Stock market analysis and stories by Aditi Priya

Articles by Aditi Priya

23 Jan 2025

Chart of the Week: Indian Rupee reaches record low against the US Dollar

The Indian Rupee (INR) has been under pressure over the last year, facing both global and domestic economic challenges. The rupee has been hit by the US Fed’s policy moves, rising crude oil prices and domestic inflation, depreciating sharply.

A selloff in Indian assets has led this month to the rupee’s biggest drop in two years. It fell 0.6% to a record low of 86.6 against the US dollar on January 13. Domestically, inflation has also put pressure on the rupee by reducing purchasing power.

With the new RBI Governor at the helm, reduced intervention by the Reserve Bank of India (RBI) has added to the pressure.

Reduced RBI intervention weakens INR

One of the primary reasons for the recent, sharp decline is the Reserve Bank of India’s (RBI) policy shift under its new governor. The RBI, under new governor Sanjay Malhotra, has opted to let the rupee move more freely, and has limited aggressive actions to stabilize the currency. This is a shift from the previous approach by ex–Governor Shaktikanta Das, who kept tight control over the rupee, only allowing gradual changes in its value.

Shaktikanta Das served as the RBI Governor from December 2018, managing crises like the pandemic, geopolitical tensions, and instability in the non-banking financial sector. The RBI, under his governance, worked to mitigate rupee volatility. To defend the rupee, the RBI intervened aggressively, utilizing over $60 billion of its foreign exchange reserves in November. The RBI also used dollar-rupee swaps to manage rupee liquidity without affecting the exchange rate.

However, experts including former RBI Deputy Governor Viral Acharya, have emphasized the importance of allowing some currency volatility to encourage private hedging, as the central bank cannot absorb all risks.

The IMF also highlighted that excessive interventions have limited rupee movement, and reclassified India’s exchange rate regime as a ‘stabilized arrangement’ from ‘floating.’ Exporters were also impacted by the central bank’s policy of not allowing the rupee to find its natural level versus the dollar.

Indian Rupee hits record lows, could fall further

The INR moved from being one of Asia’s best-performing currencies in 2023 and 2024, to a significant underperformer in the past quarter. Throughout 2024, the rupee depreciated by 2.8%, starting the year at Rs 83.2 and weakening to Rs 85.6 by December. It is down over 1% so far this year.

Over the last three years, the INR has gradually weakened against the dollar. In January 2022, the exchange rate stood at approximately Rs 74.5 per USD. By January 2025, the INR had depreciated by nearly 16.2% over this period. Several factors contributed to this decline, including the USD’s strength driven by global economic changes, India’s slowing economic growth, and a widening trade deficit. As a major crude oil importer, fluctuations in global oil prices have also hit India’s import costs and the rupee’s value.

Rupee’s depreciation comes with significant consequences

When the rupee depreciates, the cost of importing goods rises, leading to higher prices for imported products and raw materials. This increase in import costs can contribute to overall inflation, affecting consumers and businesses alike.

Rising inflation due to a weaker rupee can influence RBI’s monetary policy decisions. The RBI might raise interest rates to control inflation, which makes borrowing costlier and could slow down economic growth. On the other hand, if inflation seems under control, the RBI might decide not to change rates. With the rupee's recent drop in value, there’s speculation that planned interest rate cuts might be postponed.

A weaker rupee can make Indian exports more competitive by reducing their prices in international markets. This price advantage can boost demand for Indian goods abroad, potentially increasing export volumes. However, the benefits may be limited if key export sectors rely heavily on imported raw materials, as the cost of these imports would also rise with a depreciating rupee, offsetting the advantages gained from lower export prices.

The Baseline

16 Jan 2025

Chart of the Week: 87 out of 130 industries outperformed the Nifty 50 in 2024

By Aditi Priya

2024 was an eventful one for investors. The Nifty 50 and Sensex delivered gains of 8.8% and 8.2%, respectively, while broader markets outperformed. The Nifty Midcap 100 and Smallcap 100 indices rose by more than 20%.

However, the final quarter gave investors whiplash, with the Nifty 50 declining nearly 12% from its September peak. Disappointing quarter results and high foreign fund outflows in October and November drove markets down. Still, the year ended with positive returns, marking the ninth consecutive year of gains for the Indian equity market.

Of the 130 industries tracked on Trendlyne’s industry dashboard, 87 outperformed the Nifty 50 index in 2024. In this Chart of the Week, we highlight the top-performing industries and their major contributors over the past year.

Manufacturing and industrial sectors see steady growth in 2024

India's manufacturing and industrial sectors were the stars of 2024. Industries like heavy electrical equipment, consumer electronics, industrial machinery, and other electrical equipment rose over 70% in the past year.

The manufacturing PMI consistently stayed above the 50-mark, indicating sustained expansion in these industries. Increasing foreign investments, an expanding domestic market, and government initiatives like ‘Make in India’ and ‘Atmanirbhar Bharat’ drove this growth.

Among standout companies in these industries, Siemens (heavy electrical equipment) rose 39.8% over the past year. It also reported strong financial performance over the past 12 months. Its trailing twelve month (TTM) revenue and net profit increased by 38.5% and 13.7%. The surge in demand for electrification and data centers, driven by advancements in artificial intelligence (AI), led to high growth.

Dixon Technologies (consumer electronics) capitalized on the PLI scheme to expand its mobile phone manufacturing segment, boosting its revenue share in this category from 12% in FY20 to 62% in FY24.

Jyoti CNC, a metal cutting CNC machines manufacturer, launched its IPO in January 2024. The IPO received a strong response from investors, with an overall subscription of 40.5 times. Since its listing, the company has delivered returns of 260.9%. The rally is fueled by the company's strong financial performance, growing order book, and rising global demand for CNC machines, especially in aerospace. Jyoti CNC's total order book reached Rs 4,289.3 crore by the end of Q2FY25.

Similarly, Waaree Energies, a leading player in the other electrical equipment industry, launched its IPO in October 2024. As India's largest solar photovoltaic (PV) module manufacturer, the IPO saw high demand and was oversubscribed 76.3 times, including 11.3 times by retail investors. Since its debut, the company has delivered impressive returns of over 73.6%. As of September 30, 2024, its order book stood at 20 GW.

Financial services surged due to strong foreign inflows and increased retail participation

The banking and finance sector, including industries like exchanges, capital markets, and other financial services, saw notable performance improvements over the past year.

In 2024, strong foreign institutional inflows (in seven out of 12 months) and increased retail participation drove India's stock markets to record highs. New demat accounts rose 33% in 2024 compared to 2023, bringing the total to 18.5 crore.

Top performers from exchanges, capital markets, and other financial services industries include Bombay Stock Exchange (BSE), Multi Commodity Exchange, Motilal Oswal, KFIN Technologies and Central Depository Services (CDSL).

BSE shares surged 158.6% in 2024, fueled by its expansion of derivatives offerings and the anticipation of the National Stock Exchange’s (NSE) IPO. SEBI's regulatory changes favoring BSE's weekly Sensex options and strong financial performance also contributed to this growth. BSE’s TTM revenue and net profit grew by 17.1% and 119.3%, respectively.

CDSL maintained its dominant position with a 73% market share in demat accounts (September 2024). NSE's potential IPO boosted positive sentiment toward market infrastructure firms like CDSL, anticipating benefits from increased market activity.

Credit rating agency CRISIL's share price rallied by over 41% in 2024 after it acquired a 4% stake in Online PSB Loans (OPL) for Rs 33.3 crore, enhancing its presence in the digital credit infrastructure ecosystem. The company also reported strong financial results over the past year, with a 10.4% TTM net profit increase, and maintained consistent dividend payouts.

The services sector thrived due to rising demand and increased digital adoption

The services sector, including industries like hotels, internet software & services, and internet & catalogue retail industries, showed strong performance in 2024. The PMI for the services sector surged to a four-month high of 60.8 in December 2024, up from 58.4 in November, reflecting a strong rise in demand.

The hospitality industry benefited from a rebound in travel and tourism, while internet-based services experienced growth due to increased digital adoption and e-commerce activities. Top performers include Indian Hotel Company, Chalet Hotels, Zomato, Swiggy, Brainbees Solutions and PB Fintech.

Indian Hotels Company's (IHCL) share price surged 75.8% in 2024. The company unveiled its ‘Accelerate 2030’ strategy in November 2024, aiming to double its hotel count and revenue by FY30. This plan includes expanding its portfolio to over 700 hotels, up from 350 in FY24, and increasing consolidated revenue to Rs 15,000 crore.

Zomato's share price rose over 74% over the past year as the company reported a 249.4% increase in net profit TTM. In December 2024, Zomato joined India's BSE Sensex index, becoming the first new-age tech company to do so.

In 2024, Swiggy and Brainbees Solutions (FirstCry) launched their IPOs in the Indian market. Both IPOs received significant investor interest and were oversubscribed. Swiggy expanded its quick commerce services via Instamart, aiming for 10-minute grocery deliveries. The company increased warehouse size and cut delivery times, with quick commerce now making up 40% of its food delivery volume since 2020.

The Baseline

07 Jan 2025

Zomato leads with high analyst upside, Aster DM shows strong momentum

By Aditi Priya

Finding the right investment opportunities can feel like a race against time for stock market investors. By the time a good stock is widely covered, much of its potential upside may already be gone. The challenge is identifying the right stocks at a good valuation, while sifting through a lot of data.

Screeners make it easier to find stocks that outperform on not one or two but multiple metrics. For example, Trendlyne’s durability and momentum scores look at metrics across management quality, financial health, and several dozen technicals to identify high-scoring stocks. These scores help investors shortlist quality stocks more easily.

In this week's Chart of the Week, we look at this screener of stocks with high durability and momentum scores, that fall within the PE buy zone with at least a 5% target price upside, according to the Forecaster. A stock in PE Buy zones indicates that it is undervalued compared to its historical averages.

These stocks are from various sectors, including software & services, banking & finance, pharmaceuticals & biotechnology, retailing and diversified consumer services.

Zomato leads in 12-month upside from analysts

The internet platform company, Zomato, boasts a 12-month upside forecast of 20.2%. It has an impressive durability score of 80 and a momentum score of over 50. The company has risen 93.7% over the past year. In Q2FY25, the company reported a 64% YoY revenue increase, driven by strong performance in key segments including hyperpure, quick commerce, and the food ordering and delivery business. Net profit rose 388.9%, driven by platform fees and higher ad revenue.

Geojit Paribas maintains its ‘BUY’ rating on the stock with a revised target price of Rs 284. Analysts noted, “We believe that growth in all key areas - orders, AOV, and new user acquisition should enhance profitability going forward.”

However, on Tuesday, Jefferies downgraded Zomato to a ‘HOLD’ rating, citing increasing competition in the quick commerce space.

Healthcare sector companies exhibit strong momentum

Cipla, a pharmaceutical company, has a 12-month upside potential of 8.8%, backed by solid durability and momentum scores of 85 and 51, respectively. In Q2FY25, Cipla's revenue increased by 5.7% YoY, driven by growth in South Africa, emerging markets, and Europe. Revenue from Indian operations saw a 4.7% YoY increase, fueled by strong sales in chronic therapy and consumer health.

PL Capital has upgraded Cipla to ‘BUY’ with a target price of Rs 1,730. Analysts at the brokerage stated, “We believe the recent classification of its Goa facility as VAI (Voluntary Action Indicated) by the US Food and Drug Administration has paved the way for the gAbraxane launch.” This clears regulatory hurdles, enabling Cipla to proceed with production and launch of gAbraxane, a generic version of the chemotherapy drug Abraxane, in the US market. Cipla’s $1 billion net cash position also provides room for strategic M&A opportunities.

Healthcare facilities player Aster DM has a 12-month upside potential of 7.8%. It has the highest momentum score of 69 among all the stocks in the screener, signalling strong buying interest. The company’s net profit increased to Rs 96.8 crore, a turnaround from a net loss of Rs 30.8 crore in Q2FY24. Steady growth in its core business segments and effective cost-optimization strategies drove this performance. On November 29, 2024, Aster DM board approved a merger with Quality Care, which made them the third largest healthcare chain in terms of revenue and bed capacity in India.

After the Q2FY25 result announcement, Alisha Moopen, Deputy Managing Director, stated, “We expect synergies to deliver a near-term EBITDA upside potential of 10-15%, driven by optimizing material and manpower costs and improving ARPOB (average revenue per occupied bed) through a better clinical mix. Over the next 3-4 years, we aim to further enhance margins to 24-25%.”

Banking and finance companies show strong growth potential and high momentum

ICICI Bank has a 12-month upside forecast of 15% and is categorized as a 'Strong performer, under radar', in Trendlyne’s DVM score classification. The bank holds a durability score of 60 and a momentum score of 50, consistently delivering strong financial results. In Q2FY25, it recorded a 27.3% YoY revenue growth and an 18.8% YoY increase in net profit.

Brokerages like Motilal Oswal and Sharekhan have maintained their ‘Buy’ ratings, citing the bank’s robust performance driven by healthy loan growth, strong asset quality, and industry-leading return ratios. Sharekhan highlights, “ICICI Bank remains our top pick in the private banks and is well positioned to deliver superior performance despite cyclical headwinds. NIMs (net interest margin) are expected to be stable in H2 vs. H1 FY25 until the rate cut cycle starts.”

City Union Bank (CUB) offers a 12-month upside potential forecast of 11.6%, with a durability score of 65 and a momentum score of 50. The bank posted positive results for Q2FY25, with net profit and revenue increasing by 1.6% YoY and 11.7% YoY, respectively, driven by improved asset and earnings quality.

Axis Securities says, “CUB appears to have re-started its growth journey, with demand-driven growth evident in its core segments. As revamped processes show results and the bank expands into the non-core retail segment, we expect further improvement. Steady NIMs, better operating expense ratios, and stable credit costs are likely to help CUB achieve RoA (return on asset) and RoE (return on equity) of 1.6% and 13-14%, respectively, over FY25-27.” The brokerage upgraded its rating from HOLD to BUY on the valuation front. They revised the target price to Rs 185, a 8.7% upside potential from the current market price of Rs 170.3.

Retail sector company Campus Activewear shows strong momentum

Campus Activewear, a footwear company, has a 12-month upside potential of 6.4%, with durability and momentum scores around 60. In Q2FY25, the company reported a 30% YoY revenue increase and net profit grew to Rs 14.3 crore from a loss of Rs 0.3 crore in Q2FY24, driven by 35% volume growth.

Motilal Oswal maintains a ‘BUY’ rating with a target price of Rs 360, based on 55x Dec’26 P/E. It stated, “Campus’ innovative designs, color combinations, and attractive price points make it a market leader in the Sports and Athleisure category. We expect the revival of the demand environment in 2H and stabilization in the D2C online channel to aid Campus’ growth recovery."

The Baseline

31 Dec 2024

Chart of the week: 42 companies are poised for a comeback in Q3FY25, according to analyst estimates

By Aditi Priya

As 2024 ends, the benchmark indices, Sensex and Nifty 50, are set to finish the year with single-digit gains. The Sensex has gained 8.2% over the year, while the Nifty has risen 8.8%.

The year saw major milestones: the Sensex hit a record high of 85,978.3 and the Nifty reached a record of 26,277.4 on September 27. However, the year's final quarter has seen a downturn for the indices with the Nifty 50 declining by 8.7% and the Sensex falling by 9.7%.

ICICI Direct said, “In the journey of Nifty to 50,000 by CY30, the index has achieved the milestone of 24,800 for CY24. Our analysis indicates that the stage is set for the next up move towards 28,800 levels in CY25.”

But a continued rise for the Indian indices depends on whether company earnings can justify current and future valuations. The September quarter was disappointing for many sectors. Now as the next earnings season approaches, we look at turnaround companies that analysts say are poised for a financial recovery in Q3FY25. These companies underperformed in revenue or net profit in Q2FY25, but are expected to show a stronger performance in Q3FY25.

In this chart of the week edition, we highlight these comeback kids, the companies which delivered disappointing results in Q2FY25 but are forecast to rebound in the upcoming quarter.

Bharat Dynamics and Prestige Estates lead the turnaround charge

Bharat Dynamics, a leading defense company, is expected to see a 102.8% YoY revenue growth in Q3FY25, rebounding from an 11.5% and 16.7% YoY decline in revenue and net profit, respectively in Q2FY25. The ongoing Russia-Ukraine war and Middle East conflicts caused supply chain delays, affecting Q2 performance.

The company’s 68.3% EPS growth forecast signals a strong recovery in profitability. As the sole manufacturer of missiles and torpedoes for the Indian military, Bharat Dynamics benefits from both domestic and export opportunities. While recent order delays have affected performance, Elara Securities remains optimistic about a surge in orders driven by upcoming defense capital expenditures.

Despite a challenging Q2FY25, Prestige Estates is expected to perform strongly in Q3FY25, with a forecast of 56.6% YoY revenue growth and a 165.2% YoY EPS increase. This turnaround is driven by the expected recovery in demand across the residential and commercial real estate segments. The company is also accelerating new launches in key markets such as Mumbai, Chennai, Bengaluru, Hyderabad, and NCR, following delays due to RERA (Real Estate Regulatory Authority) approval processes. Many of these projects, originally planned for earlier, are now slated for Q3FY25. Prestige Estates has also outlined plans to launch projects with a total Gross Development Value (GDV) of Rs 520 billion in H2FY25.

General industrials and consumer durable sectors expected to recover

The turnaround screener has the maximum number of companies (8 out of 42) from the general industrials sector. Several companies from the sector are expected to make significant turnarounds in Q3FY25. Companies like CG Power & Industrial, Grindwell Norton, and Timken stand out with positive forecasts.

CG Power & Industrial is expected to see a 40.2% rise in net profit in Q3FY25, despite an 8.8% decline in Q2FY25. The decline was due to higher material costs and other expenses. The company, which specializes in electrical equipment, automation, and industrial solutions, has a strong order book of Rs 7,831 crore. In November, it won a Rs 500-600 crore order for the Kavach train protection system from Chittaranjan Locomotive Works, with execution expected within a year.

Grindwell Norton, which saw a modest 4% YoY revenue growth and a 4.7% decline in net profit in Q2FY25, is projected to post a 15.8% YoY revenue growth and 18.7% YoY EPS growth in Q3FY25. The company's performance in Q2 was impacted by margin declines in the ceramics & plastics and digital services segments, along with lower-than-expected growth in the abrasives segment. In H1FY25, the abrasives segment grew 5.5% YoY to Rs 350 crore, accounting for nearly 50% of total revenue of Rs 710 crore. Moving forward, growth in the abrasives segment is set to be driven by opportunities in solar glass edge grinding, increased demand for high-productivity solutions in steel and construction, and the expansion of non-woven products into new market segments.

Similarly, companies from the consumer durables sector are expected to deliver positive results in the upcoming quarter. Finolex Cables is expected to recover in Q3FY25 with 11.6% YoY revenue growth and 7.8% EPS growth. In Q2FY25, net profit declined by 23.5% due to volatility in input prices, inventory loss, and destocking. However, stable input costs, improving margins and higher volumes are expected to drive growth in the upcoming quarter. Strong demand from the real estate sector and increased government spending are expected to boost wire and power cable volumes.

Kajaria Ceramics, India’s largest ceramic and vitrified tile manufacturer, expects a positive Q3FY25 with 10.5% revenue growth and 12.2% EPS growth after weak Q2FY25 results. Strong domestic demand, driven by the realty sector and growing exports, is expected to support its recovery.

Honeywell Automation faced challenges in Q2FY25, with a 5.6% decline in net profit due to weak execution, softer demand, and accounting changes. However, Q3FY25 looks promising, with EPS forecast to grow by 26.2%. The company should benefit from the government's focus on infrastructure sectors like oil, gas, power, and metals. Its emphasis on industrial digitalization, automation, and sustainability is expected to drive long-term growth, aiming to outpace GDP domestically.

Strong rebound in consumer-facing companies

Jubilant Foodworks is expected to achieve 50.3% revenue growth and 48% EPS growth in Q3FY25, recovering from a 34.1% YoY net profit decline in Q2FY25 due to higher tech investments and supply chain upgrades. The company also holds the master franchise for Domino’s India. Domino's added 50 stores and entered 20 new cities in Q2, with expansion efforts set to further boost customer reach and market share.

Westlife Foodworld reported a 98.4% drop in Q2 net profit, driven by higher expenses, subdued in-store business and rising inflation, which affected consumption outside the home and intensified competition. However, the company, analysts predict, will achieve 30.9% EPS growth in Q3FY25. Despite near-term challenges like lower on-premise sales, the company is expected to perform well in Q3 due to the festive season and new menu offerings. Management expects gross margins to rebound to over 70% in H2FY25, targeting 18-20% EBITDA margins by 2027.

Dabur reported a 5.5% revenue decline and a 17.5% net profit drop in Q2FY25, impacted by inventory corrections. Commenting on Q2 results, the company's CEO, Mohit Malhotra, stated, “The inventory correction is an exceptional one-time event. Dabur's business fundamentals remain strong, with our 5-year revenue CAGR for the India business growing at over 8%.” The forecast for Q3FY25 indicates a recovery with 5.7% revenue growth and 0.9% EPS growth. The acquisition of Sesa Care in October is expected to strengthen Dabur's position in the premium Ayurvedic hair oil segment.

The Baseline

24 Dec 2024

Chart of the Week: Biggest wealth destroyers over the past year

By Aditi Priya

Over the past year and despite the volatility in recent months, the Indian equity market has delivered impressive returns, with the Nifty 500 index gaining 17.6% in 2024.

Foreign outflows increased recently due to high equity valuations and muted Q2 results in India. Foreign investors were lured elsewhere by US Fed rate cuts and recent China stimulus, contributing to an 8.1% decline in the Nifty 500 over the past quarter.

Finance Minister Nirmala Sitharaman said on December 17, “This is only a temporary blip, and healthy growth will return in the coming quarters.” She added that India’s GDP growth has averaged 8.3%, making it the world’s fastest-growing major economy.

While the Indian equity market still managed to post strong gains in the past year, the gains were unevenly distributed. Some companies surged ahead, while others struggled due to challenges such as regulatory investigations (Vodafone Idea, Rajesh Exports), sector-wide downturns (banking and finance), or significant business losses (Honasa Consumer, Tanla Platforms), leading to a loss of investor wealth.

In this edition of Chart of the Week, we spotlight the underperformers – companies that saw significant declines in their share prices, lagging behind the index and leaving investors disappointed.

126 companies from the Nifty 500 have made it to the ‘Wealth Destroyers’ screener in 2024. The banking and finance sector struggled the most, contributing 28 names to the list. Among them are CreditAccess Grameen, RBL Bank, Ujjivan Small Finance Bank, IndusInd Bank, and Equitas Small Finance Bank. The software and services sector followed, with 11 companies making it to the screener including Tanla Platforms, Tata Technologies, Happiest Minds, Tata Elxsi and Birlasoft.

A canceled merger and rising competition weigh on Zee Entertainment

Media company Zee Entertainment, witnessed the sharpest decline of 52.9% this year within the Nifty 500 universe, topping the wealth destroyer screener. It has been a tough year for the company, with the main setback being the cancellation of its proposed merger with Sony Group’s India unit, which cited concerns over fund diversion and weak corporate governance.

Additionally, the joint venture between Reliance Industries and Walt Disney, announced on February 28, merged Viacom18 and Star India, has created a media giant valued at Rs 70,352 crore. This has intensified competition, making it more difficult for Zee to grow its market share. The company also reported mixed results in Q2FY25, with revenue and operating profit falling nearly 19% and 3% YoY, respectively. However, net profit saw a 70% YoY increase driven by a 20.3% reduction in expenses through effective cost management. But the previous year's net profit was affected downward by a one-time charge of Rs 120 crore, which did not recur this year. The net profit this Q2 rose mainly due to reduced expenses and the absence of last year's one-time charge, and operating profit declined.

Multiple banking and finance companies feature in the Wealth Destroyers

CreditAccess Grameen, one of India’s largest non-banking finance company-microfinance institutions (NBFC-MFI), saw the sharpest decline of 49.2% in 2024 in share price within the banking and finance sector. This came after its Q2FY25 results highlighted increasing delinquencies in the microfinance space, slower disbursements, and higher provisions. Gross NPA rose by 1.7 percentage points YoY to 2.4%, while net NPA increased by 0.5 percentage points YoY to 0.8%, signaling a decline in asset quality.

In fact, the Nifty Bank index, with an 8% return in 2024, has notably underperformed the broader Nifty 500 index. Banks such as AU Small Finance Bank, Axis Bank, IndusInd Bank, and IDFC First Bank have significantly contributed to this underperformance, appearing on the wealth destroyer screener. IndusInd Bank has faced a sharp 40.1% decline over the past year. This was due to increased stress in microfinance loans, failure to meet its full-year loan growth target, and a surge in bad loans in the microfinance segment. Similarly, AU Small Finance Bank and IDFC First Bank have dropped nearly 30% in 2024, while Axis Bank has recorded a smaller decline of 0.9% during the same period.

In addition to these big names in the sector, small finance banks and institutions with high exposure to unsecured loans also struggled. RBL Bank faced asset quality concerns due to rising NPAs and regulatory challenges, which eroded investor confidence and sharply reduced its share value by 40.1% over the past year. The gross NPA ratio rose by 0.2 percentage points QoQ to 2.9%, while the net NPA increased by 0.1 percentage points QoQ to 0.8%.

Ujjivan Small Finance Bank saw a 41.5% drop in 2024, with net profit for Q2FY25 declining by 29% to Rs 233 crore. This decline was due to deteriorating asset quality and higher expenditures. The bank's gross NPA ratio increased to 2.5% in Q2FY25, up from 2.4% a year earlier, while the net NPA stood at 0.6%, compared to 0.1% previously.

Equitas Small Finance Bank saw a 38.6% decline in its stock price over the past year. Weak quarterly results in FY25 and higher provisions to address stress in its microfinance portfolio drove this drop.

Regulatory issues and weak financials trigger sell-off in Vodafone Idea and Rajesh Exports

Vodafone Idea's share price dropped over 45% in 2024 due to regulatory challenges and ongoing profitability concerns. The Supreme Court’s decision on Adjusted Gross Revenue (AGR) added financial pressure, requiring the company to pay significant dues. The company is also struggling with a shrinking customer base, lagging far behind Reliance Jio and Airtel, and rising costs, leading to doubts about its long-term financial health.

Similarly, Rajesh Exports, a gems and jewellery company, saw its stock decline by 36.3% over the past year, struggling with multiple challenges. The company faced regulatory compliance issues, including missing documents in earnings filings and tax-related controversies. The company also faced allegations of ambiguous transactions and lapses in disclosures, leading to accusations of misleading financial reporting.

In addition, Rajesh Exports has struggled with declining revenues and thin profit margins since Q2FY24, making it difficult for the company to generate sustainable profits.

The Baseline

17 Dec 2024

Chart of the week: The best performing IPOs of 2024

By Aditi Priya

India’s IPO market has witnessed remarkable growth in 2024, with an impressive surge in both the number of listings and the capital raised. India has overtaken China in the world’s largest investable stock benchmark. India’s share of the free float in the MSCI All-Country World Index has risen to 2.3%, exceeding China’s 2.1%.

Angel One Wealth highlighted that while the global IPO market peaked in 2021, India has stood out over the past year with strong public listings, thanks to significant demand, domestic inflows, and the outperformance of sectors like utilities, automobiles and consumer durables. BSE IPO Index, with a 33.1% YoY gain, has significantly outperformed the benchmark BSE 500 Index, which gained 19.9%.

As of December 17, 319 companies have collectively raised Rs 1.6 trillion through SME and mainboard IPOs. This figure has already surpassed the 238 IPOs recorded in 2023. In terms of funds raised, 2024 reflects an 184% increase compared to 2023, during which Rs 578.9 billion was raised. The total number of mainboard IPOs this year stands at 79, with more additions expected by the year-end.

This week’s chart of the week highlights the best-performing IPOs of 2024. It also explores which sectors saw the highest number of mainboard IPOs and which investor group is driving the IPO boom in India.

Consumer durables sector leads with top-performing IPOs

Out of the 79 mainboard companies listed so far, 57 are trading above their issue price, with an average current gain of 44.6%. Companies such as KRN Heat Exchanger & Refrigeration, Platinum Industries, Bharti Hexacom, Orient Technologies, and Diffusion Engineers have seen their stock prices more than double since listing.

On the other hand, companies like Hyundai Motor, ACME Solar Holdings, Capital Small Finance Bank, and Ceigall have been trading below their issue prices. Notably, Hyundai Motor, the largest IPO in India’s history, raised Rs 27,870 crore but debuted 7% below its issue price.

The average listing gain of mainboard IPOs stands at 26.8%, slightly below 2023's average of 28%. The metals and mining sector recorded the highest average listing gain at 71.7%, while the cement and construction sector recorded the lowest, of 10.6%.

When looking at valuations, five out of the top 10 performing companies are overvalued compared to their sector P/E. These companies include Jyoti CNC Automation, KRN Heat Exchanger, Premier Energies, Enviro Infra Engineers, and EPACK Durables. On the other hand, companies like Platinum Industries, Bharti Hexacom, Gala Precision, Orient Technologies, and Diffusion Engineers are undervalued relative to their sector P/E.

The best-performing mainboard IPO of the year is Jyoti CNC from the general industrials sector. The company specializes in manufacturing and supplying computer numerical control (CNC) machines. The company’s client base includes ISRO, Bharat Forge, Bosch Limited, and others across aerospace, automotive, and industrial sectors. Since its listing on January 16, the company's stock has surged over 333% due to a robust order book and strong H1FY25 results. The IPO, with an issue size of Rs 1,000 crore, was priced at Rs 331 per share, listed at a 31.2% premium. The company, with a P/E of 104.2, is trading significantly above the sector average P/E of 67.8, indicating that it is overvalued by approximately 53.7% compared to its sector.

Interestingly, three companies (Premier Energies, Waaree Energies and EPack Durables) in the top 10 IPOs have delivered the highest returns since their listing, are from the consumer durables sector. These companies benefitted from policies like ‘Make in India’, industry diversification, investments in new technologies, and increasing global demand for industrial products. Premier Energies debuted with an 86.6% premium, while Waaree Energies listed with a 55.6% premium.

EPack Durables was listed at a 9.4% discount on January 30 but has since gained over 110% from its issue price. The company specializes in manufacturing a variety of domestic appliances, including room air conditioners, induction stoves, mixer grinders, water dispensers, and components. With a P/E ratio of 97.4, it is currently trading well above the sector average of 71.9.

The banking and finance sector recorded the highest number of mainboard IPOs (9) in 2024, followed by the diversified consumer services sector. A total of nine companies from the banking and finance sector launched IPOs, including Bajaj Housing Finance, Aadhar Housing Finance, Manba Finance, Go Digit General Insurance, and Northern Arc Capital.

The sector's IPOs showed mixed performance, with companies like Bajaj Housing Finance, Aadhar Housing Finance, and Manba Finance delivering positive returns, while others like Northern Arc Capital, Jana Small Finance Bank, and Akme Fintrade posted negative returns. The average listing gain for this sector’s IPOs is 22.2%, while the average current gain is 15.9%.

In the diversified consumer services sector, companies such as Awfis Space Solutions, TBO Tek, Medi Assist Healthcare Services, Stanley Lifestyles, Entero Healthcare Solutions, GPT Healthcare, Suraksha Diagnostic, and LE Travenues Technology posted an average listing gain of 21.8%, with current gains reaching 39.1%. Entero Healthcare, the largest IPO in the diversified consumer services sector with an issue size of Rs 1600 crore, listed at an 8.6% discount. However, the company has since gained 16.6%. With a P/E of 89.5, which is higher than the sector’s P/E of 72, the company is overvalued by 24.3%.

Institutional plays: QIBs fuel the IPO boom with the highest subscription rates in 2024

The IPO boom in India this year was primarily driven by qualified institutional buyers (QIBs) with a median subscription rate of nearly 61 times, with the highest subscription in KRN Heat, which delivered the second-highest returns. KRN Heat was subscribed 253x by QIBs, 431.6x by HNIs, and 98x by retail investors, leading to an overall oversubscription of 214.4x.

High net-worth individuals (HNIs) have a median subscription rate of nearly 48x. The metal and mining sector saw the highest subscription rates, with an average of 142x. Vibhor Steel Tubes, in particular, saw high demand, with HNIs subscribing 721.3x, qualified institutional buyers (QIBs) subscribing 178.7x, and retail investors subscribing 188.2x, resulting in a total subscription of 298.9x, the highest among all IPOs.

Retail investors have a median subscription rate of 13.6x, with the highest demand seen in BLS E-Services. This IPO was subscribed 237 times by retail investors, 300 times by HNIs, and 123 times by QIBs.

The Baseline

12 Dec 2024

Chart of the Week: Banking & Finance sector sees the biggest shifts in public & FII shareholding

By Aditi Priya

Looking at Q2FY25 shareholding data, some companies stand out with significant increases in public shareholding and foreign institutional investments (FIIs). More retail investors are actively participating in the market, marking a big shift in how Indians invest. The total number of demat accounts in India has surged to 18.2 crore as of November 2024 increasing by 34.8% YoY. This represents an addition of 31.7 lakh demat accounts in November.

Retail investors were net buyers in the Indian equity market, even during the market correction in October and November. A report by Motilal Oswal says that India is set to grow strongly in the next decade, driven by favourable demographics and rising income. “Over the next decade, the demographic dividend will accelerate,” the analysts wrote, “with over 100 million people joining the workforce and about 100 mn households entering the middle-income class.”

In this chart of the week, we analyze companies where public shareholding has increased or decreased the most over the past quarter and examine the reasons behind these changes.

Retail investors and FIIs have been favouring stocks from the banking and finance sector. In this sector, retail investors have increased their stakes in companies like RBL Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank, and Angel One. Meanwhile, FIIs have raised their holdings in stocks such as Indian Energy Exchange, Nuvama Wealth, and PNB Housing Finance.

Outside banking, sectors like cement & construction and software & services have seen a rise in public shareholding. Retail investors have reduced their stakes in FMCG, media, realty, and general industries.

RBL Bank & GMR Airports see public shareholding jump in Q2FY25

RBL Bank (RBL) witnessed a 7.5 percentage points QoQ increase in public shareholding by retail investors during the second quarter as Foreign Portfolio Investors (FPIs) reduced their stake to 13.6% from 27.1% in June. The bank reported a 19.9% YoY growth in revenue in Q2FY25, with net interest income rising by 9% YoY and deposits by 20% YoY.

The cement & construction company, GMR Airports saw a 5.5 percentage points QoQ increase in its public shareholding. FPIs have reduced their stake in the company by more than 10 percentage points.

Ujjivan Small Finance Bank (SFB) saw a 4.9 percentage points QoQ increase in public shareholding during the past quarter, bringing total public holding to nearly 73%. FPIs sold 2.3 percentage points stake while mutual funds and insurance companies sold marginal stakes. In Q2FY25, the bank reported a 15.2% YoY revenue growth, with deposits increasing by 17% and the CASA ratio improving 26% to 25.9%. On November 27, Ujjivan SFB announced the sale of a stressed loan portfolio, including written-off loans worth Rs 270.4 crore (as of September 30, 2024). The sale reflects a positive move as it reduces the burden of non-performing assets, improving financial stability.

Equitas Small Finance Bank and Angel One also witnessed a nearly 4.5 percentage point QoQ increase in public shareholding. In case of Equitas, mutual funds like Franklin India, Nippon life india, Invesco india and Dsp Mutual Fund have reduced their stake marginally. Similarly, in Angel One, Nippon Life India trustee growth fund, Motilal Oswal Large and Midcap Fund and FPIs have reduced their stakes.

Public shareholding moves in contrast with FII holdings

The screener reveals another interesting trend - an increase in public shareholding often coincided with a decrease in FII stakes, and vice versa, in Q2FY25. Sterling and Wilson is the only company where public shareholding, DII, and FII holdings all increased in the past quarter as the promoter holdings reduced by over 7 percentage points. The company posted a 113% YoY net profit growth, and a 37% YoY revenue growth in Q2FY25.

In the banking and finance sector, public shareholding decreased in Indian Energy Exchange, Nuvama Wealth, and PNB Housing Finance, while FII holdings rose. Nuvama Wealth saw a 6.7 percentage point QoQ drop in public shareholding, offset by a 7.1 percentage point QoQ rise in FII holdings. The company's promoter group (Pagac Ecstasy) marginally reduced its stake by 0.5 percentage points, while funds like Smallcap World and Morgan Stanley increased their holdings. This shift likely reflects institutional confidence in the company’s growth prospects.

PNB Housing Finance also saw a 13.7 percentage points QoQ decrease in public shareholding, while the FIIs increased their stakes by 4.3 percentage points over the past quarter. The Government of Singapore and the Monetary Authority of Singapore increased their stake by 5 percentage points and 1.3 percentage points respectively while Asia Opportunities v reduced its stake by 3.7 percentage points. Mutual funds like HSBC Small Cap fund, Nippon India Small Cap Fund, Aditya Birla Sun Life PSU equity fund and Hdfc Large and Mid cap fund have also increased their stake along with the FIIs.

Honasa Consumer, a personal products company, witnessed a 5.4 percentage point QoQ decline in public shareholding during the past quarter. At the same time, FPIs increased their stake significantly by over 5 percentage points. Mutual funds also raised their holdings, marginally, by 0.3 percentage points.

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