Category: Personal Finance

Impact of demand and supply on gold price

Increased demand for gold is invariably accompanied by a rise in the yellow metal price. The economic rise of China and India over the last decade has fueled demand for gold, driving up prices. This demand has slowed in recent years, as the country’s economy has stabilized.

Religious practices have an impact on a variety of aspects of Indian culture, including gold pricing and demand. During significant festivals such as Dhanteras, Diwali, Ganesh Chaturthi, and Akshaya Tritiya, gold demand spikes across the country. Religious people consider these major festivals to be auspicious, and they spend these days buying gold jewelry or coins which increases the prices to some extent. When demand for gold increases, so does the price, and vice versa. Gold is a commodity that is always in high demand. Gold pricing is heavily influenced by demand and supply.

Impact of inflation on gold price

Indians prefer to invest in gold because gold prices react to inflation. When inflation rises, the value of a currency falls. As a result, many choose to save their money in the form of gold. Gold functions as a hedging measure against inflationary conditions when it remains high for an extended length of time. Gold’s value is regarded as constant in the long run because the value of the currency fluctuates.

Gold has long been regarded as a store of value. Because it is a tangible commodity, it cannot be printed like money, and its value is unaffected by government interest rate decisions. Because gold has historically held its value, it can be used as a type of insurance against economic downturns.

As a result, growing inflation might hypothetically be said to drive increased demand for gold, which in turn drives higher gold prices.

Impact of stocks on gold price

Between the Sensex and gold prices, there is an inverse link. When investors sense a bullish trend in the stock market, they prefer to invest more in stocks in order to gain from future higher stock prices. The demand for gold diminishes as a result of this shift in preference, lowering gold prices. When the stock market falls and investors believe the bearish trend will continue for some time, they choose to invest their excess funds in safe haven assets such as gold, causing gold demand to rise and gold prices to rise. It means that gold prices and the Sensex have an inverse connection.

Impact of currency on gold price

The price of a country’s currency in terms of another currency is called an exchange rate. To put it another way, it’s the rate at which one currency can be converted into another. However, that value can change over time, and it can be quite volatile at times. When the dollar’s value rises in relation to other currencies throughout the world, the price of gold tends to decline in US dollar terms. The reason for this is that gold gets more expensive in other currencies. Gold, on the other hand, tends to rise as the value of the US dollar falls, as it becomes cheaper in other currencies.

The price of gold tends to be inversely proportional to the value of the US dollar. Gold prices tend to fall as the US dollar’s strength grows. This is why many gold investors keep an eye on the US dollar and currency exchange rates.

Impact of Crude oil prices on gold

Because the two have such a close direct relationship, crude oil prices can be utilized as a trustworthy proxy for gold price changes. Gold prices tend to rise and fall in lockstep with crude oil prices throughout time. This is due to the fact that gold, like oil, is extracted from the earth and is standardized and interchangeable. 15 Because energy is the primary cost of production for gold, changes in long-term oil prices have a direct correlation with gold price swings. Furthermore, rising crude oil prices result in inflation, which is a sign of an expanding economy.

Impact of import duty on gold price

Due to the fact that gold is not produced in India, it is imported from other nations, and import tariff plays a significant impact in price variations. Because of the large number of transactions, the central bank’s choice to buy or sell gold can have an impact on the price.

Conclusion

Other factors that influence gold prices in India include geopolitical considerations, government reserves, favorable monsoon rains, and the jewellery market. The price of gold in India is influenced by a variety of internal and external variables. It’s also impossible to ignore the role of India’s growing population in driving up gold demand.

Consider the above principles and make sure your investments are in line with your investing strategy and risk tolerance. While gold is a smart investment during these times, it comes with its own set of concerns. Before you invest, be sure you have a complete understanding of the situation.

Orient Electric

The brokerage sees an upside target of 24% on the stock of Orient Electric from the current levels. According to the brokerage the annual report highlights improving product reach of existing categories, increasing adoption of digitization, and focus on cost saving programs were among the key focus areas in FY21.

“The cost saving initiative titled Sanchay’ – has been repositioned into an entity-wide overarching ideation and cost consciousness platform, with the program enabled by a Cloud hosted digitized platform,” Motilal Oswal Institutional Equities has said.

Orient Electric: Buy with a target price of Rs 395

According to the brokerage there is a focus on innovative new launches. “The pandemic presented an opportunity to Orient Electric to leverage its innovation capability and stay agile. It launched ‘UV Sanitech’- a UV-C light-based sanitization chamber that can sanitize all inanimate and daily use objects in four minutes from viruses and bacteria, including coronavirus,” the brokerage has said.

“We believe Orient Electric is best placed to capture pent-up demand, with its strong manufacturing and distribution capabilities. We forecast a revenue/EBITDA /adjusted net profit of Compounded Annual Growth Rate of 17%/19%/23% over FY21-24E. We value Orient Electric at 45 times FY23E EPS, with a target price of Rs 395. At the current market price, the stock trades at a FY22E/FY23E P/E of 49 times and 37 times.

Our longer term thesis indicates a reduction in the margin differential between Orient Electric and leading FMEG peers (refer to our initiation report). On a FY23E P/E multiple basis, Orient Electric is trading at a discount of 33%/9% v/s Havells and Crompton, while on an EV/EBITDA basis, the discount stands at 43%/32%. We maintain our Buy rating on the stock,” the brokerage has said.

Divis Labs: Buy the stock for a price target of Rs 5,750

According to Motilal Oswal Institutional Equities, the backward integration efforts over the past 2-3 years have fructified at a time when peers are facing issues in terms of raw material and logistics cost increases. In fact, this has led to better profitability for the quarter. Divis Labs remains well poised in terms of both product development and manufacturing capacity to sustain superior return ratios over the next 4-5 years.

“We raise our EPS estimate by 5% and 4% for FY22/FY23 factoring in operational efficiency, higher business opportunities in the Sartans portfolio, and enhanced growth prospects in the CS segment.

We continue to value Divis Labs at 36 times 12 month forward earnings to arrive at target Price of Rs 5,750 on the stock. We remain positive on Divis Labs on the back of its strong chemistry skill sets driving opportunities in the CS/Generics segment and continued cost reduction in production driving market share and profitability. Reiterate Buy,” the brokerage has said.

Disclaimer

Investors should not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor.

Buy Ipca Laboratories for a target of Rs 2,560 on the stock

According to ICICI Securities, Ipca is a fully integrated pharmaceutical firm that produces approximately 350 formulations, with exports accounting for 48 percent of total revenue. Pain management, cardiovascular and anti-diabetics, and anti-malarial are the most profitable therapeutic categories, accounting for 75% of total income.

“Apart from Ipca, we prefer Ajanta in our healthcare coverage because it focuses on launching a large number of first-time launches both domestically and internationally. BUY with a target price of Rs 2695”, the brokerage has said.

Why ICICI Securities is bullish on Ipca Laboratories?

“Ipca’s share price has grown by ~4.1x over the past five years (from ~Rs 488 in June 2016 to ~Rs 2026 levels in June 2021). We change our view from HOLD to BUY on this stock due to good traction in domestic formulations and growth in the medium term Target Price and Valuation: We value Ipca at Rs 2560 i.e. 25x P/E on FY23E EPS,” the brokerage has said.

Key triggers for future price-performance:

• The total portfolio is poised for stable expansion, with incremental growth in other medicines (excluding malaria), especially noncommunicable diseases like pain management, cardio-diabetology, and so on.
• Due to USFDA import alerts for the Ratlam factory, which is the only API source for Silvassa and Pithampur formulations, momentum in the US will take longer.
• Sustained traction from branded and generics exports sales, along with a resurgence in the EU, is anticipated to buffer the US gap.

Buy Caplin Point Laboratories: ICICI Securities

Caplin earns all of its money from exports, with 92 percent of its sales coming from Emerging Markets (LatAm + Africa), where it has an end-to-end business strategy that includes last-mile logistics solutions for its exclusive distributors.

According to the brokerage, Caplin announced strong performance during the first quarter of FY22.

Sales increased by 25.1 percent year over year to Rs 300.4 crore; EBITDA increased by 29.3 percent year over year to Rs 92.6 crore, and adjusted PAT increased by 70.9 percent to Rs70.9 crore (up 29.9 percent YoY).

Why ICICI Securities is bullish?

“What should investors do? Caplin’s share price has grown by ~3.8x over the past five years (from ~Rs 231 in July 2016 to ~Rs 884 levels in July 2021). We maintain our BUY rating on the stock due to visible growth in the medium to long term. Target Price and Valuation: We value Caplin at Rs 1135 i.e. 24x P/E on FY23E EPS,” the brokerage has said.

Key triggers for future price performance:

• The company has developed its own brand with long-drawn ambitions and significant capex by succeeding in lesser-known CA markets and cracking the US generic pharma code of injectable.
• Portfolio consists of 20 ANDAs that have been filed, 15 of which have been approved. In addition, the company has 45+ goods in the works.
• The momentum of growth is expected to continue, owing to additional front-end expansion, a larger product basket, a shift in product mix, and the launch of own-brand products.

Buy Abbott India with 16% upside

Abbott India is one of the fastest-growing MNC pharma businesses on the stock exchange. It has consistently surpassed the industry in areas such as women’s health, GI, metabolic, pain, and CNS, to name a few.

According to the brokerage, Abbott announced strong Q1FY22 performance. Sales increased 14.4% year on year to Rs 1217.8 crore. In Q1FY22, EBITDA was Rs 265 crore, up 13% year on year, with margins of 21.8 percent and PAT was 195.8 crore as a result of this (up 8.5 percent YoY).

Why buy the shares of Abbott?

“What should investors do? Abbott share price has grown by ~4x over the past five years (from ~Rs 4666 in July 2016 to ~Rs 19012 levels in July 2021). We maintain our BUY rating on the stock given the good Q1 performance and possible medium term traction. Target Price and Valuation: We value Abbott at Rs 20360 i.e. 42x P/E on FY23E EPS,” the brokerage has said.

Key triggers for future price-performance:

• Abbott has a strong and long-term business model based on consistent growth, a debt-free balance sheet, favourable market dynamics such as doctor prescription stickiness, and decreased perceived risk concerns.
• Abbott’s great track record in power brands and capacity to launch new products on a constant basis (+100 launches in the last ten years).

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house, Motilal Oswal are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are at record highs, with the Nifty crossing the 16,000 points mark.

Gold rates on Monday at the local jewellers could fall once again, after taking a drop of nearly Rs 800 to Rs 1,000 over the weekend for 22 karats gold for 10 grams.

Fall in international prices in Asian trade on Monday morning could lead to a further fall in the Indian cities. Gold in Asia was down 1.3%. In India, gold prices follow the international prices, and a similar amount of drop of 1.3% could mean that we could see gold drop by around Rs 500 to Rs 600.

Having said that we also need to remember that the fall could also be impacted if the rupee gains against the dollar. If the rupee falls against the dollar, the drop could be restricted. At the moment 22 karats gold in the city of Chennai was trading at Rs 45,700 per 10 grams, Bangalore it was Rs 43,750 per 10 grams, in Hyderabad gold was at Rs 43,850 and Kerala 22 karats gold was also trading at Rs 43,850 per 10 grams.

International prices of gold fall

Gold in the global markets were down to $1738.20 an ounce in Asian trade on Monday morning, after closing at $1763 an ounce over the weekend.

In fact, Gold Oct dropped to a low of $1,677 before recovering to trade at $1738.20 an ounce. Silver October futures lost 3.1% to $23.78. Platinum was also off, losing 1.24% to $960 for October futures.

The fall in the prices of gold begun late last week after the US jobs data revealed that unemployment fell sharply and wages rose. This means there are worries that the US Fed could announce the withdrawal of its taper programme, much earlier than anticipated.
All eyes would be on the Jackson Hole meeting, later this month, where it is expected US Far Chair person, Jerome Powell would be speaking.

If any hints of withdrawal of US Tapering is suggested, we could see gold prices fall even further, given that liquidity from the system is withdrawn. Many investors are betting on the fact that gold prices could fall even further. Indian markets would watch what happens to gold on the MCX, when the markets open at 9 am today. A drop of around Rs 400 to Rs 600 per 10 grams looks almost certain and gold futures on the MCX are expected to have another fall.

Investors looking to buy should be cautious as there is a possibility of a further downside in gold. If you are looking to invest, the ideal way would be to wait for declines before jumping in.

In a survey published late last week by a leading gold portal, there was not one bullish vote among Wall Street analysts. This means there is a possibility of bearish trend in gold continuing at least in the short term. The global economy too is recovering and with vaccination happening across the globe, gold outlook is unlikely to improve. At the moment there is no incentive or triggers for gold. Physical demand too over the last few quarters have been declining.