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The Baseline
04 Nov 2022
Five Interesting Stocks Today
  1. Varun Beverages: This soft drink bottler’s stock has improved 10% in the past three days and touched a new 52-week high on Thursday. The rise in share price could be attributed to robust Q2FY23 results. A strong rise in net profit and operating profit margin despite an inflationary environment excited investors. With this rise in stock price, Varun Beverages features in a screener that lists companies whose share prices are trading above short-, medium-, and long-term moving averages. 

Revenue rose 33% YoY and net profit increased by 58.7% in Q2. While a 24% YoY volume growth led revenue growth, a 7% rise in realisations on the back of price hikes led to increased profits. In addition, its higher-margin energy drink, Sting, was the star product in Q2, driving both top line and margins higher. The management said Sting’s overall realisation was higher than the average realisation by 65%, helping the EBITDA margin rise 140 bps YoY to 22%. 

Brokerages like Axis Direct, ICICI Direct and Motilal Oswal raised their target prices after the Q2FY23 results announcement. Brokerages are positive about the company on the back of its expanding distribution network and product mix shift towards higher margin products like ‘Sting’. 

  1. Bandhan Bank: This bank’s stock has been falling for the past 90 days. Looking at the technicals, the stock fell 17% in the past three months and 10% on Monday alone after reporting a 74.6% QoQ dip in net profit to Rs 209.3 crore. It missed Trendlyne’s Forecaster estimates by 72%. Although the bank’s profitability is positive considering its reported a net loss of Rs 3,008.6 crore in Q2FY22, this has not enthused investors as many key metrics including asset quality have worsened. It shows up on a screener of bearish stocks with low Trendlyne Momentum scores and falling RoE for the past two years.

The bank’s fall in net profit can be attributed  to an increase in provisions which almost doubled to Rs 1,279 crore in Q2FY23. A rise in provisions indicates that the bank has a higher pool of stressed loans. It has had some slippages in loan books despite no restructuring in the last two quarters. Overall, slippages amounted to Rs 3,954 crore with the maximum slippage (Rs 3,624 crore) coming from the EEB (Emerging Entrepreneur Business) segment. Bad loan write-offs stood at Rs 3,539 crore.

On the positive side, Bandhan Bank’s advances grew 17.4% YoY to Rs 95,834 crore. Despite muted Q2 growth, analysts maintain a sturdy rating and expect the bank to perform well in H2FY23. Consensus estimates from analysts show 17 analysts recommending a ‘Buy’ on the stock with five recommending ‘Hold’ and one recommending ‘Sell’. Emkay Global expects the bank to deliver an RoE of 20-22% by FY24-25E. The management offered a positive outlook in their earnings call, expecting to report better earnings in Q3 and Q4 with improving asset quality.

  1. Supreme Industries: This plastic processing company’s stock rose over 8% since announcing its results on October 31. This upswing comes despite a 64.1% YoY drop in net profit, with its EBITDA margin contracting 905 bps YoY to 7.1% in Q2FY23. This led the company to miss Trendlyne’s Forecaster profit estimates by 48.9%. The drop in profitability is due to inventory losses as polymer prices fell.  

However, the stock surged as the street has a positive outlook on the company’s prospects. This mostly comes on the back of the management raising its volume growth guidance to 20% from 15% for FY23. The firm’s top-line growth was supported by a 9% volume growth in Q2 due to softening resin prices. Also, the management believes that the price of Polyvinyl Chloride (PVC) resin dropping by 38% since April augurs well for volume growth from H2FY23. PVC-based products contributed around 80% of the firm’s sales volume in Q2. The company, while increasing its volume growth guidance, has lowered its operating margin guidance to 12-12.5% from 15% for FY23.

For H2FY23, the management expects robust demand for its piping products on recovery in rural demand and declining commodity and polymer prices. The stock shows up on the screener for companies that benefit from lower crude oil prices. According to ICICI Direct, the company’s piping segment’s volume will grow at a CAGR of 19% over FY22-24 on the back of a recovery in demand from the agriculture, housing, and infrastructure segments. Supreme Industries plans to incur a capex of Rs 700 crore in FY23, which will mostly be used to increase production capacity.

  1. FSN E-Commerce Ventures (Nykaa): This internet platform company posted a surge in its net profit, up  251.1% YoY to Rs 4.1 crore, and revenue grew 39% YoY to Rs 1,230.8 crore in Q2FY23, as a result of new launches and festive demand. But its revenue and profit missed Trendlyne’s Forecaster estimates by 0.3% and 30.5%, respectively. Nykaa’s gross merchandise value (GMV) also rose 45% YoY to Rs 2,345.7 crore during the quarter, with Fashion GMV contributing 26%.  

Falguni Nayar, Executive Chairperson, Managing Director, and CEO, said, "Consumer demand for premium beauty, personal care, and wellness is showing signs of buoyancy as we gear up for a promising H2FY23.”

However, the company has been underperforming ahead of the expiry of the one-year lock-in period for its pre-IPO shareholders on November 10. It hit a 52-week low in the past week due to a large sell-off, especially from foreign investors. 

On the bright side, several brokerages are optimistic about the company because of strong Q2 results. Foreign brokerage Jefferies said the company delivered better than estimates on the GMV, revenue, and EBITDA but maintains its ‘Buy’ rating with a target price of Rs 1,650 as it expects volatility ahead of lock-in expiry. 

  1. Triveni Turbines: Despite a fallout with its joint venture partners, the stock has managed to sail well, even as  markets turned volatile with rising inflation and recession fears. The stock has given decent returns as it shows up on a screener of stocks with consistently high returns over the last five years. The stock rose 20% in the last 30 days and nearly 46% in the past 90 days.

Triveni’s rise in share price comes as reports suggest that the company will cater to the entire 3-100 MW markets globally. The stock rose 5% in trade on October 21, after the news came to light. Currently, the company has a market share of more than 50% and the order book of the company stands at Rs 3,610 crore. With rising demand from international markets like Southeast Asia, Europe, West Asia and North America and the ongoing global energy crisis, energy transition through renewable sources and methods will be sped up which is an opportunity to grab.

The growth story does not stop here. The stock rose 2% on Wednesday after declaring its Q2FY23 results. It reports an increase in net profit by 21% QoQ to Rs 46.2 crore. On a YoY basis, this fell 73.4% because of an exceptional item gain in Q2FY22 (settlement amount from litigation between the company and its joint venture). Reports suggest that the management guides a 35% revenue growth for the next few years and aims to maintain the PBT above 20% to maintain high margins. Centrum Broking initiates coverage on the stock with a ‘Buy’ rating and expects a 14% CAGR growth on order inflows over FY22-25E. Triveni Turbines also shows up on a screener of stocks with improving book value per share for the last two years.

Trendlyne's analysts identify stocks that are seeing interesting price movement, analyst calls, or new developments. These are not buy recommendations.

Trendlyne Marketwatch
Trendlyne Marketwatch
04 Nov 2022
Market closes higher, Fusion Microfinance's IPO gets bids for 2.95X of the total available shares

Trendlyne Analysis

Indian indices closed in the green after gyrating between gains and losses on a volatile day of trade. India’s October Services PMI rose to 55.1 compared to 54.3 in September on the back of strong domestic demand and fast-paced job growth. European indices traded higher than Thursday’s levels. Major Asian indices closed higher on speculations over lifting of Covid restrictions in China.

US indices fell on Thursday as investors assessed the US Fed’s Hawkish commentary while awaiting the US jobs report, scheduled to be released later today. The tech-heavy NASDAQ 100 fell 2% while the Dow Jones closed 0.5% lower. The Bank of England raised its key interest rate by 0.75% - its biggest rate hike in three decades to fight high inflation. Brent crude oil prices traded over 2% higher after falling by 1% on Thursday.

Nifty Smallcap 100 closed in the green, following the benchmark index. Nifty Media and Nifty Metal closed sharply higher than Thursday’s close. Nifty IT closed in the red, taking cues from the NASDAQ 100, which fell 2% on Thursday.

Nifty 50closed at 18,127.90 (75.2, 0.4%), BSE Sensexclosed at 60,950.36 (114.0, 0.2%) while the broader Nifty 500closed at 15,536.95 (52.3, 0.3%)

Market breadth is in the green. Of the 1,917 stocks traded today, 1,043 were on the uptick, and 824 were down.

  • Money Flow Index (MFI) indicates that stocks like Bank of India, Canara Bank, Syngene International, and Engineers Indiaare in the overbought zone.

  • State Bank of Indiaand Rail Vikas Nigamhit all-time highsof Rs 592 and Rs 46.5 respectively. Both stocks rise for five consecutive sessions.

  • Cipla is falling despite its Q2FY23 net profit rising 10.9% YoY to Rs 788.9 crore. Revenue grows by 5.6% YoY led by the pharmaceuticals segment rising 5.1% YoY. The stock makes it to the screener with companies that have low debt.

  • Global Health’s Rs 2,205.6 crore IPO gets bids for 49% of the available 4.7 crore shares on offer on the second day of bidding. The retail investor quota gets bids for 25% of the available 2.3 crore shares on offer.

  • Jute & Jute Products, Commodity Trading & Distribution, and Financial Institutions industries rise more than 10% over the past week.

  • Bikaji Foods' Rs 881.2 crore IPO gets bids for 1.5X of the available 2.06 crore shares on offer on the second day of bidding. The retail investor quota gets bids for 2.3X of the available 1.01 crore shares on offer.

  • Fusion Microfinance's Rs 1,103.9 crore IPO gets bids for 2.95X of the available 2.1 crore shares on offer on the last day of bidding. The retail investor quota gets bids for 51% of the available 1.07 crore shares on offer.

  • Indian Energy Exchange’s total production volume falls 13% YoY to 7,972 million units due to the high volume base of October 2021. However, according to National Load Dispatch Center’s data, energy consumption is up 1% YoY to 115 billion units.

  • Axis Direct upgrades its rating on Cholamandalam Investment & Finance Co to ‘Buy’ from ‘Hold’ with a target price of Rs 845. This indicates an upside of 13%. The brokerage’s outlook toward the company’s prospects turns positive on the back of rising loan disbursements, a comfortable liquidity position, and a diversified portfolio mix. It expects the company’s net profit to grow at a CAGR of 25.9% over FY22-25.

  • Brent crude prices fall to $94.45 per barrel amid higher interest rate concerns from the Central Bank of the US and fresh Covid outbreaks in China.
  • Bharat Electronics signs a memorandum of understanding (MoU) with Motorola for cooperation in broadband and push-to-talk service project, according to reports. It will permit the companies to connect their teams with higher speed and efficiency by utilising Motorola WAVE PTX, a push-to-talk service.

  • JK Lakshmi Cement is rising even though its Q2FY23 net profit fell 27.6% YoY to Rs 61 crore due to high power and fuel costs. Its revenue improved 13.6% YoY to Rs 1,373.6 crore. The stock shows up on the screener for companies with a rising revenue sequentially for the past three quarters.

  • RateGain falls in trade as 28 lakh shares (2.6% equity) amounting to Rs 78.9 crore change hands, according to reports.

  • IT stocks like Persistent Systems, Infosys, Coforge, and Mphasis are falling in trade. The broader sectoral index Nifty ITis also trading in the red.

  • Vodafone Idea, Jamna Auto Industries, and Hindustan Petroleum Corp trade below their second support or S2 level as the market grows volatile.

  • Cochin Shipyard is rising as it bags an order worth Rs 1,000 crore to construct two commissioning service operation vessels from a European client. The project is expected to be completed in 35 months. The company makes it on a screener for stocks that gained more than 20% in one month.

  • Nomura upgrades its rating on Larsen & Toubro to ‘Buy’ with a target price of Rs 2,425. The brokerage says that the capex plans in India and the Middle East seem to be going strong for the company. However, its EBITDA margin guidance of 9.5% may be difficult to attain.
  • Kalpataru Power Transmission rises as it receives new orders worth Rs 3,567 crore on a consolidated basis for transmission and distribution, water, railway, pipeline and other overseas projects. Its subsidiary JMC Projects is also increasing after bagging orders worth Rs 2,277 crore in the water and building & factories segments.

  • Metal stocks like Vedanta, Jindal Steel & Power, and Hindalco Industries are rising in trade. All constituents of the broader BSE Metal index are trading in the green.

  • Amara Raja Batteries is rising as its Q2FY23 net profit rises 39.4% YoY to Rs 201.2 crore. The rise in revenue aids the company's EBITDA margin to grow by 140 bps YoY to 13.3%. The company features in a screener reflecting stocks with zero promoter pledge.

  • Indian rupee rises to 82.66 against the US dollar in the early trade today.

  • Vodafone Idea’s Q2FY23 net loss widens to Rs 7,592.5 crore against Rs 7,295.7 crore in Q2FY22. However, its revenue from services rose 2% QoQ as average revenue per unit (ARPU) grew 2.3% QoQ to Rs 131. Akshaya Moondra, CEO of the company, says, "We continue to remain engaged with our lenders and investors for further fundraising to make required investments for network expansion and 5G rollout."

  • Hero MotoCorp’s Q2FY23 net profit falls by 7.7% YoY to Rs 688.4 crore on the back of high input costs and weakening rural demand. However, revenue rises 7.3% YoY to Rs 9,158.2 crore. Niranjan Gupta, CEO of the company says, “The global macro headwinds may keep the playfield a bit uncertain, and navigating the same over the next few quarters will be important.” The stock shows up on a screener of companies with an improving book value per share over the last two years.

Riding High:

Largecap and midcap gainers today include Indian Overseas Bank (21.70, 11.86%), Adani Enterprises Ltd. (3,833.25, 6.76%) and The New India Assurance Company Ltd. (94.75, 6.76%).

Downers:

Largecap and midcap losers today include Aditya Birla Fashion and Retail Ltd. (330.65, -6.17%), Varun Beverages Ltd. (1,138.90, -4.21%) and Hindustan Petroleum Corporation Ltd. (203.60, -3.53%).

Volume Shockers

42 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Indian Overseas Bank (21.70, 11.86%), Amara Raja Batteries Ltd. (569.40, 9.55%) and Punjab & Sind Bank (18.65, 9.06%).

Top high volume losers on BSE were Ajanta Pharma Ltd. (1,256.20, -6.79%), Aditya Birla Fashion and Retail Ltd. (330.65, -6.17%) and Hindustan Petroleum Corporation Ltd. (203.60, -3.53%).

GMM Pfaudler Ltd. (1,975.60, 6.12%) was trading at 14.8 times of weekly average. The New India Assurance Company Ltd. (94.75, 6.76%) and Exide Industries Ltd. (175.55, 6.49%) were trading with volumes 14.8 and 13.8 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

18 stocks overperformed with 52-week highs, while 6 stocks hit their 52-week lows.

Stocks touching their year highs included - Bank of India (67.50, 5.47%), Bank of Maharashtra (22.75, 7.82%) and Bharat Heavy Electricals Ltd. (76.05, 0.93%).

Stocks making new 52 weeks lows included - GlaxoSmithKline Pharmaceuticals Ltd. (1,345.80, -1.13%) and TV18 Broadcast Ltd. (36.25, 4.77%).

12 stocks climbed above their 200 day SMA including Amara Raja Batteries Ltd. (569.40, 9.55%) and Vedanta Ltd. (321.95, 6.29%). 14 stocks slipped below their 200 SMA including Indigo Paints Ltd. (1,542.65, -5.34%) and Kansai Nerolac Paints Ltd. (448.00, -3.52%).

Trendlyne Marketwatch
Trendlyne Marketwatch
03 Nov 2022
Market closes lower, Global Health’s IPO gets bids for 26% of the total available shares

Trendlyne Analysis

Nifty 50 recovered over 90 points from the day’s low but still closed in the red on a volatile day of trade. European stocks followed the global trend and traded lower than Wednesday’s close ahead of Bank of England’s key policy meeting. Major Asian indices closed in the red, in line with the US indices, which closed sharply lower on Wednesday.

The US Federal Reserve delivered another 75 bps rate hike on Wednesday, taking the federal funds rate from 3.75% to 4% - its highest level in 15 years. Though the Fed hinted at slower rate hikes going forward, Fed Chairman Jerome Powell said that it was too soon to speculate on a pause in rate hikes. In reaction, the tech-heavy NASDAQ 100 fell 3.4% while the Dow Jones closed over 1.5% lower on a volatile day of trade.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, despite the benchmark index closing in the red. Nifty Bank and Nifty Realtyclosed higher than Wednesday’s levels. Nifty IT closed in the red, taking cues from the NASDAQ 100, which closed over 3% lower on Wednesday.

Nifty 50closed at 18,048.05 (-34.8, -0.2%), BSE Sensexclosed at 60,836.41 (-69.7, -0.1%) while the broader Nifty 500closed at 15,481.50 (-16.1, -0.1%).

Market breadth is balanced. Of the 1,923 stocks traded today, 889 showed gains, and 976 showed losses.

  • Relative strength index (RSI) indicates that stocks like Godfrey Phillips India, Mazagon Dock Shipbuilders, Bank of India, and Sun Pharmaceutical Industries are in the overbought zone.

  • Housing Development Finance Corp's Q2FY23 net profit rises 17.8% YoY to Rs 4,454 crore. The monetary policy and interest rate hikes have aided the net interest income (NII) to grow 13% YoY to Rs 4,639 crore. The company features in a screenerfor stocks with an improving book value per share for the past two years.

  • Commodity Printing/Stationery, Biotechnology, and Non-Durable Household Productsindustries risemore than 3% in trade today.

  • Ed Yardeni of Yardeni Research expects further rate hikes by the US Federal Reserve to combat inflation. This comes after the Central Bank raised the policy rate by 75 bps yesterday.
  • Global Health’s Rs 2,205.6-crore IPO gets bids for 26% of the available 4.7 crore shares on offer on the first day of bidding. The retail investor quota gets bids for 12% of the available 2.3 crore shares on offer. The IPO consists of a fresh issue of Rs 500 crore and an offer for the sale of Rs 1,705.6 crore.

  • Bikaji Foods' Rs 881.2-crore IPO gets bids for 67% of the available 2.06-crore shares on offer on the first day of bidding. The retail investor quota gets bids for 1.1X of the available 1.01-crore shares on offer. The IPO consists entirely of an offer for sale of Rs 881.2 crore.

  • Cipla rises in trade as around 9.08 lakh shares (0.1% equity) amounting to Rs 106.1 crore change hands at Rs 1,168.8 per share, according to reports.

  • Alembic Pharmaceuticals rises with final approval from the US FDA for ketorolac tromethamine injections. It is used to treat acute pain in adults. According to IQVIA, the injection has an estimated market size of $ 59 million for 12 months ending June 2022.

  • Defence stocks like Bharat Electronics, Bharat Dynamics, and Data Patterns (India) are rising in trade. All constituents of the broader Defence industry trade in the green.

  • Fusion Microfinance's Rs 1,103.9-crore IPO gets bids for 29% of the available 2.1-crore shares on offer on the second day. The retail investor quota gets bids for 31% of the available 1.07-crore shares on offer.

  • PSU Banks like Punjab National Bank, Bank of Maharashtra, Central Bank of India, and UCO Bank are rising in trade. All constituents of the broader Nifty PSU Bank index are trading in the green.

  • Amid strong domestic demand and fast-paced job growth, India’s Services PMI rises to 55.1 in October, against 54.3 in September.

  • ICICI Securities upgrades its rating on Dalmia Bharat to ‘Buy’ from ‘Add’ and raises its target price to Rs 2,000 from Rs 1,750. This implies an upside of 25.4%. The brokerage turns positive on Dalmia Bharat despite the firm’s net profit falling 77.5% YoY in Q2FY23. It believes that the company's margin would improve in H2FY23 with the falling price of raw materials and fuel. The brokerage expects the company’s revenue to grow at a CAGR of 13.7% over FY22-25.

  • Triveni Turbine falls as its Q2FY23 net profit dips 73.4% YoY to Rs 46.2 crore. The net profit fell as a result of the high base in Q2FY22 due to the income from exceptional items. Its board of directors also seek shareholders' approval for a share buyback of Rs 190 crore at Rs 350 per share.

  • Goldman Sachs gives ‘Sell’ rating to Bajaj Finance, SBI Cards and Payment Services, and PNB Housing Finance as it believes that a higher loan-deposit ratio could impact NBFCs by tightening liquidity. ICICI Bank, Kotak Mahindra Bank, and State Bank of India are its top picks and gives them 'Buy' ratings.

  • The US FDA issued Form 483 to Lupin with five observations of the company. The inspection was conducted at Lupin’s Nagpur manufacturing unit. Reports also suggest that the US FDA issued a warning letter to Lupin on API manufacturing lapses at its Tarapur plant in Thane.

  • EIH is falling despite posting a net profit of Rs 24.6 crore in Q2FY23, compared to a loss of Rs 37.1 crore in Q2FY22. The company’s revenue surged 68.2% YoY to Rs 417 crore. The stock shows up on the screener listing companies with an improving cash flow and high durability.

  • Morgan Stanley maintains its ‘Overweight’ rating on Dalmia Bharat with a target price of Rs 1,850. The brokerage says that the company’s results were in line with the estimates, compared to its peers, but had lower volumes. This comes after the company's net profit fell 77.5% YoY to Rs 46 crore.
  • JK Paper is rising as its Q2FY23 net profit jumps 2.7X YoY to Rs 324.2 crore on the back of higher sales volume and realisations. Revenue jumps 74.1% YoY driven by growth in its paper and board segment. The stock shows up on a screener for companies with a high Piotroski score and high RoE and EPS growth.

  • Rakesh Jhunjhunwala's portfolio sees an addition of a 4.2% stake in Karur Vysya Bank, now holds 8.7% in the company.

  • Sunil Singhania and Ashish Kacholia buy 6.1% and 3.7% stakes respectively in Acrysil in Q2FY23. They now hold 12.3% and 7.5% stakes in the company.

  • Bikaji Foods raises Rs 262 crore from anchor investors ahead of its IPO by allotting 87.3 lakh equity shares at Rs 300 per share. Another IPO, Global Health, raises Rs 662 crore. The company allotted 1.9 crore equity shares for Rs 336 per share. Common investors include the Government of Singapore, HDFC MF, Aditya Birla Sun Life, and Max Life Insurance.

  • Relaxo Footwears' Q2FY23 net profit falls 67% YoY to Rs 22.4 crore with revenue decreasing 6.3%. The fall in revenue is because of reduced demand from the mass-selling segment. EBITDA margin dips 7.5 percentage points to 8.9% because of high raw material costs. Ramesh Kumar Dua, Managing Director of Relaxo says, "The consumers were facing inflationary pressures, which affected their affordability, moving them towards cheaper alternatives even at the cost of quality."

Riding High:

Largecap and midcap gainers today include Mahindra & Mahindra Financial Services Ltd. (219.90, 13.58%), Varun Beverages Ltd. (1,189.00, 5.45%) and Punjab National Bank (41.30, 5.22%).

Downers:

Largecap and midcap losers today include Tata Motors Limited (DVR) (229.80, -9.08%), Voltas Ltd. (861.25, -5.28%) and Relaxo Footwears Ltd. (932.25, -4.54%).

Volume Rockets

28 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Mahindra & Mahindra Financial Services Ltd. (219.90, 13.58%), Mas Financial Services Ltd. (904.20, 13.05%) and Indigo Paints Ltd. (1,629.70, 11.91%).

Top high volume losers on BSE were Aavas Financiers Ltd. (1,867.85, -4.74%), KSB Ltd. (1,915.70, -4.57%) and Relaxo Footwears Ltd. (932.25, -4.54%).

Alembic Pharmaceuticals Ltd. (658.15, 7.59%) was trading at 8.9 times of weekly average. Star Health and Allied Insurance Company Ltd. (711.60, -1.83%) and UCO Bank (14.45, 5.47%) were trading with volumes 8.0 and 8.0 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

18 stocks overperformed with 52-week highs, while 6 stocks hit their 52-week lows.

Stocks touching their year highs included - Bharat Forge Ltd. (857.20, 1.18%), Canara Bank (295.05, 1.25%) and Federal Bank Ltd. (137.25, 3.04%).

Stocks making new 52 weeks lows included - Motilal Oswal Financial Services Ltd. (682.00, -0.84%) and Relaxo Footwears Ltd. (932.25, -4.54%).

11 stocks climbed above their 200 day SMA including Indigo Paints Ltd. (1,629.70, 11.91%) and Redington Ltd. (157.20, 6.29%). 12 stocks slipped below their 200 SMA including Bata India Ltd. (1,832.10, -1.53%) and DCM Shriram Ltd. (1,024.05, -1.51%).

Trendlyne Marketwatch
Trendlyne Marketwatch
02 Nov 2022
Market closes lower, Fusion Microfinance's IPO gets bids for 7% of the total available shares

Trendlyne Analysis

Indian indices closed in the red with the Nifty 50 losing over 60 points and closing below the 18,100 mark. European stocks traded mixed as investors look ahead to the conclusion of a key US Federal Reserve policy-setting meeting today. Most major Asian indices closed higher, despite the US indices closing in the red on Tuesday. US stocks fell as stronger-than-expected US jobs report raised the possibility of the Federal Reserve continuing with its aggressive monetary policy tightening to combat elevated inflation. The tech-heavy NASDAQ 100 closed over 1% lower while the Dow Jones fell 0.2% on a volatile day of trade. Brent crude oil futures traded higher after rising over 2% on Tuesday after the industry report showed a surprise drop in US crude inventories.

Nifty Smallcap 100 and Nifty Midcap 100 closed flat, despite the benchmark index closing in the red. Nifty Bank and Nifty Realty closed lower than Tuesday’s levels. Nifty IT closed in the red, taking cues from the NASDAQ 100, which closed 1% lower on Tuesday.

Nifty 50closed at 18,072.10 (-73.3, -0.4%), BSE Sensexclosed at 60,906.09 (-215.3, -0.4%) while the broader Nifty 500closed at 15,486.70 (-50.7, -0.3%)

Market breadth is balanced. Of the 1,933 stocks traded today, 934 were gainers and 921 were losers.

  • LIC Housing Finance sees a short buildup in its November 24 future series as its open interest rises 100.6% with a put-call ratio of 0.55.

  • Bikaji Foods, a manufacturer of packaged snacks, opens for IPO subscription tomorrow. The price band for the issue is Rs 286-300 per share and is entirely an offer for sale for Rs 881.2 crore. Global Health, a multi-speciality healthcare provider, also opens for IPO subscription tomorrow. The price band for the issue is Rs 319-336 per share and is entirely an offer for sale for Rs 1,705.6 crore.

  • Telecom stocks like Bharti Airtel, Indus Towers, and Vodafone Ideaare falling in trade. The broader Telecom Servicessector drops more than 2%.

  • AIA Engineeringand Torrent Pharmaceuticals hit their 52-week highs of Rs 2,814 and Rs 1,708 respectively. AIA Engineering rises for three sessions, while Torrent Pharmaceuticals trades higher for four sessions.

  • Alembic Pharmaceuticals is rising as it receives final approval from the US Food & Drug Administration for its abbreviated new drug application for mesalamine extended-release capsules. The drug is used to treat inflammation in the digestive system in adults. It is estimated to have a market value of $133 million over the past year till June.

  • Fusion Microfinance's Rs 1,103.9-crore IPO gets bids for 7% of the available 2.1-crore shares on offer on the first day of bidding. The retail investor quota gets bids for 7% of the available 1.07-crore shares on offer. The offer consists of a fresh issue of Rs 600 crore and an offer for the sale of 1.36 crore shares.

  • Devyani International, Varroc Engineering, and Chambal Fertilisers & Chemicals trade below their third support or S3 level as market trades lower.

  • DCX Systems' Rs 500-crore IPO gets bids for 69.8X of the available 1.4-crore shares on offer on the last day of bidding. The retail investor quota gets bids for 61.8X of the available 25.3-lakh shares on offer.

  • Bofa upgrades its rating on FSN E-Commerce Ventures (Nykaa) to ‘Buy’ with a target price of Rs 1,555. The brokerage believes that the company is in a better position to sustain its revenue growth and margin improvement. This comes after the company's net profit rose 251.1% YoY to Rs 4.1 crore and revenue grew 39% YoY to Rs 1,230.8 crore in Q2FY23.

  • HDFC Securities upgrades its rating on Tata Power to ‘Add’ from ‘Reduce’ with a target price of Rs 243, indicating an upside of 6.1%. The brokerage’s outlook on the company’s prospects turns positive on the back of a growing order book and a decline in loss from the Mundra power plant. It expects the firm’s revenue to improve at a CAGR of 11.3% over FY22-25.

  • Distributors, Food & Drugs Retailing, and Jute & Jute Products industries rise more than 24% in trade in the past month.

  • NCC is rising as it wins two orders worth Rs 1,056 crore from state government agencies related to the water and environment division.

  • TVS Motor Co is falling despite its monthly sales in October rising by 2% YoY to 360,288 units, driven by a 7% YoY growth in domestic two-wheeler sales. Its scooter sales rise 20% YoY, whereas its motorcycle sales decline 4.5% YoY. Three-wheeler sales rise 16% YoY to 15,658 units.

  • Centre reduces the windfall tax on locally produced crude oil to Rs 9,500 per tonne from Rs 11,000 earlier. But it increases the export tax on diesel to Rs 13 per litre from Rs 12 and aviation turbine fuel (ATF) to Rs 5 per litre from Rs 3.5.
  • Fusion Microfinance raises Rs 331.2 crore from anchor investors ahead of its IPO, which opens up for subscription today. The company allotted 89.99 lakh equity shares at Rs 368 per share to anchor investors. The investors include Nomura Trust, ICICI Prudential, Edelweiss and others.

  • Infosys' board of directors to seek approval from shareholders for a share buyback of Rs 9,300 crore from November 3 to December 2. The IT company's board had previously announced the buyback at Rs 1,850 per share through the open market route.

  • BC Asia Investments VII sells a 0.54% stake (1.6 crore shares) in Axis Bank for Rs 1,486.8 crore in a bulk deal on Tuesday.

  • Kansai Nerolac Paints’ Q2FY23 net profit rises 23.4% YoY to Rs 113.7 crore with revenue improving 19% YoY. The management says that raw material prices have started to cool off. However, the company reports an increase in input costs by 11.2% YoY in Q2. Anuj Jain, Managing Director of Kansai Nerolac Paints, says, “Company has taken price increase in both decorative and industrial segments and continues to be in discussion with OEMs for further price increases.” The company shows up on a screener of stocks with improving book value for the last two years.

  • Karnataka Bank rises in trade as around 22.57 lakh shares (0.7% equity) amounting to Rs 25.13 crore change hands, according to reports.

  • Adani Ports & Special Economic Zone (APSEZ) is falling despite its Q2FY23 net profit rising 76.3% YoY to Rs 1,677.5 crore on the back of robust cargo volumes. Revenue improves 47.5% YoY, driven by a 30.5% growth in the port activities segment. Karan Adani, CEO and Managing Director of the company, said, “Extending this strong performance into October, APSEZ achieved 200 MMT of cargo throughput within seven months, another milestone.”

  • Tech Mahindra’s Q2FY23 net profit rises 13.6% QoQ to Rs 1,285.4 crore. Revenue grows by 3.3% QoQ on the back of communications, media, and entertainment (CME) segment. In terms of geography mix, the US market drives revenue growth for the company. Its attrition rate falls by 200 bps QoQ to 20%. The stock shows up on a screener for companies with revenue rising sequentially for the past eight quarters.

Riding High:

Largecap and midcap gainers today include Gland Pharma Ltd. (1,879.95, 5.25%), Cholamandalam Investment & Finance Company Ltd. (744.70, 4.96%) and Sun TV Network Ltd. (544.10, 4.11%).

Downers:

Largecap and midcap losers today include LIC Housing Finance Ltd. (366.65, -8.45%), Kansai Nerolac Paints Ltd. (467.10, -3.57%) and Bharti Airtel Ltd. (809.85, -3.08%).

Crowd Puller Stocks

26 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Mazagon Dock Shipbuilders Ltd. (724.60, 13.56%), Vakrangee Ltd. (34.00, 7.94%) and Redington Ltd. (147.90, 7.68%).

Top high volume losers on BSE were LIC Housing Finance Ltd. (366.65, -8.45%), Chambal Fertilisers & Chemicals Ltd. (308.05, -5.54%) and Devyani International Ltd. (187.30, -3.63%).

Westlife Development Ltd. (763.50, 2.89%) was trading at 19.6 times of weekly average. Bayer Cropscience Ltd. (4,584.80, -0.65%) and Kansai Nerolac Paints Ltd. (467.10, -3.57%) were trading with volumes 7.1 and 6.2 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

13 stocks took off, crossing 52-week highs,

Stocks touching their year highs included - AIA Engineering Ltd. (2,773.70, 2.74%), Bharat Forge Ltd. (847.20, -0.41%) and Coal India Ltd. (245.80, 0.06%).

19 stocks climbed above their 200 day SMA including Vakrangee Ltd. (34.00, 7.94%) and Redington Ltd. (147.90, 7.68%). 7 stocks slipped below their 200 SMA including LIC Housing Finance Ltd. (366.65, -8.45%) and Shree Cements Ltd. (22,327.20, -1.38%).

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The Baseline
02 Nov 2022
Chart of the week: Subscriptions spike for Reliance Jio, Bharti Airtel as telcos get ready for 5G
By Abdullah Shah

India is all set to go 5G as major telecom companies, including Jio and Bharti Airtel, have started the rollout. India's 5G entry was made official at the Indian Mobile Congress (IMC) event held in New Delhi on October 1. 

Reliance Jio picked Diwali to launch 5G, hinting that beta testing had launched on October 5. Bharti Airtel launched the service in eight Tier 1 cities on October 8. Vodafone Idea however, has not yet announced the date of its 5G launch or the cities where the service would be available.

5G will be the next big battle for domination among India's telecom companies. In the meantime, we take a look at their monthly subscription numbers over the past six months in this edition of chart of the week.

Reliance Jio’s active subscriptions took a hit in July but bounced back in August as it rose almost 1% to 38.5 crore. The data indicates that 91.8% of its total subscribers are active. The company had posted an average revenue per unit (ARPU) of Rs 176 in Q1FY23. 

Bharti Airtel’s active subscribers in August rose 0.5% to 35.8 crore. It has the highest proportion of active subscribers to total subscribers, 98.3%. The company’s average revenue per unit (ARPU) has also been the highest, at Rs 183.

Vodafone Idea on the other hand, has seen its active subscribers decline in the past six consecutive months and fell 1.4% to 21.4 crore in August. Only 84.8% of the company’s total subscribers are currently active. The company had posted an average revenue per unit of Rs 128 in Q1FY23.

According to ICICI Direct, the telecom sector is due to see a rise in ARPU in H2FY23. This rise will come on the back of a higher number of days and residual benefits of the tariff hike. 

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The Baseline
01 Nov 2022
As investors seek alpha, DVM investing strategies beat benchmarks by big margins
By Tejas MD

Investors and traders are always on the hunt for alpha –  gaining excess returns on an investment relative to the benchmark index. But managing a portfolio that delivers this magic consistently, and over a period of time is something very few investors/traders are capable of. 

Why is this so difficult? A lot of factors come in the way of consistent alpha. A rising dollar may force foreign investors to temporarily exit the market, and cause indices to fall. Stocks in entire industries may fall as the sector struggles. Trading volumes may decline with changes in government regulations, or with a sharp economic downturn.

Investors also differ from traders, in seeking returns over a longer period, while investing in fewer stocks.  These investors don’t like bear market periods as a result, as even sound investments can see share price declines. Traders on the other hand, take advantage of both rising and falling markets to enter and exit positions over a shorter period, and take smaller and more frequent profits. 

Using DVM scores to deliver alpha on investments

Trendlyne’s durability (D), valuation (V), and momentum (M) scores allow investors to evaluate all aspects of a stock. By choosing from curated screeners or by creating your own, users can make use of these stock scores to devise a high-return trading or investing strategy. One can also backtest these screeners on Trendlyne to see how a particular strategy performed in the past. The backtests also have various filters that let you change the frequency of portfolio review, control for the number of stocks invested in each period, etc. 

There is no one-size-fits-all strategy in investing or trading. A Momentum Score strategy, which looks for stocks with bullish technicals, is more suitable for traders with an appetite for higher risk, who are very active in the stock market. While the Valuation Score strategy is suitable for value investors who are always looking for stocks that are undervalued, a Durability Score strategy which selects financially healthy companies, is for those looking for lower risk and in it for the long game.

Finally, combinations of these scores help investors identify high-quality stocks that may favor one approach over another. 

Let’s look at strategies that use these three DVM metrics individually, evaluate the results and then move on to combining these parameters in search of a better strategy. 

A Momentum Score strategy favours traders, but comes with caveats

This Momentum Score screener helps select high-momentum (technically bullish) stocks with sufficient volumes, so that it is easy for investors to enter and exit. This strategy outperformed all others as it delivered the highest CAGR over a shorter time frame (one to three years). This is optimal for short-term traders who are active in the stock market. Surprisingly, it also performed the best even in volatile markets, as it focuses only on stocks with the highest momentum score. With weekly portfolio reviews, this strategy delivered a stellar three-year CAGR of 301% against Nifty 50’s CAGR of 16%. 

The period analysis, which shows the returns every week, is also mostly in green. However, the maximum drawdown over longer investing time periods. 

Maximum drawdown is the biggest observed loss from a peak to a trough of a portfolio before a new peak is attained. This did not have a stop loss, so the drawdowns show the maximum possible with this strategy. 

Things to watch out for while employing this strategy: 

  1. A weekly portfolio review is essential since the momentum score is sensitive to share price changes, and can cause higher stock entries and exits. A stop loss can also reduce negative return periods. 
  2. Some stocks hit the upper/lower circuit as soon as the markets open–sometimes even before the market opens–in pre-market trading itself. Hence, in some cases, it can become difficult to enter/exit the stock when required. 
  3. For longer term investors, other strategies are more optimal as weekly portfolio reviews may not be feasible for everyone. In those cases, valuation and other strategies perform better. 

A Valuation Score strategy delivers stellar long term returns, but has the highest drawdown

The Valuation Score trading strategy performs best in a longer time frame (10 years). This could be due to markets taking time to discover the stock’s true value and price it accordingly. The screener includes high valuation score stocks with sufficient volumes so that it is easy for investors to enter and exit.

Since the stock's Valuation Score changes with share price movement, it is necessary to review the portfolio every quarter. In fact, a quarterly review (as opposed to a yearly review) allows investors to select optimal stocks based on the screener and get maximum returns. In addition, limiting the number of stocks selected during each period keeps this number manageable (stocks can be limited under the ‘Advanced’ option in the screener - see image below)

Under these conditions, the strategy delivered a staggering 93.7% CAGR over 10 years. 

However, investors will have to endure a high drawdown when following this strategy. Another important thing to note is that a single stock could be responsible for a significant portion of the returns. 

In the top valuation score strategy for instance, Sunil HiTech Engineers (now delisted) delivered over 5,400% returns. So, missing a key stock could lead to lower-than-expected returns. In addition, not all low-valuation score stocks are undervalued stocks. There could be several reasons for low share price relative to earnings–litigations, distorted earnings due to one-time gains, etc. So, there is a chance that affordable stocks can plunge further in share price. In this strategy for example, Gitanjali Gems lost big as long-hidden fraud came into view –95% of its value. 

Good for low risk investors: With lower drawdowns, the Durability Score strategy delivers results when combined with other metrics

The Durability Score strategy is most effective in relatively short terms (three years) for investors, as it delivers higher returns during this period, compared to others. Like the other two strategies, a quarterly review of stocks and controlling the number of stocks to five shows high returns for investors.

Compared to other strategies which are heavily dependent on the share price, this has a relatively lower drawdown. This could be due to the presence of fundamentally strong companies in this screener. However, it becomes more effective when combined with other metrics like valuation score. 

One such strategy can be devised, by using a screener that lists high DVM-score stocks with tradable volume. Another option is to use one of Trendlyne’s expert screeners–DVM - High Return, Highly Durable Companies. This includes companies with high DVM scores with rising stock prices and strong fundamental growth. When this expert screener is used, returns increase significantly, compared to the high DVM strategy that only uses stock scores. 

This is particularly effective for a long term (10 years), with quarterly portfolio review, and controlled for five stocks. The top strategy in this category delivered 85.4% CAGR with a maximum drawdown of 53%. In addition, filtering for Nifty 500 stocks made marginal changes in the returns, but reduced drawdown. But filtering for Nifty 50 stocks led to underperformance, mainly because of the low number of stocks selected due to stringent parameters. 

Not surprisingly, period analysis is mostly in the green as the stocks selected here are fundamentally strong. 

The DVM expert screener performs the best, when accounting for drawdowns

When mid to long-term strategies across different categories are considered, high-valuation stocks deliver the highest returns. But when we consider the maximum drawdown along with the CAGR, the expert screener comes out ahead as it has a lower drawdown. 

The expert screener (DVM - High Return, Highly Durable Companies), delivered returns at a whopping 85% CAGR–meaning an investment of Rs 10,000 10 years ago is now worth over Rs 38.2 lakh. All an investor needed to do was to review the portfolio quarterly and shuffle it according to the entry and exit of stocks in the expert screener and stay invested. 

This is just the tip of the possibilities available to investors. Investors can use several different parameters such as PE ratio and ROE  to create screeners and backtest it to calculate the returns that particular strategy has delivered over a selected period. Combining these with Trendlyne’s stock scores can, as we saw above, substantially increase your alpha.

Investors can also choose several expert screeners encompassing different parameters and investment philosophies and backtest them to come up with a trading strategy that works for them. 

Trendlyne Marketwatch
Trendlyne Marketwatch
01 Nov 2022
Markets close higher, Dhanuka Agritech approves share buyback

Adani Enterprises Ltd. (3575.70, 6.82%), Adani Wilmar Ltd. (716.45, 6.55%) are among the top gainers as markets close higher. Nifty 50 closed at 18145.40 (133.2, 0.7%) , BSE Sensex closed at 61121.35 (374.8, 0.6%) while the broader Nifty 500 closed at 15537.40 (113.4, 0.7%)

Market breadth is horizontal. Of the 1928 stocks traded today, 971 were gainers and 883 were losers.

Markets will be closely watching comments from the US Federal Reserve tomorrow. Even as the Fed struggles to control inflation, it is facing financial markets and a non-bank sector that has adapted to a very low-interest rate regime. 

While the Fed is expected to make another big interest rate hike of 75 bps, Fed watchers are hoping that the Fed will signal a slowdown in subsequent hikes to limit the fallout in the domestic and international economy. But historically, control over persistent inflation has not come without economic pain. 

  • India's foreign exchange reserves are set to drop more than was predicted by the end of the year, as the Reserve Bank of India cushions the rupee against a rising dollar, according to a Reuters poll of economists. The RBI has drawn down approximately $118 billion from its currency reserves (from a peak of $642 billion in September 2021). Despite this, the rupee has dropped over 10% in the past year against the dollar.

  • Dhanuka Agritech board approves a share buyback at Rs 850 per share. The board has fixed November 18 as the record date for the buyback offer.

  • Steel Strip Wheels in its October update, says that revenue grew by 11% YoY  for the month, with the biggest jump (103%) in the alloy wheels segment. 

  • India's manufacturing PMI rose in October, to 55.3 from 55.1 in September (a reading above 50 indicates expansion in manufacturing activity). 

  • Pharma companies Torrent Pharma and Cipla hit their all time highs today. Pharma and healthcare indices are among those rising sharply today.

  • Brokerages expect the Indian stock market to be resilient according to an ET survey, despite rising global stresses and a strengthening dollar. 

  • Crude oil prices are rising again after it had softened from the ~$120 per barrel levels it hit mid June 2022. With prices hovering at around $95 per barrel, analysts predict that it will cross "well above" $100 levels in December, as EU restrictions on Russian oil go into effect on December 7.  

  • Recently listed startups Delhivery and Nykaa are rising sharply today on the back of earnings buzz. In its recent October update, Delhivery said that it had "successfully onboarded 200+ new customers in Q2FY23, driven by improving service metrics". Nykaa's long term share price trend has been unfavourable - the stock has fallen over 12% in the last three months.  

  • HDFC Securities downgrades Bandhan Bank from 'Buy' to 'Accumulate' after the bank's Q2 results missed its estimates, and saw its asset quality weaken and write-offs accelerate. The analysts' outlook on the bank minced no words, saying that Bandhan Bank faces "existential questions on the quality and recoverability of its core customer franchise."

  • Speaking of FIIs, they have turned net buyers in the Indian stock market over the last three days, after selling Indian stocks in the last month. 

  • FII shareholding in infrastructure conglomerate Larsen & Toubro recovered in the September quarter after falling in June. 

  • Axis Bank is an outlier among finance stocks today, as it falls sharply on news that Bain Capital plans to sell a 1.24% stake in the bank through block deals. This stake would be worth around Rs 3,400 crore.

Riding High:

Largecap and midcap gainers today include Adani Enterprises Ltd. (3575.70, 6.82%), Adani Wilmar Ltd. (716.45, 6.55%) and Divi's Laboratories Ltd. (3836.45, 6.31%).

Downers:

Largecap and midcap losers today include Punjab National Bank (40.10, -5.98%), Axis Bank Ltd. (871.75, -3.78%) and Union Bank of India (52.60, -2.41%).

Movers and Shakers

25 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included ITI Ltd. (115.10, 8.48%), Shree Renuka Sugars Ltd. (58.35, 7.96%) and Godfrey Phillips India Ltd. (1590.55, 7.14%).

Top high volume losers on BSE were Timken India Ltd. (2828.85, -5.72%), Escorts Kubota Ltd. (2008.50, -1.46%) and IFB Industries Ltd. (939.80, -1.24%).

TCI Express Ltd. (1873.95, -1.01%) was trading at 12.0 times of weekly average. Heidelberg Cement India Ltd. (199.10, 5.29%) and Divi's Laboratories Ltd. (3836.45, 6.31%) were trading with volumes 6.3 and 5.6 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

22 stocks overperformed with 52 week highs, while 2 stocks tanked below their 52 week lows.

Stocks touching their year highs included - AIA Engineering Ltd. (2699.65, 0.67%), Bank of Baroda (147.70, 0.00%) and Bharat Forge Ltd. (850.70, 1.98%).

Stocks making new 52 weeks lows included - Intellect Design Arena Ltd. (425.10, -1.51%) and Chemplast Sanmar Ltd. (381.00, 1.55%).

21 stocks climbed above their 200 day SMA including ITI Ltd. (115.10, 8.48%) and Equitas Holdings Ltd. (107.95, 6.99%). 5 stocks slipped below their 200 SMA including Swan Energy Ltd. (211.70, -6.53%) and Blue Dart Express Ltd. (7347.30, -3.16%).

Trendlyne Marketwatch
Trendlyne Marketwatch
01 Nov 2022

Nifty 50 was trading at 18078.00 (65.8, 0.4%) , BSE Sensex was trading at 60961.95 (215.4, 0.4%) while the broader Nifty 500 was trading at 15473.10 (49.1, 0.3%)

Market breadth is holding steady. Of the 1910 stocks traded today, 934 were on the uptick, and 898 were down.

Riding High:

Largecap and midcap gainers today include Adani Enterprises Ltd. (3534.75, 5.60%), Divi's Laboratories Ltd. (3798.45, 5.25%) and FSN E-Commerce Ventures Ltd. (1201.85, 4.26%).

Downers:

Largecap and midcap losers today include Axis Bank Ltd. (872.05, -3.75%), Ashok Leyland Ltd. (147.90, -3.52%) and Eicher Motors Ltd. (3765.50, -2.21%).

Crowd Puller Stocks

9 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included ITI Ltd. (115.45, 8.81%), Saregama India Ltd. (397.95, 6.01%) and Godfrey Phillips India Ltd. (1572.95, 5.96%).

Top high volume losers on BSE were Timken India Ltd. (2858.85, -4.72%) and TeamLease Services Ltd. (2900.00, -0.39%).

TCI Express Ltd. (1897.15, 0.22%) was trading at 10.1 times of weekly average. Heidelberg Cement India Ltd. (199.55, 5.53%) and Divi's Laboratories Ltd. (3798.45, 5.25%) were trading with volumes 5.6 and 4.0 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

20 stocks hit their 52 week highs, while 2 stocks tanked below their 52 week lows.

Stocks touching their year highs included - AIA Engineering Ltd. (2700.40, 0.70%), Bank of Baroda (147.55, -0.10%) and Bharat Heavy Electricals Ltd. (75.50, 1.96%).

Stocks making new 52 weeks lows included - Intellect Design Arena Ltd. (423.05, -1.98%) and Chemplast Sanmar Ltd. (379.25, 1.08%).

20 stocks climbed above their 200 day SMA including ITI Ltd. (115.45, 8.81%) and Heidelberg Cement India Ltd. (199.55, 5.53%). 4 stocks slipped below their 200 SMA including Blue Dart Express Ltd. (7341.00, -3.24%) and Shriram Transport Finance Company Ltd. (1207.55, -1.76%).

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The Baseline
31 Oct 2022
Five analyst picks from pharma and chemicals
By Suhas Reddy

This week we look at analyst picks from the Pharmaceutical and Chemicals & Petrochemicals sectors.

  1. Granules India: ICICI Direct maintains its ‘Buy’ rating on this pharmaceutical company with a target price of Rs 410, implying an upside of 10.0%. In Q2FY23, the firm’s net profit rose 79.8% YoY and revenue, 29.5% YoY. Analysts Siddhant Khandekar and Utkarsh Jain say Granules’ revenue growth in this quarter has beaten their estimates, mainly driven by higher paracetamol sales in the US, increased market share and new launches. They added that the company’s EBITDA margins also beat their estimates. It grew by 409 bps YoY to 21.1%. 

Khandekar and Jain believe that the company’s margin will improve in the coming quarters on the back of a focus on economies of scale and gradual expansion of complex products. Overall, they are positive about the company’s prospects, given its focus on product portfolio diversification, improving backward integration, and cost management. The analysts expect the firm’s net profit to grow at a CAGR of 27.8% over FY22-24.

  1. Glenmark Life Sciences: BoB Capital Markets keeps its ‘Buy’ rating on this active pharmaceutical ingredient (API) manufacturer but reduces the target price to Rs 535 from Rs 560. This implies an upside of 25.9%. Analyst Saad Shaikh reduces the target price on the expectation of higher costs to commission the new plant in Dahej and a fall in the firm’s Q2FY23 revenue. GLS’ revenue fell on the back of a 33% YoY reduction in API business from its  parent company Glenmark Pharmaceuticals, the analyst noted.

However, Shaikh remains positive about the company’s growth prospects for its “strong market position in key APIs and focus on product value over volumes, which translates to a superior margin profile”. He also believes that an increase in production capacity will benefit the company in the medium to long term. The analyst expects the company’s net profit to grow at a CAGR of 9.8% over FY22-25.

  1. Torrent Pharmaceuticals: ICICI Securities maintains its ‘Buy’ rating on this pharmaceutical company and increases its target price to Rs 1,853 from Rs 1,769. This indicates a 12.3% upside. Analysts Vinay Bafna and Rohan John say that the firm’s Q2FY23 revenue and EBITDA margin growth was broadly in line with their estimates. But then, its profit growth came in below estimates. They attribute this to higher other expenses and lower other income. Despite its profit growth missing their estimates, the analysts remain positive on Torrent Pharma, considering “its strong branded franchise supported by a dominant chronic segment in India and Brazil”.

Bafna and John believe that the company’s recent acquisition of Curatio will augur well for it, despite the acquisition diluting the earnings per share in the near term. They also expect the firm’s operational leverage, cost optimisation, and resolution of its plants will drive margin growth in the coming quarters. The analysts estimate Torrent Pharma’s net profit to grow at a CAGR of 35.5% over FY22-25.

  1. UPL: Prabhudas Lilladher maintains a ‘Buy’ call on this agrochemical manufacturer with a target price of Rs 1,020. This indicates an upside of 39.7%. UPL has announced a strategic realignment of its businesses into four distinct business verticals. Himanshu Binani remains optimistic about the company on the back of this business restructuring strategy. 

Marquee investors like ADIA, TPG, Brookfield, and KKR are investing a total of $500 million in UPL. But ADIA and TPG will receive $241 million for their exit from non-crop protection in UPL Corp business resulting in net proceeds of $259 million. Binani believes that these net proceeds are likely to be utilized towards debt reduction and working capital requirement and would not meaningfully impact the earnings profile in the near term. “In terms of unlocking the fair value of each of the business segments, It will be a positive move in the long term,” he added.

  1. Navin Fluorine International: Edelweiss maintains a ‘Buy’ call on this commodity chemicals company with a target price of Rs 5,500, indicating an upside of 20.8%. In Q2FY23, the company’s profit decreased 8.6% YoY to Rs 57.8 crore, despite a 23.1% YoY increase in revenue to Rs 430.1 crore. Analysts T Ranvir Singh, Nikhil Shetty, and Prasad Hase said, “Navin Fluorine International’s Q2FY23 performance was below our estimates and street expectations on the revenue and bottom-line front.” 

Despite the lower-than-expected results, the analysts remain positive on the chemicals manufacturer on the back of strong hydrofluoroolefin demand, commercialization of phase one multi-product plant, robust demand outlook, ability to pass on price hikes, and healthy realizations across specialty chemical products. “The company’s long-term story is intact and we expect new capacity additions to drive top-line growth while gaining leverage after achieving optimum capacity utilization to improve profitability,” they concluded.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

Trendlyne Marketwatch
Trendlyne Marketwatch
31 Oct 2022
Market closes higher, DCX Systems' IPO gets bids for 2.1X of the total available shares

Trendlyne Analysis

Indian indices closed in the green for a third straight session. The Nifty 50 rose 225 points or 1.3% and closed above the 18,000 mark. European stocks traded marginally lower ahead of the key Eurozone inflation data release. Most major Asian indices closed in the green, in line with the US indices, which closed sharply higher on Friday. US stocks rose on the back of an encouraging US consumer spending report released on Friday. The tech-heavy NASDAQ 100 rose 3.2% as Apple reported a higher-than-expected profit in Q2FY23. The S&P 500 closed 2.5% higher while the Dow Jones rose 2.6%. Brent crude oil futures trade lower as concerns over Covid curbs in China outweigh strong global crude oil demand.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, following the benchmark index. Nifty Pharma and Nifty Auto closed higher than Friday’s close. Nifty IT closed in the green, tracking the NASDAQ 100, which rose over 3% on Friday.

Nifty 50closed at 18,015.70 (228.9, 1.3%), BSE Sensexclosed at 60,746.59 (786.7, 1.3%) while the broader Nifty 500closed at 15,428.35 (186.8, 1.2%)

Market breadth is in the green. Of the 1,947 stocks traded today, 1,003 were on the uptrend, and 887 went down.

  • Stocks like Bank of India, Union Bank of India, Indian Bank, and Canara Bank are in the overbought zone, according to the relative strength index (RSI).

  • HDFC Securities maintains a 'Reduce' rating on V-Guard Industries with a target price of Rs 240. This indicates a downside of 5.1%. The brokerage expects the company's EBITDA margin to improve in H2FY23 as its high-cost raw material inventory has been used up. It estimates the company's revenue to grow at a CAGR of 10.6% over FY22-25.

  • HFCL rises after receiving purchase orders worth Rs 115 crore from Reliance Projects & Property Management Services for the supply of optical fibre cables. The orders are expected to be executed by January 2023.

  • Granules Indiaand Karur Vysya Bankhit their 52-week highs of Rs 372.9 and Rs 104.7 respectively. Both stocks rise for two consecutive sessions.

  • DCX Systems' Rs 500-crore IPO gets bids for 2.1X of the available 1.4-crore shares on offer on the first day of bidding. The retail investor quota gets bids for 8.7X of the available 25.3-lakh shares on offer. The offer consists of a fresh issue of Rs 400 crore and an offer for sale of Rs 100 crore.

  • Minda Corp rises after signing of technology license and technical assistance agreement with Daesung Eltec, a South Korea-based company. The agreement pertains to Daesung Eltec supporting the company in manufacturing and developing advanced driver assistance products for passenger, commercial and off-road vehicle segments. Its stocks show up on a screener for companies with consistent high returns over the past five years.

  • Stocks like Cummins India, Bosch, Mahindra & Mahindra, and Escorts Kubota are rising in trade. All stocks of the broaderBSE Auto index are trading in the green.

  • Jute & Jute Products, Internet & Catalogue Retail, and Petrochemicals industries rise more than 3% in trade today.

  • Indian rupee appreciates 15 paise to 82.32 from Friday’s close of 82.47 against the US dollar in the early trade today.

  • Nifty 50was trading at 17,975.50 (188.7, 1.1%), BSE Sensexwas trading at 60,657.63 (697.8, 1.2%) while the broader Nifty 500was trading at 15,382.50 (0.92%).

  • Market breadth is in the green. Of the 1,936 stocks traded today, 1,022 were gainers and 844 were losers.

  • CB Ananthakrishnan, Director (Finance) and CFO of Hindustan Aeronautics, expects the orderbook of the company to exceed Rs 1.2 lakh crore and revenue growth of 7% in FY23.
  • Axis Direct is optimistic about Aarti Drugs’ growth prospects despite the company’s Q2 gross margins and net profit missing its estimates. The brokerage upgrades its rating on the company to ‘Buy' from ‘Hold' with a target price of Rs 545, indicating an upside of 18%. It believes that the firm is well-placed to benefit from the rise in demand for active pharmaceutical ingredients and a fall in raw material and freight costs. The brokerage expects the company’s net profit to grow at a CAGR of 15% over FY22-24.

  • Ramkrishna Forgings wins export orders for heavy-duty commercial vehicles for its European application worth Rs 113.2 crore from a manufacturer of rear and front axles. The order will be conducted over the next four years.

  • Larsen & Toubro rises after bagging multiple engineering, procurement, and construction orders worth Rs 1,000–2,500 crore in Saudi Arabia. The orders pertain to the construction of overhead transmission lines and a new gas-insulated substation.

  • Maruti Suzuki India is rising as its Q2FY23 net profit jumps 4.3X YoY to Rs 2,112.5 crore. Revenue rises 45.7% YoY, driven by robust sales volume. The company’s sales rise on the back of improving availability of semiconductors and recovery in demand for passenger vehicles. The stock shows up on a screener for companies with zero promoter pledges.

  • Hero MotoCorp is rising as its retail sales grow 20% over the festive period. Retail sales in this period were driven by a rise in sales of two-wheelers like 100cc Splendor+ and others.

  • Chandra Shekhar Ghosh, Managing Director and CEO of Bandhan Bank, says that the bank's net interest margin will stay around 7.5-8%. He adds that the bank's focus is on MSME growth.
  • Dolly Khannasells a 0.4% stake in KCP in Q2FY23 and now holds a 3% stake in the company.

  • Ashish Kacholiaadds Rainbow Childrens Medicare to his portfolio in Q2FY23 and buys a 1% stake in the company.

  • Stocks like Tata Consultancy Services, Infosys, HCL Technologies, and Wipro are rising in trade. All stocks of the broader Nifty IT index are trading in the green.

  • DCX Systems raises Rs 225 crore from investors ahead of its IPO which opens up for subscription today. The company allotted 1.08 crore equity shares at Rs 207 per share to anchor investors. The investors include Volrado Venture Partners Fund, Cohesion MK Best Ideas and others.

  • Vedanta’s Q2FY23 net profit falls 61% YoY to Rs 1,808 crore as total expenses rise 43% YoY. Power and fuel costs surged almost 93.9% YoY, while finance costs increase 54% in Q2. However, revenue increased by 20.6% YoY. The company shows up on a screener listing stocks with improving RoA from the last two years.

Riding High:

Largecap and midcap gainers today include FSN E-Commerce Ventures Ltd. (1,152.75, 17.20%), Supreme Industries Ltd. (2,170.30, 6.53%) and JSW Energy Ltd. (337.65, 6.10%).

Downers:

Largecap and midcap losers today include Bandhan Bank Ltd. (238.55, -10.10%), Gland Pharma Ltd. (1,784.35, -4.67%) and LIC Housing Finance Ltd. (405.30, -3.77%).

Volume Rockets

53 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included FSN E-Commerce Ventures Ltd. (1,152.75, 17.20%), Swan Energy Ltd. (226.50, 9.98%) and HFCL Ltd. (82.70, 7.40%).

Top high volume losers on BSE were Intellect Design Arena Ltd. (431.60, -13.78%), Bandhan Bank Ltd. (238.55, -10.10%) and Fine Organic Industries Ltd. (5,741.20, -9.65%).

Cholamandalam Financial Holdings Ltd. (628.25, 0.04%) was trading at 42.1 times of weekly average. Grindwell Norton Ltd. (2,103.00, 1.79%) and Indoco Remedies Ltd. (354.00, 3.93%) were trading with volumes 20.9 and 19.7 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

17 stocks overperformed with 52-week highs, while 4 stocks hit their 52-week lows.

Stocks touching their year highs included - Bharti Airtel Ltd. (832.00, 1.85%), Blue Star Ltd. (1,236.15, 1.20%) and Container Corporation of India Ltd. (798.00, 1.58%).

Stocks making new 52 weeks lows included - Gland Pharma Ltd. (1,784.35, -4.67%) and Intellect Design Arena Ltd. (431.60, -13.78%).

21 stocks climbed above their 200 day SMA including Swan Energy Ltd. (226.50, 9.98%) and Dalmia Bharat Ltd. (1,600.95, 4.46%). 6 stocks slipped below their 200 SMA including Housing and Urban Development Corporation Ltd. (36.30, -1.49%) and NOCIL Ltd. (242.60, -1.30%).