therefore, upward movement from the current level is expected to resume in the coming sessions.

Siemens Ltd

BUY | CMP: Rs 3708 | TARGET: Rs 3890 | SL: Rs 3630

After a robust rally of the past few weeks, the stock went into a consolidation mode. At present, the structure is indicating a likely breakout of the consolidation phase. Hence, the formation indicates a further bullish trend  to resume from the current levels.

(Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd. Views expressed are the author’s own. Please consult your financial advisor before investing.)

Perils of investing in unlisted shares: PharmEasy, Reliance Retail hurt traders who invested on FOMO

By Arihant Bardia

“An early bird catches the worm” is an idiom we have heard in some form or another. For years, Institutional Investors have been endeavoring to buy a good business early to capitalize on higher returns. HNIs have followed suit by chasing Pre IPO shares, but a few recent events have been a brutal awakening for them.

Another enigma is PharmEasy. The company raised its last round in Oct 2021 at a valuation of $5.6 billion after acquiring diagnostic chain “Thyrocare” for ~ Rs 4,500 crores. Soon, PharmEasy was the talk of the town, with the price per share going up in private markets from Rs 90 to Rs 135 in no time. However, things took a U-turn after that, as PharmEasy couldn’t raise its next round. The company took a large debt to finance the Thyrocare acquisition that is due for repayment. With the increased cost of capital and no possibility of IPO, there was no choice left. The company is in talks to raise Rs 2,400 crore through a rights issue at a valuation 90% lower than its last round. 

These examples are classic FOMO behavior. As investors, we often want to jump on the latest investment trend, fearing that we might miss out on potential gains. However, this fear can lead to impulsive decision-making, causing us to make irrational investment choices.

What can one learn from these examples

Never mimic Institutional Investors:

PE & VC funds are different animals with far different investment horizons & risk appetites. Also, they follow “Power Law” more diligently by spreading their bets. Also, the contours of the deals done by VC Funds are mostly in their favour. VCs widely use Liquidation Preference & Anti Dilution Rights. In PharmEasy, most investors who invested in the last round at $5.6 billion valuation have Anti-Dilution rights inbuilt, which means that if the company raised money at a lower valuation, they would be compensated by being given more shares, free of cost. For a round happening at a 90% lower valuation, the VCs will be allotted 10X more shares. HNIs who bought the shares from the market don’t have that protection.

Don’t Catch A Falling Knife:

Savvy investors believe in Averaging Up rather than averaging down. While it may look prudent to buy more of PharmEasy at Rs 50/share, if you bought initially at Rs 100/Share, you may feel your average has come to Rs 75/ share. But you have lost more now since the price is far lower. Throwing good money on bad money, not worth it. 

Be Willing to Wait for a Liquidity Event:

It may take far longer for a planned IPO to happen, even for stable, profitable businesses. The reasons could be any. Take NSE, for example, a great cash-throwing business whose earnings doubled in the last couple of years, but its IPO keeps on getting delayed for regulatory reasons. You can always sell at distressed pricing in private markets if you need money, but it takes a lot of mental strength.

Having said this, pre-IPO investing has a lot of merit and should be part of the “satellite” allocation of the portfolio, provided:

The allocation is within your risk framework.You are willing to be patient to hold these investments indefinitely without seeking interim liquidity.You have help from your advisors to overcome information asymmetry.

These are exciting times to be a risk investor in India, and given more time, Indian markets will mature to a better understanding of new-age businesses and start treating them differently. The key for an investor is to make lesser but informed decisions and stay patient.

(Arihant Bardia, CIO and Founder, Valtrust on Unlisted shares.Views expressed are the author’s own. Please consult your financial advisor before investing,)

Oil trades flat as supply concerns offset worries over demand

Oil prices traded flat on Tuesday as worries that further possible U.S. interest rate hikes could pull down demand were countered by concerns a tropical storm off the U.S. Gulf Coast may impact supply.

Brent crude was flat at $84.42 a barrel by 0335 GMT, while U.S. West Texas Intermediate crude shed 2 cents to $80.08.

Markets anticipate an 80% chance the Fed standing pat next month, Refinitiv’s FedWatch tool showed, but the probability of a rate hike in November is now seen at roughly 56%.

“It may be difficult for oil prices to maintain the strong bull trend (seen) in July at this stage. The U.S. and European economies will face downward pressure in the fourth quarter until interest rates peak,” said CMC Markets analyst Leon Li.

“So there might be a concern about demand, which puts pressure on oil prices. And China’s economy still hasn’t seen a significant improvement… Oil prices may remain volatile at this stage, and further increases in the future may require a rebound in Chinese data.”

China’s economic recovery has faltered on the back of a worsening property slump, weak consumer spending and tumbling credit growth, prompting Beijing to cut key policy rates to shore up activity in the world’s second-largest economy and oil consumer.

While prices since the start of the third quarter are up about 12% and 13% for Brent and WTI, respectively, following production cuts from OPEC+, the outlook for China’s economy continues to remain a concern, said analysts at National Australia Bank in a Tuesday note.

Meanwhile, Tropical Storm Idalia lashed western Cuba on Monday and was almost a hurricane as it headed toward Florida. The storm is likely to cause power outages and could impact crude production on the eastern side of U.S. Gulf Coast.

This week the focus will be on the U.S. personal consumption expenditures price index report that is due on Thursday and the August nonfarm payrolls data on Friday.