Good Morning Toasters!

In today’s issue of the Morning Toast, we discuss:

• Kotak ready for its next big move
• Reliance Industries concludes 5 year buying spree
• News around the world
• An educational concept to keep you learning every day 🙂

Market Watch

Nifty: 17,245.65 | -69.85 (-0.40%)
FII Net Bought: INR 481.33 crore

Sensex: 57,684.82 | -304.48 (-0.53%)
DII Net Sold: INR 294.23 crore

Technical Setup

Kotak ready for its next big move? 🚀

• Analysing Kotak Mahindra Bank on a weekly time-frame, indicates that the stock has taken support (1700) more than 5 times in the past one year making those levels an important demand zone
• Lately, prices are consolidating in a tight range, facing resistance along a falling trendline making a descending triangle pattern
• Last week the candle closed on a positive note confirming prices taking support along the demand zone yet again

Awesome! Tell me more? Any other tools?

• Looking at the chart on a daily time frame, shows the stock to be in a steady downtrend, making lower highs and lower lows (see image below)
• Prices in the last 11 trading sessions have been in a steady up move narrowing the gap between the market price and the 200-day SMA
• A breakout above the 200-day SMA and the previous swing high can lead to a good rally in Kotak Mahindra Bank

That’s Great! How do I enter / exit such a setup?

• Wait for prices to give a closing above the 200-day SMA and enter keeping a trailing stop-loss below the 200-day SMA (to limit your losses)

Interesting! Final thoughts?

• On a weekly time frame, the all important support (1700) being maintained and prices consolidating in a descending triangle pattern shows a positive bias
• On a daily time-frame, prices showing a steady up move, trading close to the 200-day SMA adds strength

Keep a track?

Around the World 🌎

• Oracle of Omaha makes a USD 12 Bn comeback- Legendary Investor and Life Guru, Mr. Buffet has splurged for the first time since 2016, acquiring Insurance conglomerate Alleghany for USD 11.6 Bn in cash; Insurance is a Berkshire Bread & Butter industry, and generates a fifth of their profits; Alleghany stock was up ~25% post announcement as shareholders were especially happy with the premium paid by the Oracle; despite an extremely conservative approach (Mr. Buffet sits on ~USD 150 Bn in cash, complaining of expensive valuations & complicated businesses), Berkshire stock crossed USD 500,000 / share (not a typo bro), beating the S&P 500 on an overall basis
• Tesla expands & opens the first factory in Europe – last year, ~85% of the world’s EVs were sold to customers in Europe & China, and with oil prices all over the places (thanks OPEC+) EV demand is expected to soar in the near term; Tesla now operates Gigafactories in 3 locations, including in Shanghai, with the Berlin factory expected to churn out 30k cars by June and ~500k cars/year (a dream according to analysts); Tesla shipped 1M cars last year, which was double their count in 2020, and with a high volume of purchases (for EVs) in Europe, Tesla and the TechnoKing himself (Elon 😏) hopes to reduce the delivery time (currently shipping from Shanghai for this market)

Company News

Reliance Industries concludes 5 year buying spree; what’s up and what do you need to know?

The Deals

• India OG Rockefeller esque group, and one half of the Mr A’s, has concluded a five year acquisition spree, culminating in a net spend >USD 5.6 Billion across Telecoms and Digital Business (~half)
• Originally remembered for being a leader in the Petrochemicals business, including exploration, refining and marketing, Reliance Industries is now synonymous with the next phase in the India growth story (Tech, Retail & Consumer + More)
• The group has made sizeable sectoral bets, across Telecom + Internet, New Energy (Renewables + Green), Media / Education, Retail, Chemicals / Energy, Digital (Tech Startups), Hospitality and Life Sciences (paging Competition Commission of India, 🧐)
• RIL concluded between ~30-60 deals each year b/w 2018 – 2021, deploying USD 5.6 Bn in the process; during a similar period (b/w 2016-21), Reliance Industries has been the highest wealth creator, creating INR 9.6 Lakh crores, beating its own record (b/w 2014-19) in the process

The Details

Retail

• Starting operations in 2006 via a grocery store in AP, Reliance Retail now operates >12,800 stores in >7,000 cities/towns covering a space of ~34.5 Mn sq.ft.
• The subsidiary raised its largest round ever in 2021, garnering ~47,265 crores from several marquee investors (think: Silver Lake, KKR, Mubadala etc), and has in the 9M of FY22 spent ~8,000 crores in acquiring retail assets
• The company has invested in brands & businesses across the value chain, including automations, robotics, fashion labels & brands alike; similarly, expanding to the tech space, RIL invested a sizeable chunk in Dunzo, which operates a fast commerce / hyper-local delivery service
• And the cherry on the cake? Future Retail transaction that has been yo-yoing in the courts; RIL initially purchased the company in 2020, spending ~USD 3.5 Billion for Future groups retail chains/warehouses, with a positive verdict in the case to likely to put rest to the q😉

Digital + Energy Pivots

• Jio Platforms has consistently been mopping up local Indian tech players, to add to the availability on the Jio Smartphone, including plays across music streaming, news / TV and more
• Across the value chain, the company has invested in traditional network plays, including Hathaway, Den and content plays including Glance and Haptik (ed-tech)
• ~1 year ago, Mr A announced an investment of ~INR 75,000 crores into new energy & materials, declaring a massive pivot from what is a core driver of FCF indicating an existential change of direction
• Since then, the company has allocated & invested capital across multiple solar & renewable energy plays, including
  • bagging a 100% stake in a UK-based sodium ion based battery tech co.
  • Norwegian Solar Manufacturing company for an EV OF USD 771 Mn,
  • ~40% stake in Sterling & Wilson RE and more

The Conclusion

• An extremely aggressive inorganic growth strategy, guided in part by a need to diversity interests, and partly to keep pace with other major Indian & global conglomerates (think: TATA, Amazon, Adani) now positions Reliance Industries at the centre of the so-called, India Stack
• Key to track will be the longer term playout of such an aggressive expansion drive, and how monetisation flows through via Jio Platforms and Reliance Retail Ventures, which are the two major bets
• The street & markets will take solace from the core Oil to Chemicals business still spewing cash, and maintaining the bottom line

Keep a track?

What else caught our eye? 👀

HDFC Limited approves loans worth ~INR 2 Trillion this fiscal year (whaaat) 

• Mortgage lender & crown of HDFC Group (outside of Bank), announced that they have approved the highest count of home loans in their 4 decade past, indicating a golden period for the housing sector
• Attributing the growth & tailwinds to a concerted effort by the government to push for affordable housing, coupled with low interest rates and stable property prices, HDFC Limited has recorded stellar growth, without compromising on diligence (apparently)
• The lender indicated that the number of new launches in the last year have surpassed pre-pandemic levels, with strong demand from first time homeowners as well as return buyers looking to upgrade their standard of living

Mr A’s rivalry to intensify

• In the latest sign of India’s favourite children crossing paths, Adani Enterprises is said to be in talks to purchase a 20% stake in Saudi Aramco from the oil rich kingdom’s Public Investment Fund
• This comes months after the proposed deal between Reliance Industries & Aramco was called off after almost 2 years of negotiating, including on-boarding the Chairman of PIF as an Independent Director on the board of RIL
• Adani’s main interest in hydrocarbons continues to be coal, with multiple plants across the country & in Australia; however, the group has repeatedly tried diversifying, initially announcing a strong push towards Green & Renewable Energy and also via multiple proposed investments in other petrochemicals player

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Educational Topic of the day

Reward-To-Risk Ratio (RRR)

The reward-to-risk ratio (RRR) measures a trade’s potential returns against its predetermined risk of loss.

The ratio is computed by dividing the profit that a trade is expected to yield by the loss that the trade may incur.