Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

iShares MSCI ACWI ETF / Technical Analysis

<ul>
<li>There continues to be little traction above $93 on MSCI ACWI (ACWI-US), which remains the top-end of our anticipated 2023 trading range. Important downside targets are $86, $84, and $75-77.</li>
<li>Additionally, the EURO STOXX 50 remains below 2-year resistance at 4400-4415.</li>
<li>We remain overweight Europe, Japan, and India, and we prefer to only add exposure on a pullback -- especially in Japan where indexes are bullish yet extended.</li>
</ul>


There continues to be little traction above $93 on MSCI ACWI (ACWI-US), which remains the top-end of our anticipated 2023 trading range. Important downside targets are $86, $84, and $75-77.
Additionally, the EURO STOXX 50 remains below 2-year resistance at 4400-4415.
We remain overweight Europe, Japan, and India, and we prefer to only add exposure on a pullback -- especially in Japan where indexes are bullish yet extended.


No Traction Above $93 on ACWI-US or 4400-4415 on EURO STOXX 50. Buys in Defensives/Japan/EM

Specialist in Indian Banking and Economic Research

Hemindra Hazari

Government banks have been derided for indulging in ‘phone banking’ (being instructed on the telephone by ruling party politicians and civil bureaucrats to lend to specific unworthy companies). But what the Enforcement Directorate’s (ED) affidavit in the Delhi Court (as disclosed by the media -- <a href="https://www.hindustantimes.com/india-news/71-loans-given-in-kapoor-s-tenure-turned-bad-ed-101633976406867.html" target="_blank" rel="noopener">here</a> and <a href="https://economictimes.indiatimes.com/industry/banking/finance/enforcement-directorate-says-bank-loan-fraud-was-mutually-beneficial-to-avantha-yes-bank/articleshow/86699558.cms?from=mdr" target="_blank" rel="noopener">here</a>)  reveals is that senior executives from the private sector <a href="https://www.smartkarma.com/entities/yes-bank-ltd" target="_blank" data-smartkarma-citation="entities:767:1" rel="noopener">Yes Bank (YES IN)</a> were no different from their government counterparts. The only difference is that the concerned senior executives at Yes Bank were excessively paid, and were highly qualified persons from premier institutions, as compared with government bankers. The ED’s charge sheet alleges that senior executives at Yes Bank knowingly engaged in sham transactions, and the accused Yes Bank officials put the onus on the transactions on the now jailed Rana Kapoor, the erstwhile founder-Chief Executive Officer (CEO), Yes Bank. Despite their educational qualifications, previous work experience and the senior positions they held, they allowed themselves to  be reduced to being low-paid clerks – or worse, since the latter at least know enough not to engage in fraudulent transactions. The entire edifice of Yes Bank’s credit appraisal, independent risk management and board oversight was a myth, as nobody recorded strong objections to giving loans to a shell company and structuring a product whose sole objective was a spurious show of compliance with regulatory guidelines.   Stakeholders, media and analysts rarely get to see the inner working of a bank and how loans are appraised, independently evaluated by risk management and subsequently monitored. The ED’s affidavit, as reported by the media, provides such a rare inside knowledge view of how a poor quality loan for a dubious purpose was conceived, structured and approved by an over-qualified and overpaid team, solely on the basis of instructions from the CEO. What is equally disturbing, but also telling, is that three of the accused have left the bank, and have taken up fresh engagements with their new organisations – who, presumably, were impressed with these persons’ work credentials at Yes Bank, and wanted them to continue the same practices for their new employers.What is worrying is that Yes Bank’s practice of having senior executives with impressive qualifications, stellar resumes, and imposing titles, knowingly engaging in such transactions may not be the exception in the private financial sector. Regulatory agencies have investigated or are currently investigating similar transactions at <a href="https://hemindrahazari.com/2021/06/16/cg-power-loan-scandal-indusind-bank-pioneers-lending-without-documents-to-a-firm-with-no-assets/" target="_blank" rel="noopener">Indusind Bank</a>, <a href="https://hemindrahazari.com/2021/06/23/aditya-birla-finances-loans-to-a-shell-company-another-reason-why-corporates-shouldnt-be-allowed-to-control-banks/" target="_blank" rel="noopener">Aditya Birla Finance</a>, <a href="https://economictimes.indiatimes.com/prime/corporate-governance/how-an-eur44-million-loan-from-stanchart-put-murugappas-cg-power-between-sebi-and-a-hard-place/primearticleshow/83285540.cms" target="_blank" rel="noopener">Standard Chartered Bank</a> and <a href="https://hemindrahazari.com/2021/08/31/sebi-exposes-kotak-mahindra-mutual-funds-policy-of-investing-blindly/" target="_blank" rel="noopener">Kotak Mahindra Mutual Fund</a>. This indicates that the situation may be systemic. It appears that, for all their experience and seniority, key senior executives in the private financial sector are paid inflated packages precisely for engaging in the intellectually undemanding task of ‘phone banking’. The valuations of private financial firms may need to be reassessed in the light of these disclosures.

Government banks have been derided for indulging in ‘phone banking’ (being instructed on the telephone by ruling party politicians and civil bureaucrats to lend to specific unworthy companies). But what the Enforcement Directorate’s (ED) affidavit in the Delhi Court (as disclosed by the media -- here and here)  reveals is that senior executives from the private sector Yes Bank (YES IN) were no different from their government counterparts. The only difference is that the concerned senior executives at Yes Bank were excessively paid, and were highly qualified persons from premier institutions, as compared with government bankers. The ED’s charge sheet alleges that senior executives at Yes Bank knowingly engaged in sham transactions, and the accused Yes Bank officials put the onus on the transactions on the now jailed Rana Kapoor, the erstwhile founder-Chief Executive Officer (CEO), Yes Bank. Despite their educational qualifications, previous work experience and the senior positions they held, they allowed themselves to  be reduced to being low-paid clerks – or worse, since the latter at least know enough not to engage in fraudulent transactions. The entire edifice of Yes Bank’s credit appraisal, independent risk management and board oversight was a myth, as nobody recorded strong objections to giving loans to a shell company and structuring a product whose sole objective was a spurious show of compliance with regulatory guidelines.   Stakeholders, media and analysts rarely get to see the inner working of a bank and how loans are appraised, independently evaluated by risk management and subsequently monitored. The ED’s affidavit, as reported by the media, provides such a rare inside knowledge view of how a poor quality loan for a dubious purpose was conceived, structured and approved by an over-qualified and overpaid team, solely on the basis of instructions from the CEO. What is equally disturbing, but also telling, is that three of the accused have left the bank, and have taken up fresh engagements with their new organisations – who, presumably, were impressed with these persons’ work credentials at Yes Bank, and wanted them to continue the same practices for their new employers.What is worrying is that Yes Bank’s practice of having senior executives with impressive qualifications, stellar resumes, and imposing titles, knowingly engaging in such transactions may not be the exception in the private financial sector. Regulatory agencies have investigated or are currently investigating similar transactions at Indusind Bank, Aditya Birla Finance, Standard Chartered Bank and Kotak Mahindra Mutual Fund. This indicates that the situation may be systemic. It appears that, for all their experience and seniority, key senior executives in the private financial sector are paid inflated packages precisely for engaging in the intellectually undemanding task of ‘phone banking’. The valuations of private financial firms may need to be reassessed in the light of these disclosures.

Yes Men at Yes Bank, and Elsewhere: ‘Phone Banking’ in the Private Sector

India Equity Analyst - Fundamental & Thematic, Beat the Street

Sudarshan Bhandari

India Equity Analyst - Fundamental & Thematic

Beat the Street

Beat The Street was founded by Nimish Maheshwari and Sudarshan Bhandari, both of whom are Chartered Accountants by Profession, known for their expert analysis in the fields of Business, Sectoral analysis, and Corporate governance.

With a strong social media presence of 45,000+ Subscribers across various platforms, they are considered trusted voices in the industry. Their insights and analysis have been featured in some of India’s most prominent publications, including the Economic Times, Dalal Street Investment Journal, The Morning Context, and The Ken.

Their analysis on Bankrupt & Insolvent companies has been instrumental in saving investors from significant losses. They have a keen eye for identifying red flags and has identified exclusive redflags earlier in Vedanta, Nykaa, Dhani Services, Adani and many more.

Read Business Not Stock Prices

Equity Bottom-Up

<ul>
<li>Grasim's 71%-owned Aditya Birla Renewables (ABRen) will acquire 100% of Solenergi Power (Sprng Energy) from Shell for Rs. 17,200 crore enterprise value.</li>
<li>The deal nearly doubles ABRen's portfolio to 9.3–9.4 GWp, reshapes India's renewables pecking order, and tests Grasim's balance sheet discipline.</li>
<li>Valuation looks attractive versus listed peers, but funding structure, leverage and GIP's equity role will decide whether this creates or destroys near-term value.</li>
</ul>


Grasim's 71%-owned Aditya Birla Renewables (ABRen) will acquire 100% of Solenergi Power (Sprng Energy) from Shell for Rs. 17,200 crore enterprise value.
The deal nearly doubles ABRen's portfolio to 9.3–9.4 GWp, reshapes India's renewables pecking order, and tests Grasim's balance sheet discipline.
Valuation looks attractive versus listed peers, but funding structure, leverage and GIP's equity role will decide whether this creates or destroys near-term value.


Grasim Doubles Down on Renewables with ₹17,200 Crore Sprng Energy Deal

The ET Prime 3-part series based on the Securities and Exchange Board of India’s (SEBI) show cause notices to <a href="https://economictimes.indiatimes.com/prime/corporate-governance/how-an-eur44-million-loan-from-stanchart-put-murugappas-cg-power-between-sebi-and-a-hard-place/primearticleshow/83285540.cms" target="_blank" rel="noopener">Standard Chartered Bank</a>, <a href="https://economictimes.indiatimes.com/prime/corporate-governance/how-a-usd40-million-loan-to-cg-power-arm-in-gift-city-put-indusind-bank-under-sebi-glare/primearticleshow/83342665.cms" target="_blank" rel="noopener">Indusind Bank</a>  and <a href="https://economictimes.indiatimes.com/prime/corporate-governance/sebi-slaps-show-cause-on-aditya-birla-finance-for-realty-loans-to-a-shell-firm-to-help-thapars/primearticleshow/83518285.cms" target="_blank" rel="noopener">Aditya Birla Finance</a> highlighted the manner in which these institutions allegedly ‘evergreened’ their exposure and shifted their loans from the unlisted Thapar group entities to the listed CG Power and Industrial Solutions (CG Power) in 2017-2018. These transactions, if proven, would demonstrate the misuse of their banking and non-bank finance company license In all three cases a similar structure (see Annexure) was adopted: transactions were layered by providing loans to a shell company, thus eventually shifting liabilities from founder/promoter unlisted companies to CG Power and Industrial Solutions (CG Power), a publicly listed company. Obviously, this adversely affects the minority shareholders of CG Power.The modus operandi of providing foreign exchange loans to a foreign subsidiary of an Indian company to repay rupee loans of the parent, thereby ‘evergreening’ the loan, was not new. This analyst had first highlighted it in a research note in August 2012, when he was Head of Research and banking analyst with a sell-side firm. The dubious practice in these cases by the mentioned entities, apart from alleged ‘evergreening’, was the use of this route to shift liabilities from an unlisted company to a listed company. The ET Prime scoop has perhaps for the first time made public documentary proof of specific cases of the money trail and of routing funds through various companies to achieve the objective.The purpose of lending in foreign exchange to a foreign subsidiary of a domestic company, and layering the transactions through various companies, was to confuse auditors and regulators, and to hide the objective of the end-use of the loans. The brazenness of these transactions (transferring the funds to other companies within the same day or in a few days) and the possible violation of the Reserve Bank of India (RBI) <a href="https://rbidocs.rbi.org.in/rdocs/notification/PDFs/15MDC8CEB9A7BDE64745B9BE1DCEC3293CA1.PDF" target="_blank" rel="noopener">norms</a> for the end-use of external commercial borrowings indicate that these banks believed the regulators would not catch them, and it is therefore possible that it was a common practice.That these transactions were systemic, with a top-down approach, and not the work of ‘rogue’ employees, is visible in the fact that these dubious loans were cleared by the risk department and key divisional heads at Indusind Bank and Aditya Birla Finance, far from being punished for structuring the loans, were rewarded through promotions (<a href="https://hemindrahazari.com/2021/06/16/cg-power-loan-scandal-indusind-bank-pioneers-lending-without-documents-to-a-firm-with-no-assets/" target="_blank" rel="noopener">here</a> and <a href="https://hemindrahazari.com/2021/06/23/aditya-birla-finances-loans-to-a-shell-company-another-reason-why-corporates-shouldnt-be-allowed-to-control-banks/" target="_blank" rel="noopener">here</a>) and allowed to retain their jobs. It can therefore be presumed that these transactions had also been approved by their boards of directors, and they have to be held accountable.The important fact is that the three entities targeted by SEBI are not some fly-by-night operators. Rather, they are well established banks and an NBFC belonging to the house of Aditya Birla. If this analyst in 2012 was confident to publish and inform investors about such practices, as the facts were well known within banking circles, why was the banking/NBFC regulator not taking action against senior officials? It is on account of the lack of action by the RBI that senior officials in these entities were brazenly structuring such loans in 2017-2018. Sadly, to date, the Reserve Bank of India (RBI) has not exerted its considerable muscle to bring the key officials and the boards of directors in these institutions to account. So far the RBI has been content with levying monetary penalties on errant institutions; whereas in fact the regulator in the cases unearthed by SEBI should not only sack the key senior executives but render them unemployable in the financial sector, and also remove independent directors for their complicity. As long as the regulator mollycoddles errant senior executives and independent directors, such malpractices will continue to flourish as, understandably, the culprits have no fear of the regulator.

The ET Prime 3-part series based on the Securities and Exchange Board of India’s (SEBI) show cause notices to Standard Chartered Bank, Indusind Bank  and Aditya Birla Finance highlighted the manner in which these institutions allegedly ‘evergreened’ their exposure and shifted their loans from the unlisted Thapar group entities to the listed CG Power and Industrial Solutions (CG Power) in 2017-2018. These transactions, if proven, would demonstrate the misuse of their banking and non-bank finance company license In all three cases a similar structure (see Annexure) was adopted: transactions were layered by providing loans to a shell company, thus eventually shifting liabilities from founder/promoter unlisted companies to CG Power and Industrial Solutions (CG Power), a publicly listed company. Obviously, this adversely affects the minority shareholders of CG Power.The modus operandi of providing foreign exchange loans to a foreign subsidiary of an Indian company to repay rupee loans of the parent, thereby ‘evergreening’ the loan, was not new. This analyst had first highlighted it in a research note in August 2012, when he was Head of Research and banking analyst with a sell-side firm. The dubious practice in these cases by the mentioned entities, apart from alleged ‘evergreening’, was the use of this route to shift liabilities from an unlisted company to a listed company. The ET Prime scoop has perhaps for the first time made public documentary proof of specific cases of the money trail and of routing funds through various companies to achieve the objective.The purpose of lending in foreign exchange to a foreign subsidiary of a domestic company, and layering the transactions through various companies, was to confuse auditors and regulators, and to hide the objective of the end-use of the loans. The brazenness of these transactions (transferring the funds to other companies within the same day or in a few days) and the possible violation of the Reserve Bank of India (RBI) norms for the end-use of external commercial borrowings indicate that these banks believed the regulators would not catch them, and it is therefore possible that it was a common practice.That these transactions were systemic, with a top-down approach, and not the work of ‘rogue’ employees, is visible in the fact that these dubious loans were cleared by the risk department and key divisional heads at Indusind Bank and Aditya Birla Finance, far from being punished for structuring the loans, were rewarded through promotions (here and here) and allowed to retain their jobs. It can therefore be presumed that these transactions had also been approved by their boards of directors, and they have to be held accountable.The important fact is that the three entities targeted by SEBI are not some fly-by-night operators. Rather, they are well established banks and an NBFC belonging to the house of Aditya Birla. If this analyst in 2012 was confident to publish and inform investors about such practices, as the facts were well known within banking circles, why was the banking/NBFC regulator not taking action against senior officials? It is on account of the lack of action by the RBI that senior officials in these entities were brazenly structuring such loans in 2017-2018. Sadly, to date, the Reserve Bank of India (RBI) has not exerted its considerable muscle to bring the key officials and the boards of directors in these institutions to account. So far the RBI has been content with levying monetary penalties on errant institutions; whereas in fact the regulator in the cases unearthed by SEBI should not only sack the key senior executives but render them unemployable in the financial sector, and also remove independent directors for their complicity. As long as the regulator mollycoddles errant senior executives and independent directors, such malpractices will continue to flourish as, understandably, the culprits have no fear of the regulator.   

How Diversion and Layering Became a Common Modus Operandi, While the Regulator Slept

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Thematic (Sector/Industry)

RBI announced its monetary policy updates yesterday (Feb 6, 2020). While it left the interest rates unchanged, it signaled accommodative stance with a focus on supporting growth conditional upon inflation remaining within target range.
Alongside the regular monetary policy announcements, RBI announced a few pertinent policy measures to support stressed sectors like real estate, auto and MSME, which in turn is likely to have strong positive cascading effects for Indian financials.
Key Takeaway: All in all, while RBI did not cut rates, it announced several measures to boost liquidity and credit growth in the economy. Also, the signalling from RBI in terms of growth being a key priority and its focus on reviving the economy, was a strong positive. Inflation, while a concern at this point, appears to be under check as most drivers of uptick in inflation have been seasonal and unlikely to persist. Overall, RBI's policy measures bode well for reviving credit growth and liquidity availability with potential for positive knockdown effects for the overall economy. This should help Indian financials significantly across various metrics such as credit growth, NIM expansion and improvement in asset quality. We remain optimistic on the Indian financials sector, including select NBFCs and HFCs. For more details, please also refer to some of our recent coverage on Indian Financials:
<a href="https://www.smartkarma.com/insights/lic-housing-finance-asset-quality-weakens-but-green-shoots-emerging" target="_blank" data-smartkarma-citation="insights:36257" rel="noopener">LIC Housing Finance: Asset Quality Weakens But Green Shoots Emerging</a> 
<a href="https://www.smartkarma.com/insights/bajaj-finance-the-stellar-growth-streak-continues" target="_blank" data-smartkarma-citation="insights:36170" rel="noopener">Bajaj Finance: The Stellar Growth Streak Continues!</a> 
<a href="https://www.smartkarma.com/insights/ujjivan-small-finance-bank-growth-momentum-continues-ripe-for-scaling-up" target="_blank" data-smartkarma-citation="insights:36122" rel="noopener">Ujjivan Small Finance Bank: Growth Momentum Continues; Ripe for Scaling Up</a>
<a href="https://www.smartkarma.com/insights/edelweiss-a-turnaround-idea-shifting-from-fund-based-to-fee-based-business-model" target="_blank" data-smartkarma-citation="insights:35488" rel="noopener">Edelweiss - A Turnaround Idea: Shifting from Fund-Based to Fee-Based Business Model</a>

RBI announced its monetary policy updates yesterday (Feb 6, 2020). While it left the interest rates unchanged, it signaled accommodative stance with a focus on supporting growth conditional upon inflation remaining within target range.
Alongside the regular monetary policy announcements, RBI announced a few pertinent policy measures to support stressed sectors like real estate, auto and MSME, which in turn is likely to have strong positive cascading effects for Indian financials.
Key Takeaway: All in all, while RBI did not cut rates, it announced several measures to boost liquidity and credit growth in the economy. Also, the signalling from RBI in terms of growth being a key priority and its focus on reviving the economy, was a strong positive. Inflation, while a concern at this point, appears to be under check as most drivers of uptick in inflation have been seasonal and unlikely to persist. Overall, RBI's policy measures bode well for reviving credit growth and liquidity availability with potential for positive knockdown effects for the overall economy. This should help Indian financials significantly across various metrics such as credit growth, NIM expansion and improvement in asset quality. We remain optimistic on the Indian financials sector, including select NBFCs and HFCs. For more details, please also refer to some of our recent coverage on Indian Financials:
LIC Housing Finance: Asset Quality Weakens But Green Shoots Emerging 
Bajaj Finance: The Stellar Growth Streak Continues! 
Ujjivan Small Finance Bank: Growth Momentum Continues; Ripe for Scaling Up
Edelweiss - A Turnaround Idea: Shifting from Fund-Based to Fee-Based Business Model 

RBI Policy Update: A Boost For Indian Financials

India

Aditya Birla Capital Ltd (ABCL) is a non-banking financial company and the financial services flagship of the Aditya Birla Group. It offers a comprehensive suite of financial solutions, including loans, investments, insurance, and payments. The company is headquartered in Mumbai, Maharashtra, India, and was founded in 2007.

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Aditya Birla Capital (ABCAP IN)

No Traction Above $93 on ACWI-US or 4400-4415 on EURO STOXX 50. Buys in Defensives/Japan/EM

No Traction Above $93 on MSCI $ACWI or 4400-4415 on EURO #STOXX 50. Continues to reinforce our view from early-January that $93 on ACWI caps upside...

Vermilion Research

Yes Men at Yes Bank, and Elsewhere: ‘Phone Banking’ in the Private Sector

It appears that, for all their experience & seniority, key senior executives in the pvt financial sector are paid inflated packages precisely for...

Hemindra Hazari

Grasim Doubles Down on Renewables with ₹17,200 Crore Sprng Energy Deal

Grasim's ABRen to acquire Sprng Energy from Shell for Rs. 17,200 crore, reshaping India's renewables sector and testing balance sheet discipline.

Sudarshan Bhandari

How Diversion and Layering Became a Common Modus Operandi, While the Regulator Slept

As long as the regulator mollycoddles errant senior executives and independent directors, such malpractices will continue to flourish as,...

Hemindra Hazari

RBI Policy Update: A Boost For Indian Financials

RBI announced its monetary policy updates yesterday (Feb 6, 2020). While it left the interest rates unchanged, it signaled accommodative stance...

Ankit Agrawal, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

No Traction Above $93 on ACWI-US or 4400-4415 on EURO STOXX 50. Buys in Defensives/Japan/EM

No Traction Above $93 on MSCI $ACWI or 4400-4415 on EURO #STOXX 50. Continues to reinforce our view from early-January that $93 on ACWI caps upside...

Vermilion Research

Yes Men at Yes Bank, and Elsewhere: ‘Phone Banking’ in the Private Sector

It appears that, for all their experience & seniority, key senior executives in the pvt financial sector are paid inflated packages precisely for...

Hemindra Hazari

Grasim Doubles Down on Renewables with ₹17,200 Crore Sprng Energy Deal

​Grasim's ABRen to acquire Sprng Energy from Shell for Rs. 17,200 crore, reshaping India's renewables sector and testing balance sheet discipline.

Sudarshan Bhandari

How Diversion and Layering Became a Common Modus Operandi, While the Regulator Slept

As long as the regulator mollycoddles errant senior executives and independent directors, such malpractices will continue to flourish as,...

Hemindra Hazari

RBI Policy Update: A Boost For Indian Financials

RBI announced its monetary policy updates yesterday (Feb 6, 2020). While it left the interest rates unchanged, it signaled accommodative stance...

Ankit Agrawal, CFA

Grasim's ABRen to acquire Sprng Energy from Shell for Rs. 17,200 crore, reshaping India's renewables sector and testing balance sheet discipline.