Short Call: A sense of euphoria, Tata Steel, Symphony in focus and the latest on China

A sense of euphoria appears to be slowly building in the market

A sense of euphoria appears to be slowly building in the market, say veteran market participants. There is chatter that some SME promoters are borrowing money from the market to inflate the subscription figures of their upcoming initial public offers (IPOs).

“The gravy train is chugging along fine, but one would be better travelling on the footboard so to be able to get off quickly,” a trader of 25 years vintage told Short Call.

Petronet LNG

Tepid ratings by analysts are not holding back bulls in the Petronet LNG stock, which surged around 7 percent on Wednesday on massive volumes. Petronet shares have been languishing for a long time as high LNG prices is hurting demand in the domestic market. Sentiment has improved somewhat after the first quarter performance. But most analysts are yet to warm up to the stock.

“Concerns on capital allocation remain unresolved and we continue to be sceptical of the company’s plan to invest Rs 14,000-15,000 crore in an unrelated business line (petchem),” said ICICI Securities while assigning a ‘hold’ rating for the stock.

“Despite increase in volumes, PLNG’s long-term volume growth prospects remain bleak due to intensifying competition from the upcoming LNG terminals as well as rising domestic gas supply,” said Motilal Oswal, which has a neutral rating on the stock.

Tata Steel

Profit booking pushed the stock down 1.6 percent lower on Wednesday. The stock has been in the limelight over the last few days media reports about 500 million pounds in aid from the UK government for the Port Talbot plant. But some analysts have pointed that that the package may not suffice. While seeking the aid in January, Tata Steel had said that it would have to study what was on offer before deciding the future course of its UK operations. That said, the longer term outlook on the India steel story in general is positive. It is the short term that is a problem, mainly because of the problems in China and a general slowdown in the global economy. The Silent Operator is reported to have accumulated a sizeable chunk of Tata Steel shares over the last couple of weeks.

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Symphony

The stock had a flying start to the year, but has been struggling since February. In an interview to CNBCTV18, the company said its market share grew in summer despite the degrowth in the industry as a whole. The company’s first quarter numbers were weak, but the management said it is confident of double digit revenue growth “in the medium and long term”, and that gross margins seen in the first quarter can sustain. But that will still be a poor consolation for shareholders. Gross margins which used to be in excess of 25 percent till five years back, fell to 12 percent in FY23. For the quarter ended June, it was 9 percent.

Hiring trends

SMEs are hiring more than the large companies, says Pawan Goyal of Naukri.com. Oil and gas, banking, hospitality, and real estate seeing month-on-month and year-on-year increase in hiring. Also, hiring has been flat in 3-5 years experience bracket.

Movie over?

Shares of AMC Entertainment closed at a record low Wednesday after the movie theater chain announced a plan to sell up to 40 million common shares. The poster child of the meme-stock craze during pandemic, the chain narrowly escaped going bankruptcy, thanks to the appreciation in its stock price which then allowed it raise funds. But the enthusiasm has cooled off over the last year after investors were irked by the company’s plan’s to sell more shares to raise funds. Investors challenged the move in court, but were overruled. AMC's stock is down 76 percent this year.

A breather

Shares of Chinese property developer Evergrande surged as much as 82 percent on Wednesday, leading gains on the Hang Seng index, after beleaguered property developer Country Garden reportedly managed to pay $22.5 million in bond coupon payments on Tuesday, and narrowly avoided default. But China’s property market is not yet out of the woods.

Greenmail

Large offshore wind developers in New York are asking for an average 48 percent price adjustment in their contracts to cover rising costs, reports zerohedge.com quoting a report by the New York State Energy Research and Development Authority . The Alliance for Clean Energy NY is also requesting an average 64 percent price increase on 86 solar and wind projects.

The Inflation Reduction Act (IRA) includes federal tax credits that can offset 50 percent of a project’s costs. But renewable developers say their costs are increasing faster than inflation and that the projects will not be economically viable and would be unable to proceed to construction and operation under their existing pricing.

Saving is earning

European Union lawmakers will push for far greater recycling of waste in a new EU law to ensure the bloc has raw materials such as lithium, nickel and cobalt required for its green transition, reports website mining.com. The parliament text proposes the EU should raise recycling capacity by 10 percent for each of 16 “strategic raw materials” by 2030 and collect, sort and process 45 percent of each material contained in EU waste, subject to technical and economic feasibility.

Insult to injury

A day after it extended production cut for crude, Saudi Arabia has hiked prices for customers in Asia and the US, though only slightly. State-owned Saudi Aramco raised its flagship Arab Light price to Asia in October by 10 cents to $3.60 a barrel more than the benchmark, according to a Bloomberg report. That’s the highest since December, but lower than an expected 30-cent increase in a Bloomberg survey.