Short Call | Defence still a clear favourite, HDFC AMC, Deepak Nitrite, Aarti Industries in focus

There is no hurry among both institutional investors and retail investors to load up on stocks at current levels. “The market is not going anywhere soon” seems to be the general attitude. Defence stocks, however, seem to be an exception to the trend. Overall, the bias is still for mid, small and micro cap stocks as far as retail investors are concerned.

After rallying nearly 50 percent in less than three months, the stock appears to be running into resistance around Rs 2,500. The stock closed 2 percent lower in a steady market on Tuesday. Part of the recent run-up could have to do with the stock’s impending inclusion in the MSCI Global Standard Index from September. Savvy traders would have warehoused the stock, hoping to sell it at a premium to fund managers tracking the index.

Big jump in both stocks, supported by heavy volumes. Some market chatter about chemical prices having bottomed, but too early to call a trend. Heavy call writing in Deepak Nitrite call option contracts for 2,100 and 2,200 Strikes in the September series. Also, Deepak Nitrite has been a trading bet than an investor’s favourite for a while now, with the price stuck in a narrow range for nearly two years since hitting a peak in October 2021.

Antique Stock Broking says demand for agrochemicals in the domestic market has revived following increased sowing activity in July because of heavy rains.

“Prices in both domestic and export market have settled down and showing

signs of revival for a few molecules. We believe the worst is largely over for domestic players and expect a bounceback in performance in 2QFY24 on the back of strong volume off-take,” says the Antique report.

No cheer though for companies dependent on the export market for revenue growth. “For export-oriented players, the slowdown is expected to continue in the near term on account of high channel inventory amid correction in product prices.”

Steel stocks have struggled in 2023, but it may not be a bad idea to start accumulating them from a longer-term perspective, says broking firm Prabhudas Lilladher.

“Near-term global demand is muted, led by a weaker China and developed nations struggling from inflation and higher interest rates, both peaking out. As Chinese GDP growth is expected to be driven by stimulus and consumption, demand recovery will be slow and steel prices may bottom out as industry makes losses. With curtailed production in 2HFY24, we expect pricing to get support and thereby Indian players would be ultimate beneficiaries of the same."

The US labour market is showing signs of cooling, but still not at the rate that would please the Federal Reserve. Official data showed 8.8 million unfilled job openings in July, down from 9.2 million in June and 11.4 million a year earlier. The ‘quit rate’, or the number of people quitting, as a share of total employment has now fallen to pre-pandemic levels of 2.3 percent. And yet, majority of the employers are still loathe to fire staff even as profit growth has slowed. The worry is that it will be hard to hire people again should the need arise.

Bitcoin rallied more than 7 percent intraday on Tuesday, topping $28,000, after a federal appeals court ruled that the US SEC must review its rejection of Grayscale Investments' application to launch the first bitcoin exchange-traded fund.

From coindesk.com:

“The legal victory potentially opens the door for a spot bitcoin ETF in the US Advocates have long argued that allowing this type of product would enable a greater swath of the general public to invest in bitcoin without having to go through the trouble of buying the crypto directly or deal with potential issues like their custody providers collapsing.”

US regional banks with at least $100 billion will need to hold a layer of long-term debt to absorb losses in the event of a government seizure, the US regulators said on Tuesday. The banks have to ensure that their long-term debt levels equal to 3.5 percent of average total assets or 6 percent of risk-weighted assets, whichever is higher. At the margin, the move is expected to put further pressure on the industry’s earnings by increasing the cost of funds.

Chilean firm Codelco, the world’s biggest copper supplier, is staring at a cut in its credit rating after Moody’s Investor Services placed the company’s ratings under review for downgrade. “The review for downgrade reflects the likelihood that production volumes will not materially improve in the short term and will remain below historical levels in the next 12 to 18 months, which will weigh on Codelco’s profitability, leverage and coverage metrics,” Moody’s wrote.

China’s largest banks are preparing to cut interest rates on existing mortgages and deposits, the latest state-directed measures to shore up growth in the world’s second-largest economy, reported Bloomberg quoting unnamed sources. The lower rates will be applicable only to the first home, the report added.

China's factory activity is likely to have contracted for a fifth straight month in August, reported Reuters, based on a poll of 34 economists. The official purchasing managers' index (PMI) is expected to have edged up to 49.4 in August, a marginal improvement on the 49.3 recorded in July, according to the median forecast.

The Pentagon plans to field thousands of drones and other high-tech military equipment within the next two years as the United States military turns to autonomous systems to counter China’s numerical edge in terms of manpower and weaponry, US Deputy Secretary of Defense Kathleen Hicks told a military technology conference in Washington, reported Al Jazeera.