Daily Notifications as on 10th September 2020

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20200910-47

1. Scrip code : 506943
Name : J.B. Chemicals & Pharmaceuticals Ltd
Subject : Updates on Open Offer ICICI Securities Ltd (“Manager to Open Offer”) has submitted to BSE a copy of Pre-Offer Advertisement in accordance with Regulation 18(7) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended, and Corrigendum to the Detailed Public Statement for the attention of the Public Shareholders of JB Chemicals & Pharmaceuticals Ltd (“Target Company”).

2. Scrip code : 533023
Name : WABCO India Ltd
Subject : Updates on Open Offer
J.P. Morgan India Pvt Ltd (“Manager to Open Offer”) has submitted to BSE a Copy of Post-Offer advertisement in accordance with Regulation 18(12) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended, for the attention of the public shareholders of WABCO India Ltd (“Target Company”).

Market Vulnerability – Five Red Flags

VULNERABILITY ~ OF MARKETS AND VALUATIONS

Just too many Red Flags

Just too Many Red Flags

We have been living two unreal realities the past few months :

  • the ongoing Covid-19 Pandemic that’s now stretched late into the second half of 2020
  • the strength, speed and scale of the Stock Markets bouncing back after the March 2020 Global Meltdown.The March Meltdown played out FEAR with the Sensex crashing from near 43000 levels to sub 26000 and then bouncing back stunningly to play out GREED to cross 40000 on the morning of the last day in August 2020 before China Intrusion in Ladakh again at the weekend intruded the Sensex too and it closed at 38628, down 3.5% from the day’s high and closed the week on September 4,2020 at 38357.Pre November USA President Election Polls show Joe Biden leading incumbent President Donald Trump and that saw Nasdaq drop a sharp 5% in a day last week.Forewarning?

Correction is overdue, in that the stunning pullback has to pullback. In previous editions we’ve spelled out the disconnect between rising Stock Indices and declining Economies on the strength of Liquidity Flows .In this edition of SCRIP STANDPOINT we flag up Five striking Red Flags objectively as below that simply cannot be ignored despite high levels of Foreign Portfolio Investor  (FPI) Equity Inflows (pumped in Rs 47080 crs near US $ 6.5 billion in August 2020) and the anticipation of a Covid-19 Vaccine this year itself and hopes of a V shaped recovery in economic growth in Q 2,3 & 4 of FY 21

  1. Record GDP De-Growth globally and with India worse than expected at -23.9% in Q1 FY 21 and Unemployment at 2%
  2. Record near 5.1 m new Demat Accounts opened in the lockdown period March to August 2020
  3. Market Cap to GDP Ratio at a record 2.2 times in the US and at a high of 0.84 times in India
  4. Nifty PE soars past 32,higher than even pre Lehman collapse in 2008 and nearly three times standard deviation
  5. Gold and Silver at record Highs

First however have a glance at how Global Indices fared in 2020 till date September 4,2020

 

 

Country

 

 

Index

Year Opening January

2020

 

Closing

March 24, 2020

 

 

% Fall

 

 

September 4, 2020

 

 

% Rise from March 24, 2020

 

 

% Fall/Rise from Jan-20

North America
USA Dow Jones 28990 20705 -28.6 28307 36.7 -2.4
USA S&P 500 3258 2447 -24.9 3429 40.1 5.3
USA NASDAQ 100 8794 7554 -14.1 11505 52.3 30.8
Canada S&P/TSX 60 17100 11228 -34.3 16368 45.8 -4.3
Mexico IPC 44437 34400 -22.6 36430 5.9 -18
South America
Brazil IBovespa 118573 69729 -41.2 100381 44 -15.3
Argentina Merval 25 41107 25480 -38.0 44800 75.8 9
Chile IGPA 23985 10217 -57.4 13139 28.6 -45.2
Europe
 

Euro zone

EURO STOXX 50  

3793

 

2715

 

-28.4

 

3298

 

21.5

 

-13.1

U K FTSE 100 7604 5446 -28.4 5849 7.4 -23.1
Netherlands AEX 613 462 -24.6 547 18.4 -10.8
Belgium BEL 20 4016 2868 -28.6 3337 16.4 -16.9
Germany DAX 13386 9700 -27.5 13006 34.1 -2.8
Russia RTS 1564 1081 -30.9 1222 13 -21.9
France CAC 40 6042 4243 -29.8 5018 18.3 -17
Italy FTSE Italia A 25980 16949 -34.8 19471 14.9 -25.1
Spain IBEX 35 9691 6717 -30.7 7066 5.2 -27.1
Switzerland SMI 10700 8733 -18.4 10255 17.4 -4.2
Asia & Asia Pacific & Australia
China Shanghai 3085 2722 -11.8 3355 23.3 8.8
China SZSE Comp 10639 9922 -6.7 13657 37.6 28.4
Hong Kong Hang Seng 28544 22663 -20.6 24695 9 -13.5
Singapore Straits Times 3238 2362 -27.1 2510 6.3 -22.5
Japan NIKKEI 225 23205 18092 -22.0 23205 28.3
Thailand SET Composite 1596 1034 -35.2 1312 26.9 -17.8
Korea KOSPI 2175 1610 -26.0 2368 47.1 8.9
India Sensex 41306 26674 -35.4 38357 43.8 -7.1
India Nifty 12183 7801 -36.0 11334 45.3 -7
Australia S&P ASX20 3762 2728 -27.5 3208 17.6 -14.7

Global Indices across the continents have pulled back smartly from the March 24,2020 Meltdown that  had got the world shivering of a Financial Armageddon being unleashed at the time. In fact the US ( S & P 500 and Nasdaq ),Argentina,China and Korea Indices are currently at higher levels in eight months of 2020 than what they were when 2020 dawned and our own Nifty and Sensex have been in the same pack but yet have to be in the green for the year to date even after a remarkable pullback of 44% & 45% respectively from March Lows .Europe is yet considerably down.

What is most striking is that it’s been a rocking NASDAQ 2020 Tech Story thus far .After  dropping 14% in March from the January opening ,it has surged 72% from March Lows and is now 31% over even January Opening

In our March 15,2020 edition here’s what we had opined :

“It is difficult to call the bottom as it’s difficult to call the duration, spread and intensity of COVID- 19.But it’s easy to call ,based on historic evidence, that after this crisis passes and after any US & Global Recession the bounce back in Equities will be significant in the years ahead. These declines are introducing some sanity back on Valuations on the bourses and give some great opportunities in value buying for the long term

Major Spoilers for any recovery later in 2020 could be that the COVID-19 crisis prolongs late into 2020 and hopefully not into 2021 and Geo Political Conflicts will intensify across global hotspots in the Middle East and Asia as economic stress pushes Nations to the wall.”

Both Spoilers have played up as Covid-19 Pandemic has stretched into the second half of 2020 and the India-China Border Skirmish that had escalated violently in June 2020 with hand to hand combat in the Galwan Valley resulting in tens of deaths of soldiers on both sides has refused to die down with China violating the agreed Line of Control last weekend

Significant Correction is again indicated and it will come very soon ~ this month, next or by November.We’ll be surprised if it does not. Caution needs to be exercised with strict discipline of Asset Allocation and maintaining Cash and Core in Direct Equity at a sound tactical weightage.

Let’s raise the Five Red Flags

  • ~ Record GDP De-Growth globally

Q1 FY 2020 Official GDP Figures for India have been released and shows a huge contraction of a record 23.9% largely due to a fall in manufacturing (-39.3%), construction (-50.3%) and Travel and Hospitality (-47%) activities

Source : Moneycontrol

Source : Business Today

This Q 1 FY GDP Contraction points to a 10% fall in India’s GDP in FY 21 despite the V Shaped recovery in the remaining three quarters being forecast by a few market commentators and the Finance Ministry.The Fiscal Deficit in the four months April to July 2020 period stands at Rs 8.2 lakh crs (previous year Rs 5.47 lakh crs) ~ that’s already at 103% of the full FY 21 target deficit of Rs 7.96 lakh crs.Loss of Economic Output at such a staggering level has led to stunning loss of jobs that reflects in soaring and alarming Unemployment at 8.2% as on date.It’s recovered from a peak of 23.5% in April 2020 when 121 m were unemployed. Provisional FY 20 GDP is Rs 203.4 lakh crs => Estimated FY 21 GDP will be Rs 183.1 lakh crs at -10% fall

Such an Economic disconcerting narrative and yet a soaring Sensex and Nifty? Some commentators are plugging the government line and don’t see the stark disconnect despite the RBI Governor

,Shaktikanta Das, warning a fortnight ago “There is so much liquidity in the system ,in the global economy,that’s why the stock market is very buoyant and it is definitely disconnected with the real economy.There will definitely be a correction but we can’t say when”

2   ~ Record 5.1 million new Demat Accounts opened in the lockdown months

A record 5.1 m new Demat Accounts have been opened in the six months March to August 2020 lockdown period.

Month in 2020 New Demat Accounts Opened inMillion
March 0.7
April 0.7
May 0.7
June 1
July 0.9
August 1.1
Record No of Demat Acs Opened March-August 2020 5.1

Source : CDSL/NSDL

 

Compare this with 2.7 m accounts opened in the previous six month period of September 2019 to February 2020 At August 31,2020 the Total Number of Demat Accounts have crossed 45 million.Just five years ago they had closed FY 16 at just past 25 m growing at about a million a year.Post Demonetisation in November 2016 we’ve witnessed a burst of demat accounts being opened with 2.8 m in FY 17, 4 m in both FY 18 and FY 19 and 4.9 m in FY 20.In FY 21 already 4.4 m accounts have been opened in the five months till August 31,2020

While this is a promising indicator for an increasing % weightage allocation in the Equity Component in an Investment Portfolio, the sudden burst of demat accounts flags up heightened risk as most accounts are retail driven in the lower age group .This young age group may have aggressive profiles but lack the experience and fundamental skills and knowledge to make sound equity selections.

Why this sudden burst of new demat accounts in this Covid-19 ongoing Pandemic ?

Well,clearly the Pandemic has been the alarming catalyst. With growing nervousness and uncertainty on the Business Earnings and Employment front and the low interest rates scenario expected to stay over the next two years at least, Equity is increasingly being seen as an Income Stream that will support survival with the seducer being this scale and speed of pullback in Stocks since the March 2020 meltdown. In fact Millions more accounts should be opened as the LIC IPO draws nearer. It’s now expected in 2021.Millions of LIC Insurance Policy Holders who thus far have no Equity exposure and don’t possess a Demat Account will decide to become LIC Shareholders too and would need to open a Demat Account

The Risk associated with Equity has been put on the backseat as Robinhood Trading ,as we see this, take over. This is a Front Seat Concern for us.Time and Again we have seen Retail and Small Investors being burnt in Indian Equity Markets in the 1990s and in this Millennium when they enter at lag ends of bull runs and are swept away in the crash and significant corrections that follow.We visualize a re-run of this sad scenario

3  ~ Market Cap to GDP Ratio at a record levels in USA and India

The Market Capitalisation to GDP Ratio in USA and India has surged .Take a look.

The Ratio shows a strongly overvalued US Market and a correction is strongly indicated

Here’s the Indian Market Cap/GDP Story in 2020

Date Sensex Level Market Cap

(Rs Crs)

Mkt Cap/GDP
All Time High January 20,2020 42274 1,59,28,030 0.78
52 Week Low March 24,2020 25639 1,03,69,706 0.51
Current September 4,2020 38357 1,54,50,052 0.84*

 

* On FY 21 Estimated GDP assuming -10% fall in GDP

Provisional FY 20 GDP is Rs 203.4 lakh crs => Estimated FY 21 GDP Rs 183.1 lakh crs at -10% fall

In 2007 Pre Lehman bull run era this Ratio was at a bold Red 1.92 in India and the crash that followed took it to 0.52 inside months as can be seen below.This low level was touched late March 2020 this year in the meltdown and at the time we had issued a SCRIP STANDPOINT that revolved around Cash, Courage & Conviction to take advantage of great value opportunities

Here’s the Indian Market Cap/GDP Trend 2006 to 2015

The Market Cap/GDP Ratio is now at 0.84.That may not seem as alarming as the 1.92 we witnessed in 2007.Yet after being at 0.65 to 0.75 levels in recent years the move up to current level of 0.84,last seen in euphoric 2014 and 2015 when the BJP Party lead a coalition back to power on the Modi wave, raises concern

4        ~ Nifty PE soars past 32,higher than even pre Lehman collapse in 2008 and nearly three times standard deviation

T

he Nifty PE has soared past 32.We last saw 30 at the turn of the Millennium in 2000/2001 in the Ketan Parekh led ICE Bull Run.Before this we also saw it at crazy 64 levels in 1991/92 in the late Harshad Mehta led Bull Run. The subsequent market decimation post these bull runs decimated many.

Even Pre Lehman 2007 Bull Market never saw the Nifty PE at above 30.Now at past 32 and near three standard deviations it is one of the most striking red flags that’s screaming out a loud warning that Rising Stock Market Levels are out of sync with expected lower Corporate Earnings in FY 21 and a correction is strongly indicated. Making hay while this suns shines are innumerable penny stocks on BSE too that have soared without fundamental justification sucking in especially retail investors.

 

  • ~ Gold and Silver at record Highs

 

Date Gold US $/oz Silver US $ /oz Gold/Silver Ratio
August 3,2018 1214.59 15.44 78.7
September 13,2019 1490.65 17.57 84.84
July 3,2020 1775 18.05 98.34
September 4,2020 1933.52 26.72 72.36

In the past two years ,after being relatively calm for many years, Gold and Silver have surged 60% and 73% respectively ,reflecting the rising demand for bullion in  rising global nervousness and uncertainty  on many fronts, economic and geo-political and now Covid helplessness leading the way.In periods of global stress, like at present, Bullion serves as a hedge and sees demand led price rising and should be inversely co-related to Stocks.Yet we find a scenario where both Bullion and Stocks are rising

Conclusion

Caution Red Flags are getting more striking every day warning of a significant Stock Market Reversal. Though it may be not be as intense, sudden and scary as we witnessed in the March Meltdown this year when the Oil Shock and Covid Pandemic Scare were the powerful triggers.

Strict discipline of Asset Allocation needs to be adhered to while balancing out Greed,Fear and Risk and maintaining Cash and Long Term Core in Direct Equity at a sound tactical weightage.

Low Yields are driving increased risk taking and thus driving this rally in Stocks and taking prices and valuations through the ceiling. Bulls are taking comfort in this and there is danger of being lulled into a false sense of security and complacency in that that this rally will go on and on and on as long as the US Fed keeps expanding it’s balance sheet (record Trillions of Dollars already this year) to provide liquidity support. Yet, there’s got to be a Limit.

A Healthy Correction will bring back sanity to Valuations and make a sound base for a sustainable Recovery later in 2021 hopefully in a post Covid era and on a global economic recovery regardless of whether incumbent President Trump trumps the November US Elections or contender Joe Biden does.

Of course Trump has repeatedly warned ,first in June 2019 then again in September 2019 and just a few days ago too on September 2,2020 when Dow crossed 29000,that if he’s not re-elected, the Stock Markets Crash that will follow will be Epic and nothing like anything one has ever seen before

Now would it not be amusing that Trump is re-elected and yet the Stock Markets go down !

Let’s not wait to find out though. Better Safe than Sorry & always good to take trading and investment gains of the Equity Table and even reduce Equity Exposure for now .One can always get back in when there’s some clarity and stability on especially the economic and geo-political front or when we see the imminent launch of a genuine Covid Vaccine

 

Cheers,

Gaurav Parikh, Managing Director [email protected] +9820162597

 

Disclosure & Disclaimer

This Report is under our free access SCRIP STANDPOINT Module.It is for the personal information of the recipient/reader. We are not soliciting any action based upon it. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. It is our Viewpoint for general information purposes only. It does not take into account the particular investment objectives, financial situations, or needs of individuals & other entities .We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be guaranteed. Neither JSAAPL, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their own professional advice. Opinions expressed are our current opinions as of the date appearing on this material only. No part of this material may be duplicated in any form and/or redistributed without JSAAPL’s prior written consent.In case you require any clarification or have any concern, kindly write to us at: [email protected] 

Regd Office: Jeena House, Plot No 170, Om Nagar off Pipeline Road, Andheri (East), Mumbai 400099, Maharashtra, India Corporate Office: Elphinstone Bldg, 1st Fl, Above Starbucks & Croma, Veer Nariman Rd, Horniman Circle, Fort, Mumbai 400001 Tel: +91 22 62999117 /138 ~ Email: [email protected] ~ Website: www.jsalphaa.com ~ CIN: U74999MH2010PTC210730 SEBI Research Analyst Registration : INH000006907 ~ SEBI Investment Adviser Registration : INA000013217

Tube Investments invests in CG Power

 

Details on the Investment: 

Murugappa Group’s engineering firm Tube Investments picked up a controlling stake in CG Power & Industrial Solutions for Rs 700 crore.

CG Power has approved a proposal to issue shares and warrants on a preferential basis.

On 2nd September 2020, Tube Investments upped their investment by Rs 100 crs in the form 68.73 million equity shares of CG Power to be issued to TII at Rs 14.55 per equity share on a preferential basis. This will increase its stake to 58.58% 

Key Financial Data:

52 W H/L: 25/4.6

Market Cap: Rs 1558 crs

FV CMP Equity Capital Networth Total Debt Total Income PAT EPS BV
FY 20 2 25 125 -104 1661 5158 -2167 -34 -2
FY 19 125 2185 2729 8049 -507 -8 35

 

CG Power is engaged in engineering solutions and the power sector and has 13 manufacturing facilities.

The main reasons for losses in CG ower other than the loss from the Power Segment (Rs 222.3 crs)  are due to Exceptional Items (Rs 1788 crs) mainly A provision for a doubtful advancement for Rs 905 crs.  A (provision) of net assets of subsidiaries for Rs 468 crs and a  Liability on deconsolidation of HBE Group of Rs 341 crs. 

Brief History on the Fraud at CG Power: 

In August 2019, CG Power had reported a financial scam found in an investigation by an independent law firm where some employees had carried out unauthorised transactions, which led to an understatement of the liabilities of CG Power and advances to related and unrelated parties of the company and the group. The company said that total liabilities may have been potentially understated by Rs 1,053.54 crore for CG Power and Rs 1,608.17 crore for the whole group.

 As a result, the chairman of the group Mr Gautam Thapar was fired. 

Historical Price Chart: 

Daily Notifications as on 4th September 2020

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20200904-34

1. Scrip code : 526817
Name : Cheviot Co.Ltd.
Subject : Corporate Action-Intimation of Buy back
Pursuant to Regulation 29 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, notice is hereby given that the Board of directors of the Company shall meet through audio-visual means on Tuesday, 8th September, 2020 at 11:30 A.M. to inter-alia consider the proposal for buy-back of ordinary shares of the Company and matters incidental thereto.

2. Scrip code : 532980
Name : Gokul Refoils and Solvent Limited
Subject : Corporate Action-Intimation of Buy back
Intimation of Letter of Offer

3. Scrip code : 541154
Name : Hindustan Aeronautics Limited
Subject : Announcement under Regulation 30 (LODR)-Offer for Sale
Offer of equity shares to the Eligible Employees of Hindustan Aeronautics Limited (“Company”) as per Department of Investment and Public Assets Management, Ministry of Finance, Government of India approval letter dated 31st August, 2020 – Employee Offer for Sale (“Employee OFS”)

Daily Notifications as on 3rd September 2020

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20200903-44

1. Scrip code : 540936
Name : Gautam Gems Limited
Subject : Clarification On Bonus Ratio Of The Company
It is hereby clarify that the Bonus will be issued in proportion of 5(Five) new Fully Paid up Equity Shares of Rs. 10/-(Rupees Ten Only) each for every 6(Six) existing Equity Shares of Rs. 10/-(Rupees Ten Only) each held as on record date and same has been approved by Board of Director and by the shareholders in their respective meetings.

Daily Notifications as on 2nd September 2020

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20200902-28

1. Scrip code : 519491
Name : Ocean Agro (India) Limited
Subject : Delisting- Updates- Exit Letter Of Offer
Please find enclosed copy of the Exit Letter of Offer and Exit Application Form by the Promoter (Acquirer) to the Residual Public Shareholders in terms of the Delisting of Equity Shares of Ocean Agro (India) Limited (Scrip Code: 519491) vide BSE Notice No. 20200820-5 dated August 20, 2020.

 

 

Daily Notifications as on 1st September 2020

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20200901-40

1. Scrip code : 524348
Name : Aarti Drugs Limited
Subject : Corporate Action-Board recommends Bonus Issue
We wish to inform you that Board of Directors at its Meeting held on Thursday, August 20, 2020 has approved the following subject to approval of the Shareholders (through Postal Ballot and e-voting): a) Increase in authorized share capital of the Company from Rs. 25,00,00,000/- (Rupees Twenty Five Crore) to Rs. 120,00,00,000/- (Rupees One hundred and Twenty Crores) by creation of additional 9,50,00,000 (Nine Crores Fifty Lakhs) Equity Shares of Rs. 10/- (Rupees Ten only) each and consequent amendment to clause V of the Memorandum of Association of the Company. b) the issuance of fully paid up Bonus Share in the ratio of 3:1 i.e. 3 (Three) Bonus Equity Share of Rs. 10/- each for 1 (One) fully paid up Equity Share of Rs. 10/- each. The Company will intimate the ‘Record Date’ for determining eligible Shareholders entitled to receive Bonus Shares in due course.

2. Scrip code : 500207
Name : Indo Rama Synthetics (India) Ltd.,
Subject : Withdrawal Of Disclosure Given Under Regulation 10(5) Of The SEBI (Substantial Acquisition Of Shares And Takeover) Regulations, 2011
This is to inform that the Company had earlier received an intimation in relation to the proposed acquisition of 5,35,64,057 equity shares held by Brookgrange Investments Limited in Indo Rama Synthetics (India) Limited by another Promoter Mr. Aloke Lohia, and a disclosure under Regulation 10(5) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 was filed vide a letter dated 11 August 2020. Further, we wish to inform that the Company has now received a letter dated 31st August 2020 from Mr. Aloke Lohia (the ‘Acquirer’) intimating the withdrawal of the above-stated proposed acquisition and the disclosure given under Regulation 10(5) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011, vide a letter dated 11 August 2020.