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The Baseline
01 Oct 2022
Festival season boosts travel, jewelry, paint sectors; stocks flying high in a volatile market
By Deeksha Janiani

For a time, it was good: optimistic growth predictions for India helped drive a market rally over the past three months. But the world is becoming sharply volatile, and multiple global factors are now rocking the boat. Russia's gas cutoff has caused an energy crisis in Europe, threatening a deep recession, and US Fed Reserve Chairman Jay Powell announced an interest rate hike of 75 bps on September 21.

Higher US interest rates have made US treasury assets more attractive, and foreign investors renewed selling Indian equities. The "fear index" Nifty Vix is back up to June levels.  

However amid this gloom, the Indian consumer story is a bright promise. Indians are preparing for get-togethers and celebrations, with big spending plans this festive season.

In this week’s Analyticks:

  • Festive plans cheer travel, home improvement and jewellery sectors
  • Screener: These stocks are holding steady, with high-momentum and strong EPS growth predicted in FY23

Let’s get into it.

The great Indian festival season is here: What’s in store for tourism, home improvement and jewellery?

The Indian festive season kick-started with the arrival of Ganesh Chaturthi and Onam in August-end. Now, it’s in full swing with the onset of Navratri. For the first time in two years, people will be able to gather for the Garba Utsav without restrictions - no mandatory masking, no one checking your Covid certificate at the door, no limits on the number of people.

Indians are itching to get into their party clothes, and are ready to loosen their purse strings. According to a survey undertaken by LocalCircles, consumer spending during the festive season is expected to hit $32 billion this year, higher than both 2020 and 2021. Although this is below the pre-Covid level (2019) of $37 billion, this will boost India Inc in an otherwise inflationary and tough global environment. 

24% of respondents in this survey plan to spend on travel and tourism in this season - the highest among all categories. Jewellers and home improvement players will also see the benefit of higher consumer spends. 

Hotels and Tourism sizzle, as consumer segments come alive

When the worst of the pandemic got over in March 2022, short-haul travel became the top priority for millennials. Businesses also restarted events and conferences as employees were back in offices. 

By the summer of ’22, there was high traction visible across both leisure and corporate travel segments. The occupancy rates and revenue per available room of the hospitality sector crossed pre-pandemic levels in Q1FY23 thanks to the demand rebound in metros. 

According to the management of Indian Hotels, robust demand especially in the corporate segment continued in July and August, despite the seasonal weakness. Now, with consumers willing to spend more on travel, the demand outlook from September to November also looks strong. 

Traveller mix shifts towards richer Indians

Overall festive spends this year are being driven by higher income groups, as they saved a lot of money in the work-from-home era, according to LocalCircles.

This may also be true for the travel sector.

Let’s consider some hard facts here: the traveller mix is changing. In Q1FY23, the premium chains of Indian Hotels like ‘SeleQtions’ and ‘Vivanta’ saw over20% growth in occupancies while mid-segment chains like ‘Ginger’ fell 11% compared to pre-covid levels.

The overall occupancy level of a mid-segment hotel chain like Lemon Tree has been consistently lower than that of premium and luxury players like Indian Hotels and EIH in the past three quarters. Clearly, higher price inflation has impacted the discretionary spends of middle-income groups, while the affluent class is relatively unaffected. 

Foreign travellers will also drive demand for hospitality and recreational sectors in H2FY23. According to a RateGainreport, foreign tourist arrivals in Delhi and Mumbai are likely to see double-digit MoM growth between September and November owing to the festivities and a favourable climate in India. 

These demand trends bode well for an online travel agent like Easy Trip Planners. This travel startup has showcased consistent profitability in the past 10 quarters despite the pandemic. This was achieved on the strength of its ‘no convenience fee’ model and easy refunds policy. The company now looks to double its gross booking revenue to Rs 6,500-7,000 crore in FY23 and makes a good proxy play in the travel sector. 

Enthused by the current travel boom, hotel chains have drawn up ambitious expansion plans. Indian Hotels looks to add 18 hotels in its portfolio this year while Lemon Tree seeks to complete a major hotel project in Mumbai. 

According to Trendlyne Forecaster’s consensus estimates, annual revenues of the top three listed hotels will jump by over 60% YoY in FY23 with all of them returning to profitability. 

Jewellery makers sparkle on lower gold prices, healthy demand

Women customers have also made a comeback - retail sales of jewellery have grown in double-digits in the past four months, backed by the correction in gold prices. This trend is likely to continue in the coming months as the peak festive season has begun, which will be followed by the wedding season. According to C K Venkataraman, Managing Director at Titan, the affluent class has amassed a lot of wealth in the pandemic years and are now ready to spend on high value items.

The period from Navratri upto Diwali is an auspicious period to buy jewellery in India. In order to leverage this, Tanishq, a brand owned by Titan, has launchednew collections like ‘Zoya’, ‘Aishani’, 'Chozha' and ‘Alekhya’. This is also in line with the company’s strategy to cater to more regional tastes to capture higher market share. 

Kalyan Jewellers aims to spend Rs 250 to 300 crore to open 10 stores across Delhi, Maharashtra, Uttar Pradesh, Orissa and Chhattisgarh by this Diwali. Meanwhile, Titan aims to launch 50 Tanishq stores in FY23 to meet rising demand. The revenue of both these players is set to jump over 20% in FY23 with profits rising faster. 

Paint companies are all set for a 'double delight' 

Another major beneficiary of this festive season will be the home improvement sector, as people repaint and refurbish their houses for Laxmi Pooja. Paint makers like Asian Paints and Berger Paints already witnessed robust sales volumes in Q1FY23, backed by premium and luxury products. Such strong demand trends will continueinto Q2FY23 with the early onset of Navratri. 

Demand growth is coming with lower costs - a double delight for paint companies. Pressure on the gross margins of these companies have eased up thanks to the 27% correction in crude oil prices since May 2022. Analysts predict oil prices will zoom back up towards the end of the year as China comes out of lockdowns, but Q3FY23 may still see the double benefit of low input costs and high demand. This is why analysts predict these companies’ net profit rising more than their revenues in FY23.

However, Kajaria Ceramicsis likely to suffer margin compression on account of higher natural gas prices. Nevertheless, the tile-maker is positive on the demand front and is putting up new capacities in the sanitaryware and bathware segments. 

Hopes are high for a bumper festive season across consumer facing sectors in India. The promise is clear: let's see which companies are able to make the most of it. 

Screener: Stocks flying high in a volatile market, with medium to high momentum score and rising EPS forecasts

With the result season just around the corner, we take a look at stocks which have a medium to high momentum score, with high EPS growth forecasts. This screener consists of 34 companies within the Nifty 500 index. The companies belong to industries like telecom services, realty, non-alcoholic beverages, two-wheelers among others.

Major stocks featured in the screener are Bharti Airtel,Phoenix Mills, Adani Enterprises, Varun Beverages and Eicher Motors. Bharti Airtel has the highest annual EPS growth forecast of 237%. According to Prabhudas Lilladher, the telecom company’s customer focused strategies along with digital investments has helped increase revenue and subscriber market share. It has a Trendlyne momentum score of 60.7, indicating that it has high buying interest and improving sentiment.

The second highest annual EPS growth forecast is for Phoenix Mills. The company saw a 316% rise in its annual EPS in FY22. According toICICI Securities, the realty player has a strong pipeline of projects which will aid its bottomline growth. It has a Trendlyne momentum score of 61.8.

Analysts see Eicher Motors clocking an EPS growth of over 65% in FY23. Axis Securitiesbelieves that lower commodity prices, improving demand and easing of supply-side constraints will aid its earnings growth. 

Varun Beverages has a healthy EPS growth estimate of 88% for FY23. The demand outlook for this Pepsico franchise is strong given that its juices, energy drink and dairy segments are performing well,and it is expanding into newer markets.

You can find some popular screeners here.

 
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The Baseline
30 Sep 2022
Five Interesting Stocks Today
  1. Nestle India:The foreign parent of this FMCG major is set to invest Rs 5,000 crore in the business over the next three years, a significant ramp-up compared to its investment of Rs 8,000 crore made over the last 60 years. The stock rose nearly 3% after Nestle S.A.’s CEO Mark Schneider made this announcement in a press conference on September 23.

Given the sheer size of the investment vis-à-vis the previous commitment, India has clearly become an important emerging market for Nestle. The CEO highlighted that the company was facing a difficult situation globally on account of runaway inflation. India, on the contrary, appears to be in a bright spot owing to its rising middle-class population and increasing per-capita income levels.

According to Suresh Narayanan, Chairman at Nestle India, the investment outlay will be spent across new growth opportunities in the nutrition segment, including plant-based proteins and healthy snacking. The Maggi maker may look to acquire companies present in this segment. Additionally, the capex will be utilized in developing the emerging categories of pet care and toddlers’ snacks. The pet care market size is roughly Rs 4,000 crore in India and growing at a CAGR of 20-25%. Given the fresh capex, Nestle India will be able to take on Hindustan Unilever. It has some catching up to do here – HUL has actively invested in building its health and nutrition segment since FY20, notable investments, being the acquisition of Horlicks and Boost brands.

Investors need to watch for Nestle India’s margins in upcoming quarters as they were under pressure owing to input cost inflation. In a major relief, the prices of edible oil and packaging material softened over the past few months. However, wholesale prices of wheat and milk continue to trend higher. 

  1. Torrent Pharmaceuticals: This pharma company’s stock fell over 5% intraday on Wednesday after it announced the acquisition of Curatio Healthcare for Rs 2,000 crores. Expensive deal valuation could be the reason why the acquisition did not excite investors. Torrent Pharma acquired Curatio at a costly valuation of 8.2 times enterprise value/trailing twelve months sales (EV/TTM sales). For reference, recent deals by big players in the pharma industry have an average of 4.2 EV/sales. In addition, the management in the analyst call on Tuesday said that 75-85% of the Rs 2,000 crore price tag would be funded by debt. This comes at a time when Torrent Pharma was reducing its debt and the stock comes up in a screener that lists companies that are decreasing leverage. 

Curatio derives over 82% of its revenue from the dermatology segment with cosmetic dermatology as the leading contributor. Over the last decade, cosmetic dermatology as a therapy grew at 18% CAGR, which is comfortably higher than the Indian pharmaceutical market’s (IPM) growth. Curatio’s revenue grew 25% YoY in FY22 after two years of stable sales and the management guided for 24% revenue growth from the Curatio portfolio in FY23, and expects to sustain this level going forward. 

Brokerages like ICICI Securities and Prabhudas Lilladher kept their ‘Buy’ rating on Torrent Pharma, indicating an upside of over 15%. The brokerages have a positive outlook on the company as the deal allows it to foray into the high-growth cosmetic dermatology segment. 

  1. Life Insurance Corporation of India (LIC): This insurance stock is falling in trade for the last five sessions, hitting all-time lows almost every day. It touched an all-time low of Rs 618 on Thursday, which is 29% lower than its issue price. The stock was also trading below its second support or S2 level on Tuesday. It also shows up on a screener of stocks with low to medium Trendlyne Momentum Score. 

Ever since its listing, LIC’s share price has been on a declining trend. Reports suggest that LIC’s declining market share and its dependency on the age-old, somewhat outdated model of agents as its biggest distribution network is a dampener in terms of growth. However, in its annual general meeting on Tuesday, LIC’s Chairperson M R Kumar said that the company is devising strategic changes in product mix and distribution channels to enhance growth and improve market share. The plan is to shift the product mix towards non-participating products, increasing this to 12-15% in the next 3-4 years. In non-participating products the profits and dividends are not shared with the policyholders, making it lucrative for insurance companies to sell such policies. M R Kumar also says that in the ‘LIC 3.0’ version the company plans to close Q2FY23 with increased market share and better technological processes to match the competitors.

LIC has also been making changes in its holdings. On Tuesday it announced the acquisition of an additional 2% stake in Bharat Petroleum Corp (BPCL) over a period of 9 months (December 28, 2021 to September 26, 2022). LIC now holds a 9% stake in BPCL. On Wednesday it announced a significant stake reduction in Gujarat State Fertilizers & Chemicals to 3.96% from 6.05% from April 8 to September 27. This transaction amounts to nearly Rs 133.9 crore. Possibly with these new changes, LIC may be able to adapt to the shifts in the market, the rise of digital channels and increasing interest rates affecting people’s investment choices.

  1. Power Grid Corporation of India: This power stock fell nearly 8% in trade on September 23 after reports of it buying shares of Power Finance Corporation (PFC) - a subsidiary of Power Grid, from Rural Electrification Corporation (REC). This suggests that Power Grid is getting into the business of financing power projects where its competence is limited. According to reports, this would cause the company’s dividend yields to drop to 4%.

However, on Tuesday the Centre rejected REC’s proposal to sell PFC’s stake to Power Grid. This drove the stock to rise 3% in trade on Tuesday in an otherwise volatile market. Foreign brokerage Citi gave a ‘Buy’ rating on the stock on a stable business outlook, high market share and better RoE. The stock also shows up on Trendlyne’s screener of companies with improving RoE over the past two years.

The company’s board also approved a power transmission project costing Rs 327.7 crore, on Monday. The project will connect Jamnagar Oil Refinery of Reliance Industries with Jam khambhaliya ISTS PS. 

Energy indices like BSE Power and Nifty Energy have been up for the past three months. Jefferies in its report says that it is bullish on the power sector and predicts decade-long growth. It also expects power stocks to improve their renewable energy capacity by 82% to 305 GW till FY30E. Power Grid is among Jefferies’ top picks from the sector. Trendlyne’s consensus recommendation also shows 17 analysts recommending a ‘Buy’ on the stock. 

  1. KPIT Technologies: This IT Consulting & Software company rose 14.6% over the past month, outperforming the Nifty 500 index by 18.2% till Thursday. This rise comes at a time when most IT companies are falling given the high inflationary environment. The Nifty IT declined by 6.5% over the past month as of Thursday. 

The surge in the stock was triggered by its acquisition of four Technica group companies in the automobile software and electrical space. The firm expects this acquisition to improve its scale of operations. The acquisition will cost the company a fixed consideration of 80 million euros, and a maximum variable payment of 30 million euros. Post the completion of the acquisition in October, the Technica group will be fully owned by the firm. 

The management believes that the acquisition will improve KPIT’s EPS upon consolidation and increase revenue by at least 10% by the end of FY24. It may raise its revenue guidance upon completing the acquisition, according to reports. In July, it had given a revenue guidance of 18-21% for FY23. Trendlyne’s Forecaster estimates KPIT Tech’s revenue to grow 6.1% QoQ to Rs 727.2 crore. The stock also shows up on a screener which lists companies with revenue increasing sequentially for the past four quarters.

The company expects to maintain its margin guidance for FY23 as well, according to reports. It says there is no slowdown in demand as its Europe business vertical is not impacted by the macroeconomic tailwinds yet. Its Europe business segment was the largest contributor to revenue in Q1FY23, accounting for nearly 30% of revenue.

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

 
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Trendlyne Marketwatch
30 Sep 2022
Market closes higher, JP Morgan reiterates ‘Overweight’ rating on Paytm

Trendlyne Analysis

Nifty 50 rose over 250 points and closed above the 17,000 mark, with the volatility index, India VIX, falling significantly. Reserve Bank of India's Monetary Policy Committee raised the RBI's repo rate by an expected 50 bps to 5.9%. The RBI also lowered the GDP growth forecast for FY23 to 7% from 7.2%. India's current account deficit widens to $23.9 billion or 2.8% of the country's GDP in the April-June period. European indices traded higher as UK’s gross domestic product or GDP rises 0.2% QoQ in Q2FY23, topping analysts’ expectations.

However, most major Asian indices closed in the red, in line with the US stocks which closed sharply lower on Thursday. US indices fell to their lowest level since November 2020 as investors remain wary of slowing economic growth amid the Federal Reserve raising interest rates to combat record-high inflation levels. The tech-heavy NASDAQ 100 fell 2.9% while the S&P 500 closed 2.1% lower. Crude oil prices head for their first weekly gain in five weeks amid supply concerns as traders look ahead to the outcome of the OPEC+ meeting next week.

Nifty Midcap 100 and Nifty Smallcap 100 closed in the green, following the benchmark index. Nifty Energy and Nifty Media closed higher than Thursday’s level. Nifty IT closed in the red, despite the NASDAQ 100 falling close to 3% on Thursday.

Nifty 50closed at 17,107.20 (289.1, 1.7%), BSE Sensexclosed at 57,426.92 (1,017.0, 1.8%) while the broader Nifty 500closed at 14,837.45 (235.0, 1.6%)

Market breadth is surging up. Of the 1,927 stocks traded today, 1,349 were on the uptick, and 518 were down.

  • Rites and Cochin Shipyardare trading in the overboughtzone, according to the Money Flow Index or MFI.

  • Bharti Airteland Gujarat Fluorochemicalshit their 52-week highs of Rs 809 and Rs 4,024, respectively. Both the stocks rise for four consecutive sessions.

  • City gas distributor stocks like Adani Total Gas, Gujarat Gas, Indraprastha Gas, and Mahanagar Gasfall in trade today.

  • One97 Communications (Paytm) rises as JP Morgan reiterates its ‘Overweight’ rating on the company, with a target price of Rs 1,000, an implied return of 58.19%. The brokerage says that the company’s model is undergoing a shift and the company may turn profitable by September 2023.

  • Nestle India, Mphasis, Dabur India, and Dr. Reddy’s Laboratories’ weekly average delivery volumes rise, ahead of their Q2FY23 results.

  • Schneider Electric is rising as the company plans to invest Rs 300 crore for the development of a new smart factory in Telangana, according to reports. CEO of Schneider Electric, Anil Chaudhry says, they aim to make Hyderabad a leading manufacturing hub the country.

  • RBI is focused on price stability, says RBI’s Deputy Governor Micheal Patra. He expects the current account deficit to slightly widen during H1FY23 and to narrow in H2FY23.

  • HDFC Bank, Carborundum Universal and Bharti Airtel trade above their third resistance or R3 level as market trades higher.

  • Energy stocks like Adani Green Energy, Oil and Natural Gas Corp, Reliance Industries, Power Grid Corp of India, and Indian Oil Corp are rising in trade. The broader sectoral index Nifty Energy is also trading in the green.

  • Axis Direct continues to keep its positive outlook on ITC’s prospects as it retains its ‘Buy’ rating on the company with a target price of Rs 380. This implies an upside of 17%. The brokerage believes the firm is well-placed to capitalise on the stable tax regime. It expects revenue growth to be led by the recovery in its cigarette and hotels segments, scaling up of its FMCG business, and focus on increasing exports. The brokerage estimates the firm’s net profit to grow at a CAGR of 13.5% over FY22-25.

  • Public sector banks like Canara Bank, Punjab National Bank, Bank of Baroda, and Union Bank of India are rising in trade. The broader sectoral index Nifty PSU Bank is also trading in green.

  • Motherson Sumi Wiring's board of directors approve a bonus issue of shares in the ratio of two shares for every five shares held in the company.

  • Marine Port & Services, Non-alcoholic beverages, andElectric Utilities industries fall more than 10% in trade over the past week.

  • Punjab National Bank is rising as it plans to sell its entire stake of 10.01% (3.25 crore shares) in Asset Reconstruction Co (India) in an all-cash consideration deal. Post the divestment the company will cease to be a shareholder of Asset Reconstruction Co (India). The stake sale is set to be completed by December 31.

  • Macrotech Developers' board of directors to meet today to approve the proposal of repaying Rs 125 crore in borrowings from Yes Bank, according to reports. The repayment comes five months ahead of schedule. The company features in the screener of companies with reducing debt.

  • India’s current account deficit widens to 2.8% of the GDP and stands at $23.9 billion during the April-June quarter due to rising global commodity prices and capital outflows.

  • Rail Vikas Nigam rises as it wins a contract worth Rs 408 crore from National Highways Authority of India. The order pertains to the construction of a four-lane highway in Andhra Pradesh.

  • The Reserve Bank of India's Monetary Policy Committee raises the RBI's repo rate by 50 bps to 5.9%

  • Bajaj Electricals is rising as it bags an order worth Rs 332.6 crore from the Power Grid Corp of India. The order is for supply and services of under the transmission line tower package TW04 associated with transmission network expansion in Gujarat.

  • Vodafone Idea rises after it clarifies that it is in talks with Indus Towers to discuss payment terms to clear its pending dues to the tower company. According to reports, the company owes Indus Rs 6,800 crore.

  • Hero MotoCorp to collaborate with Zero Motorcycles – a California-based manufacturer to develop electric motorcycles. Hero’s board approved an investment of $60 million in Zero Motorcycles for the same.

Riding High:

Largecap and midcap gainers today include Adani Green Energy Ltd. (2,260.80, 12.81%), Indus Towers Ltd. (197.45, 6.21%) and Tube Investments of India Ltd. (2,744.35, 6.21%).

Downers:

Largecap and midcap losers today include Indraprastha Gas Ltd. (396.80, -5.51%), Adani Transmission Ltd. (3,289.80, -3.42%) and Dr. Lal Pathlabs Ltd. (2,518.75, -2.80%).

Movers and Shakers

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

Top high volume gainers on BSE included Adani Green Energy Ltd. (2,260.80, 12.81%), Granules India Ltd. (345.35, 6.49%) and Bajaj Electricals Ltd. (1,202.20, 5.79%).

Caplin Point Laboratories Ltd. (744.40, 2.12%) was trading at 5.3 times of weekly average. Dilip Buildcon Ltd. (220.80, 3.93%) and Aptus Value Housing Finance India Ltd. (307.30, 1.20%) were trading with volumes 4.0 and 3.8 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

9 stocks overperformed with 52-week highs, while 8 stocks hit their 52-week lows.

Stocks touching their year highs included - Bharti Airtel Ltd. (799.90, 4.61%), Cipla Ltd. (1,114.95, -0.08%) and Phoenix Mills Ltd. (1,399.10, 5.49%).

Stocks making new 52 weeks lows included - Sanofi India Ltd. (5,780.80, -0.17%) and Zensar Technologies Ltd. (211.65, 0.79%).

41 stocks climbed above their 200 day SMA including Adani Green Energy Ltd. (2,260.80, 12.81%) and Canara Bank (228.75, 6.20%). 9 stocks slipped below their 200 SMA including Balaji Amines Ltd. (3,167.50, -1.45%) and ITI Ltd. (105.45, -1.31%).

 
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Trendlyne Marketwatch
29 Sep 2022
Market closes lower, US FDA issues warning letter to Lupin

Trendlyne Analysis

Nifty 50 closed lower for a seventh straight session with the volatility index, India VIX, at an elevated level of 22%. The benchmark index remained volatile today on the back of futures and options September 29 contract expiry. Investors look ahead to RBI’s Monetary Policy Committee or MPC meeting decision to be announced on Friday. Analysts expect RBI to raise interest rates by 50 bps to combat high inflation.

European stocks traded lower ahead of the German inflation print release for clues on interest rate hikes by the European Central Bank. Major Asian indices closed mixed, despite the US indices closing in the green on Wednesday. US stocks rose sharply amid falling treasury yields after the Bank of England announced a 65-billion-pound bond-buying program to stem a crisis in treasury markets due to a huge sell-off in government bonds. The tech-heavy NASDAQ 100 index and S&P 500 rose close to 2% while the Dow Jones closed 1.9% higher. Brent crude oil futures traded higher after rising over 6% in the past two days. Crude oil extended its gains on Wednesday after supply concerns emerged from the US due to a hurricane in the Gulf of Mexico. Traders will keep an eye on the Chinese manufacturing data and an OPEC meeting that could further aggravate the supply concerns.

Nifty Midcap 100 and Nifty Smallcap 100 closed in the green, despite the benchmark index closing lower. Nifty Metal and Nifty Media closed higher than Wednesday’s close. Nifty IT closed in the red, despite the NASDAQ 100 rising close to 2% on Wednesday.

Nifty 50closed at 16,842.90 (-15.7, -0.1%), BSE Sensexclosed at 56,409.96 (-188.3, -0.3%) while the broader Nifty 500closed at 14,617.90 (-2.7, 0.0%)

Market breadth is in the green. Of the 1,916 stocks traded today, 1,029 were gainers and 826 were losers.

  • Sanofi India is trading in the oversold zone, according to the relative strength index or RSI.

  • Puneet Chhatwal, MD and CEO of Indian Hotels says that the upcoming festive season will be positive for the hospitality sector. He expects Q2FY23 to be the best quarter in the last 5-6 years.

  • Media stocks like Sun TV Network, PVR, Saregama, and Network 18 Media & Investmentrise in a volatile market. PVR and Network 18 rise more than 2.5% in trade today.

  • Sharekhan maintains its ‘Buy’ rating on Mahindra Logistics with a target price of Rs 600, implying an upside of 18.3%. The brokerage is optimistic about the company’s long-term growth potential given its focus on increasing warehousing capacity, scaling up network services, and strategic acquisitions in the logistics space. It expects the company’s revenue to grow at a CAGR of 18.5% over FY22-24.

  • Chemcon Speciality Chemicals surges as it commences commercial production at the P9 facility at Manjusar, Gujarat. The company adds a capacity of 2,400 metric tonnes per annum of bromobenzene at the P9 facility.

  • Russia may suggest OPEC+ to cut crude oil output by 1 million barrels per day in a meeting to be held on Wednesday, according to a report by Reuters. The meeting will be held to discuss market volatility and falling oil prices.

  • Abbott India, Pfizer and PVR trade above their third resistance or R3 level as market trades higher.

  • Apollo Pipes is rising in trade as Systematix Institutional Equities initiates coverage on the stock with a ‘Buy’ rating and a target price of Rs 650. This implies an upside of 27.25%. The brokerage expects the company to perform better than its peers as it focuses on high-margin products and high capacity utilisation. It also says that the company will benefit because of a healthy outlook on the plastic piping industry.

  • Lupin is falling after the US FDA issues a warning letter for its Tarapur facility near Mumbai. The filing does not disclose the observations given out by US FDA but the company is working towards resolving the issues highlighted. It however says that the warning letter will not have any impact on supplies or revenues generated from the Tarapur facility.

  • Adani Enterprises' wholly-owned arms achieve financial closure for the Ganga Expressway project in Uttar Pradesh. The company will invest Rs 6,826 crore as equity, with Rs 5,996 crore as viability gap funding, and has tied up loans worth Rs 10,238 crore from lenders.

  • Jefferies is optimistic about the growth potential of the power sector. It expects renewable energy capacity to rise by 82% by FY30E. NTPC, Power Grid and JSW Energy are its top picks in the sector.

  • Electronic Components, Other Non-Ferrous Metals, and Exploration & Production industries rise more than 2.5% in trade today

  • ICICI Securities remains positive on Torrent Pharmaceuticals’ prospects as it maintains its ‘Buy’ rating on the company but reduces its target price to Rs 1,769 from Rs 1,771. This indicates an upside of 15.3%. The brokerage revises its target price due to the additional debt the company will take on to complete the acquisition of Curatio Healthcare. It expects the firm’s new launches and robust branded chronic segment in India and Brazil to drive revenue growth. The brokerage anticipates the company’s net profit to grow at a CAGR of 57.4% over FY22-24.

  • FSN E-Commerce Ventures(Nykaa) is rising as its board of directors will meet on Monday to consider a bonus issue of shares

  • Bharat Heavy Electricals is rising as it bags an order to set up two 660 MW thermal power plants for the Talcher Thermal Power Project Stage-III in Odisha. The order consists of design, engineering, manufacturing, construction and commissioning of the two plants.

  • Metal stocks like Hindalco Industries, Jindal Steel & Power, Tata Steel among others are rising in trade. All constituents of the broader Nifty Metal index are trading in the green.

  • Blue Dart is rising in trade after the company announces a price increase, effective from January 1. The average shipment price will go up by 9.6%, depending on the shipping profile.

  • Ashish Kacholia buys a 1.38% stake in Agarwal Industrial Corp worth Rs 11.4 crore in a bulk deal on Wednesday.

  • PGIM India Mutual Fund sells a 0.75% stake (10 lakh shares) in Can Fin Homes for Rs 46.9 crore in a bulk deal.

  • Edelweiss Financial Services invests Rs 250 crore in subsidiary Edelweiss Tokio Life Insurance through a rights issue. This takes its stake up to 75% from 66% earlier.

  • US FDA issues Form 483 with three observations to Torrent Pharma for its manufacturing facility in Indrad, Gujarat. The form is issued when the regulator observes a violation of the Food Drug and Cosmetics Act. The company however maintains that none of the observations were related to data integrity.

Riding High:

Largecap and midcap gainers today include Abbott India Ltd. (1,9181.10, 5.74%), Zomato Ltd. (61.20, 5.43%) and Bank of India (48.20, 4.56%).

Downers:

Largecap and midcap losers today include Aarti Industries Ltd. (733.85, -6.06%), Vodafone Idea Ltd. (8.50, -5.56%) and Adani Transmission Ltd. (3,406.40, -5.43%).

Crowd Puller Stocks

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

Top high volume gainers on BSE included Sun Pharma Advanced Research Company Ltd. (231.10, 14.86%), Esab India Ltd. (3,511.00, 8.33%) and Rites Ltd. (323.90, 7.32%).

Top high volume losers on BSE were Aarti Industries Ltd. (733.85, -6.06%), Equitas Holdings Ltd. (93.60, -3.90%) and Lupin Ltd. (654.80, -2.30%).

Supreme Industries Ltd. (2,117.40, 0.16%) was trading at 8.8 times of weekly average. Pfizer Ltd. (4,228.65, 1.59%) and Adani Total Gas Ltd. (3,372.25, -2.20%) were trading with volumes 8.5 and 8.0 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

4 stocks made 52-week highs, while 13 stocks were underachievers and hit their 52-week lows.

Stocks touching their year highs included - Cipla Ltd. (1,115.85, 1.70%), Cochin Shipyard Ltd. (432.85, 3.23%) and Rites Ltd. (323.90, 7.32%).

Stocks making new 52 weeks lows included - Alembic Pharmaceuticals Ltd. (599.80, -0.41%) and Dhanuka Agritech Ltd. (637.85, 0.09%).

28 stocks climbed above their 200 day SMA including Esab India Ltd. (3,511.00, 8.33%) and Prism Johnson Ltd. (129.05, 6.87%). 12 stocks slipped below their 200 SMA including Dr. Lal Pathlabs Ltd. (2,591.40, -3.82%) and Vakrangee Ltd. (33.10, -2.93%).

 
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The Baseline
28 Sep 2022
Chart of the week: US interest rate hikes drive plunge in world currencies against the dollar
By Abdullah Shah

The US Federal Reserve is laser focused on cutting inflation in the US, and that’s causing the world a whole lot of pain. Federal Reserve Chairman Jay Powell announced another interest rate hike of 75 bps on September 21, taking the US federal funds rate to a target range of 3-3.25%. 

The aggressive pace of the Fed’s rate hikes in the past six months has strengthened the US dollar against world currencies, making commodities traded in dollars, like oil, expensive to purchase. It has also caused rapid outflows of foreign investor money from emerging markets.

In Asia, the Chinese yuan and Japanese yen have been the worst hit. The Chinese yuan has fallen 13.5% in six months against the dollar. The Japanese yen has fallen 16.8% over the same time period. The fall in the currencies of Asia’s largest economies might force foreign investors to sour on investments in  the region as a whole. 

The Indian rupee fell 7.7% in six months against the dollar and hit  a new all-time low of Rs 81.6 per dollar on Monday. FIIs have pulled out money from Indian equities everyday since September 21.

As currencies tanked against the dollar, Central Banks moved to limit the declines. China has disbursed $39.6 billion in the forex market to limit the fall of the yuan. The Reserve Bank of India (RBI) has spent $75.1 billion since the start of 2022 in order to support the rupee against the dollar.

Things are not that different in Europe, where the Euro fell 14.8% while the British pound dropped 22.4% in six months against the dollar. The recent tax cuts by the UK government have contributed to this fall, as investors fear that the move will lead to runaway inflation. 

 
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Trendlyne Marketwatch
28 Sep 2022
Market closes lower, Vodafone Idea falls after Indus Towers asks to clear dues

Trendlyne Analysis

Nifty 50 lost over 145 points and closed in the red, with the volatility index, India VIX, rising over 22%. Indian indices closed lower for a sixth straight session. European stocks followed the global trend and traded lower than Tuesday’s close. Major Asian indices closed in the red, following the US indices which mostly closed lower on Tuesday. US stocks gave up their gains towards the end of the trading session and closed in the red on a volatile day of trade. The Dow Jones fell 0.43% while the S&P 500 closed 0.2% lower. However, the tech-heavy NASDAQ 100 managed to close 0.2% higher. Brent crude oil futures traded higher after rising over 2% on Tuesday as supply concerns emerged due to OPEC production cuts and a hurricane in the Gulf of Mexico.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the red, following the benchmark index. Nifty Bank and Nifty Energy closed lower than Tuesday’s levels. Nifty IT closed flat, despite the NASDAQ 100 closing higher on Tuesday.

Nifty 50closed at 16,826.15 (-181.3, -1.1%), BSE Sensexclosed at 56,598.28 (-509.2, -0.9%) while the broader Nifty 500closed at 14,594.15 (-133.2, -0.9%)

Market breadth is in the red. Of the 1,922 stocks traded today, 640 were in the positive territory and 1,240 were negative.

  • Medplus Health Services and Can Fin Homes are trading in the oversoldzone, according to the Money Flow Index or MFI.

  • Asian Paints is rising as analysts say a drop in raw material prices and better product mix will drive EBITDA margin growth, according to reports. The stock also features in a screener that has negative to positive growth in sales and profit with strong price momentum.

  • Coromandel International, Chambal Fertilisers, and Indian Potash sign a memorandum of understanding with Canpotex, Canada. According to the MoU, Canpotex will supply up to 15 lakh metric tonne of potash annually, for the next three years to the fertilizer companies.

  • Punjab National Bank, Mangalore Refinery and Petrochemicals, and CG Power and Industrial Solutions trade below their second supportor S2 level as markets trade lower.

  • Vodafone Idea falls in trade after Indus Towers asks the company to clear its dues, failing which access to the tower network would be disrupted, according to reports. Vodafone Idea’s dues to Indus Towers stand at Rs 7,000 crore.

  • Sona BLW Precision Forgings and Indian Energy Exchange hit their 52-week lows of Rs 458.1 and Rs 65.5, respectively. Indian Energy Exchange falls for two sessions, while Sona BLW Precision Forgings trades lower for four sessions.

  • Metal stocks like JSW Steel, Hindalco Industries, National Aluminium, and Coal Indiaare falling in trade. The broader sectoral index BSE Metalis also trading in red.

  • ICICI Securities maintains its ‘Add’ rating on AIA Engineering with a target price of Rs 2,720, implying an upside of 6.7%. The brokerage believes the company is well-placed to benefit from the mining sector’s capacity expansion due to the upswing in the commodity cycle. It believes the company’s ability to pass on increases in input costs and improve product basket to improve profitability. It expects the company’s revenue to grow at a CAGR of 14.7% over FY22-24.

  • City gas distributor stocks like Adani Total Gas, Indraprastha Gas, and Mahanagar Gas rise in a weak market. This is after the Centre takes more time to submit a report on the pricing strategy of gas to meet the expectations of both consumers and producers.

  • Motherson Sumi’s board of directors will meet on Friday to take up a proposal to issue bonus shares.

  • Supriya Lifescience is falling as its CEO and key managerial personnel (KMP) resigns from his post citing personal reasons. The company’s board approves the appointment of Rajeev Kumar Jain as the new CEO and KMP, effective from October 3.

  • Oil & Gas, Coal, and Fertilizers sectors fall more than 6.5% in trade over the past month.

  • Larsen & Toubro receives an engineering, procurement and construction order worth Rs 1,000-2,500 crore from the state government of Assam to construct a medical college and hospital at Golaghat.

  • FMCG stocks like Hindustan Unilever,Nestle India, Britannia Industries, Godrej Consumer Products and Marico are rising in trade, as palm oil price falls 5%.

  • Brent crude is trading below its $100-mark and global cues suggest that the prices are likely to go up on the possibility of a shortage in the supply of oil, according to oilprice.com. This is because of a fall in OPEC’s production of oil to 3.5% of global demand (3.58 million barrels per day) and news that Russia’s exports may fall by 2.4 million barrels per day. Also, with US’ strategic petroleum reserve going below commercial storage will have a direct effect on Europe’s supply of energy. With China's economy re-opening the demand is likely to increase causing a supply shock in the global market.

  • Sharekhan remains optimistic about Vinati Organics’ future growth prospects as it keeps its ‘Buy’ rating on the company with a target price of Rs 2,500. This implies an upside of 22.2%. The brokerage believes the firm’s dominant market share in niche chemical segments, robust balance sheet, and capacity expansion plans will drive profit growth in the coming years. It expects the company’s profit to grow at a CAGR of 31.9% over FY22-24.

  • Power Grid’s board approves an investment of Rs 327.71 crore for a transmission project. The project is to connect Reliance Industries’ Jamnagar Oil Refinery with Jamkhambaliya ISTS PS.

  • Indian rupee touches another record low of 81.9 against the US dollar, in early trade today.

  • Bharti Airtel's promoter Bharti Telecom acquires an additional 19 crore shares (3.2% stake) of the telecom company from the affiliates of Singtel. The promoter now holds a 38.62% stake in the company.

  • V-Sciences Investments sells 0.47% stake (9 lakh shares) in Godrej Agrovet for Rs 45 crore in a bulk deal. The shares were picked up by Unifi Capital via block deals.

  • Torrent Pharma will buy a 100% stake in Curatio Healthcare for Rs 2,000 crore, which includes an upfront payment of Rs 115 crore on the date of signing. This acquisition will help the company expand its presence in the cosmetic dermatology segment in the Indian market.

Riding High:

Largecap and midcap gainers today include Muthoot Finance Ltd. (1,048.65, 3.62%), The New India Assurance Company Ltd. (85.50, 3.20%) and Asian Paints Ltd. (3,570.65, 2.88%).

Downers:

Largecap and midcap losers today include Punjab National Bank (34.85, -5.04%), Adani Green Energy Ltd. (2,051.05, -4.44%) and Au Small Finance Bank Ltd. (582.25, -4.01%).

Volume Shockers

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

Top high volume gainers on BSE included ITI Ltd. (112.15, 8.41%) and Eris Lifesciences Ltd. (698.60, 1.36%).

Top high volume losers on BSE were Torrent Pharmaceuticals Ltd. (1,494.30, -2.58%), CCL Products India Ltd. (500.45, -2.13%) and Star Health and Allied Insurance Company Ltd. (712.05, -0.91%).

Symphony Ltd. (835.90, -0.77%) was trading at 8.5 times of weekly average. Hitachi Energy India Ltd. (3,467.50, -0.47%) was trading with volume 4.8 times weekly average on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

2 stocks overperformed with 52-week highs, while 17 stocks tanked below their 52-week lows.

Stocks touching their year highs included - Cipla Ltd. (1,097.15, -0.14%) and Gujarat Fluorochemicals Ltd. (3,878.70, 6.69%).

Stocks making new 52 weeks lows included - Dhanuka Agritech Ltd. (637.25, -2.46%) and Johnson Controls-Hitachi Air Conditioning India Ltd. (1,385.55, -1.43%).

13 stocks climbed above their 200 day SMA including ITI Ltd. (112.15, 8.41%) and Nesco Ltd. (574.15, 1.88%). 17 stocks slipped below their 200 SMA including Punjab National Bank (34.85, -5.04%) and NOCIL Ltd. (240.05, -3.48%).

 
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The Baseline
27 Sep 2022
Five analyst stock picks this week
By Abhiraj Panchal

Analysts are making some of their final picks ahead of Q2 results, which will start being released early October. Footwear, banking and health stocks are among the favorites.

  1. Campus Activewear: Motilal Oswal initiates a ‘Buy’ coverage on this footwear retailer with a target price of Rs 640. This indicates an upside of 10.1%. Aliasgar Shakir, Harsh Gokalgandhi, and Tanmay Gupta say that the Indian footwear market is witnessing an increase in demand due to younger people aspiring for more fashionable footwear. 

The analysts think that with a vertically integrated manufacturing ecosystem and superior product quality footwear, the company has created an edge over the Indian sportswear market. They believe its effective cost management, quick time to market, and premiumization push are benefiting it in the shift towards sportswear. Shakir, Gokalgandhi, and Gupta add, “Campus’ tenable earnings growth, strong returns profile and self-sustainable growth model warrants rich valuation.” The analysts expect revenue and profit CAGR of 29% and 42% over FY22-25, respectively. 

  1. City Union Bank: IDBI Capital initiates a ‘Buy’ call on this banking company with a target price of Rs 230, indicating an upside of 32.5%. “City Union Bank’s asset quality got impacted due to Covid-19 with GNPA at 5.6% in Q1FY22 as against 3% in FY19 (pre-Covid-19). GNPA declined to 4.7% by the end of FY22 backed by higher recoveries/upgrades (including write-offs) against fresh slippages,” write Bunty Chawla and Debesh Agarwala. 

The analysts note that the bank reported the most consistent performance in terms of return ratios and expect the return on assets ratio to improve to pre-covid levels of 1.5% backed by 15% CAGR in FY23-24 and a decline in credit cost to 1.2% in FY23 against 2.2% FY21. They initiate coverage on City Union Bank on the back of improving asset quality, credit growth being in the high teens, and the restructured assets’ trajectory.

  1. Eicher Motors: Axis Direct upgrades this automobile company to a ‘Buy’ call from a ‘Hold’ with a target price of Rs 4,125. This indicates an upside of 14.4%. According to Aditya Welekar and Shridhar Kallani, Royal Enfield (RE) domestic sales contracted over FY19-22 due to Covid-19, higher vehicle prices, weak consumer sentiments, and supply-chain constraints. However, the analysts say, “both demand and supply constraints are easing now, and lowering commodity prices coupled with vehicle prices that are expected to remain stable should drive an uptick in sales moving forward.” 

RE’s total wholesales stood at 70,112 in August, up 53% YoY. “After channel checks on the pan-India level, most dealers are projecting higher demand this festive season with a few even suggesting overall volumes will cross pre-Covid levels,” say the analysts. Welekar and Kallani expect the volume growth to drive higher operating leverage, which along with the correction in commodity prices, should lead to EBITDA margin expansion over FY22-25.

  1. Krishna Institute of Medical Sciences: ICICI Securities initiates coverage of this healthcare facilities company with a ‘Buy’ rating and a target price of Rs 1,565. This implies an upside of 17.7%. Analysts Vinay Bafna and Rohan John are positive on the company’s long-term growth prospects given its strong brand recall in Andhra Pradesh and Telangana, expansion into newer markets, and healthy margins. Another key advantage of this healthcare services provider is that “it follows an affordable pricing strategy whereby its services are priced lower vs key competitors”, add the analysts. 

Bafna and John believe the firm’s plans to expand into Maharashtra, Bangalore, Chennai, and central India will drive its next phase of growth in the coming years. According to the analysts, it intends to enter these new markets through a series of strategic partnerships and acquisitions to increase its scale of operations. The analysts expect the company’s revenue to grow at a CAGR of 26.7% over FY22-24.

  1. Kennametal India: Edelweiss assigns a ‘Buy’ rating on this metal products manufacturer with a target price of Rs 3,384, indicating an upside of 27.3%. Analyst Tushar Chaudhari expects the company to benefit from the rising manufacturing activity in India, especially the rising capacity utilisation across the automobile sector. He adds that “the company is one of the major beneficiaries of the impending revival in the automobile sector as it is one of the biggest consumers of its hard metal products”. He believes the firm can capitalize on this recovery given its strong balance sheet.

Chaudhari also expects Kennametal’s margins to expand as raw material prices are softening. The main raw materials used by this company are Tungsten Carbide and Cobalt, whose prices have significantly fallen since March 2022. The analyst also says that the focus on indigenization and import reduction will bode well for the business in the long term. He expects the company’s net profit to grow at a CAGR of 22.8% over FY22-25.

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

(You can find all analyst picks here)

 
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Trendlyne Marketwatch
27 Sep 2022
Market closes flat, HFCL wins purchase orders worth Rs 202.6 crore

Trendlyne Analysis

Indian indices closed flat after gyrating between losses and gains throughout the day, with the volatility index, India VIX, at around 21.5%. European stocks traded higher, taking cues from Asian indices. Most major Asian indices closed in the green, recovering some of their losses, despite the US indices closing in the red on Monday. The Dow Jones and S&P 500 lost over 1% and closed at their lowest levels in 2022. Dow Jones, which comprises 30 large-cap companies, has now lost over 20% from its peak in January, meeting common criteria for the definition of a bear market. Investors continue to assess the impact of aggressive interest rate hikes by central banks on already slowing economic growth. Brent crude oil futures traded higher after falling around 3.3% on Monday due to demand concerns amid slowing global economy.

Nifty Midcap 100 and Nifty Smallcap 100 closed in the green, despite the benchmark index closing flat. Nifty FMCG and Nifty Media closed higher than Monday’s close. Nifty IT closed in the green, despite the tech-heavy NASDAQ 100 index closing lower on Monday.

Nifty 50closed at 17,043.45 (27.2, 0.2%), BSE Sensexclosed at 57,107.52 (-37.7, -0.1%) while the broader Nifty 500closed at 14,755.00 (29.3, 0.2%)

Market breadth is in the green. Of the 1,920 stocks traded today, 1,024 were gainers and 831 were losers.

  • JM Financial is trading in the overbought zone, according to the relative strength index or RSI.

  • Medplus Health Services falls to a new all-time low of Rs 608.15 per share. The stock is falling for the last 11 consecutive sessions.

  • Indian Rupee hits another record low of near 81.66 against the US dollar in trade today.

  • HFCL receives purchase orders worth Rs 202.6 crore consisting of Rs 167.6 crore from Reliance Retail, and Reliance Projects and Property Management Services for the supply of optical fibre cables and of Rs 35 crore from an overseas customer for the supply of various types of cables and related accessories.

  • Amara Raja Batteriesannounces a backward integration plan. The company proposes to buy plastic components for battery business from Mangal Industries in a share swap deal.

  • UNO Minda, Gujarat Gas, and Indraprastha Gas trades above its second resistance or R2 as markets trade higher

  • Advertising & Media, Integrated Oil & Gas, and Special Consumer Services industries rise more than 15% over the past month.

  • Gautam Adani says that Adani Group will invest $100 billion over the next 10 years. 70% of the amount will be invested in the energy transition segment.

  • Nazara Technologies falls after the Tamil Nadu government banned online gaming in the state on Monday, according to reports. The stock shows up on a screener of companies with promoters decreasing their shareholding in the last four quarters.

  • Power Grid Corp of Indiarises as the government turns down REC’s proposal to sell Power Finance Corp's (PFC) stake in REC to the company, according to reports. As the stake sale will not be going through REC will continue to operate as PFC’s subsidiary. PFC acquired REC for Rs 14,500 crore in 2019 and the merger is still in the process of completion.

  • Paint stockslike Asian Paints, Berger Paints, and Kansai Nerolac Paints trade in green as crude oil prices trade at a 9-month low.

  • Axis Direct retains its ‘Buy’ rating on AU Small Finance Bank with a target price of Rs 705, implying an upside of 10%. The brokerage believes the bank is well-placed to drive growth in an increasing interest rate environment given its healthy asset quality, robust disbursement growth, and strong deposit franchise. It expects the company’s net profit to grow at a CAGR of 26.2% over FY22-25.

  • Fitch Ratings maintains its rating on Bharat Petroleum Corp (BPCL) at ‘BBB’, with a stable outlook. The rating agency expects BPCL to incur gross marketing losses in FY23, as oil marketing companies are impacted by changing crude oil prices.

  • Metro Brands touches an all-time high of Rs 948.5 in trade today before giving up its gains and falling nearly 6%. The stock is also outperforming the Sensex by 18.4% in the past month on a better outlook of business in terms of sales, across all its formats. The company expects gross margins to go back to 55-56% in the coming quarters.

  • Sterlite Technologies’ arm Sterlite Global Venture agrees to sell its entire stake in Impact Data Solutions (IDS) to Hexatronic Group. The initial consideration will be worth 9.6 million pounds and the additional earnout consideration will be capped at 7.2 million pounds, which will be based on the EBITDA performance of IDS.

  • Dish TV is falling as its shareholders reject four out of six resolutions at its annual general meeting. The shareholders did not approve the reappointment of Rakesh Mohan as an independent director. Also, the shareholders did not approve the appointment of new statutory auditors S N Dhawan & Co. The board strength is now down to two.

  • Private Equity firm Blackstone Group to sell 7.7 crore units in Embassy REIT worth Rs 2,650 crore via block deals today, according to reports.

  • Hornbill Orchid India sells a 1.4% stake (4.2 lakh shares) in Mastek for Rs 75.5 crore in a bulk deal. In another deal Smallcap World Fund buys a 1.8% stake (5.4 lakh shares) in Mastek for Rs 96.7 crore.

  • Jubilant Foodworks acquires a 29.42% stake in Roadcast Tech Solutions on a fully diluted basis. Roadcast Tech Solutions is a delivery automation SaaS platform helping with last-mile delivery operations. It will buy an additional 10.58% stake by October 26.

  • Mahindra Logistics announces the acquisition of Rivigo Services’ B2B express delivery business, on a slump sale basis. Mahindra will acquire the customers, team, technology and assets of the B2B express delivery segment. The deal is valued at around Rs 225 crore.

Riding High:

Largecap and midcap gainers today include Indraprastha Gas Ltd. (422.95, 6.86%), Gujarat Gas Ltd. (516.65, 6.04%) and Muthoot Finance Ltd. (1,012.05, 5.84%).

Downers:

Largecap and midcap losers today include Varun Beverages Ltd. (1,038.55, -4.45%), Emami Ltd. (499.95, -4.20%) and Tube Investments of India Ltd. (2,577.70, -3.53%).

Volume Rockets

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

Top high volume gainers on BSE included Aster DM Healthcare Ltd. (250.65, 8.69%), Great Eastern Shipping Company Ltd. (524.35, 6.91%) and Indraprastha Gas Ltd. (422.95, 6.86%).

Top high volume losers on BSE were DCM Shriram Ltd. (997.90, -2.18%), Crisil Ltd. (3,100.05, -2.08%) and Phoenix Mills Ltd. (1,337.00, -0.35%).

Akzo Nobel India Ltd. (2,175.60, 1.01%) was trading at 3.9 times of weekly average. Zydus Wellness Ltd. (1,580.05, -0.28%) and Allcargo Logistics Ltd. (389.50, 6.17%) were trading with volumes 3.5 and 3.5 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

2 stocks overperformed with 52-week highs, while 16 stocks hit their 52-week lows.

Stocks touching their year highs included - Cipla Ltd. (1,098.70, 3.10%) and Metro Brands Ltd. (867.80, -2.88%).

Stocks making new 52 weeks lows included - Alembic Pharmaceuticals Ltd. (600.15, 0.76%) and Aurobindo Pharma Ltd. (502.90, 0.15%).

13 stocks climbed above their 200 day SMA including Mahanagar Gas Ltd. (851.35, 6.67%) and Dr. Lal Pathlabs Ltd. (2,649.15, 3.19%). 47 stocks slipped below their 200 SMA including Suzlon Energy Ltd. (8.35, -2.34%) and DCM Shriram Ltd. (997.90, -2.18%).

 
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Trendlyne Marketwatch
26 Sep 2022
Market closes in red, PVR plans to invest Rs 350 crore in FY23

Trendlyne Analysis

Nifty 50 lost over 300 points and closed in the red on a volatile day of trade. The benchmark index managed to close just above the 17,000 mark with the Indian volatility index, India VIX, rising above 21.5%. European indices traded mixed with the Italian index trading in the green as right-wing leader Giorgia Meloni secured a majority in Italy's parliamentary elections.

Most Asian indices closed in the red, tracking the US indices which closed lower on Friday. The Dow Jones lost 4% last week and closed at its lowest level since November 2020. The tech-heavy index, NASDAQ 100, also extended its losses by falling over 4.6% last week. Investors continue to be wary of the slowing economic growth amid central banks raising interest rates to combat record-high inflation levels. Brent crude oil futures traded lower and hovered around $85 per bbl, its lowest level since January.

Nifty Smallcap 100 and Nifty Midcap 100 lost over 3% and closed deep in the red, following the benchmark index. Nifty Metal and Nifty Realty fell over 4% and closed sharply lower than Friday’s close. Nifty IT bucked the market trend and closed in the green, despite the NASDAQ 100 closing lower on Friday.

Nifty 50closed at 17,016.30 (-311.1, -1.8%), BSE Sensexclosed at 57,145.22 (-953.7, -1.6%) while the broader Nifty 500closed at 14,725.70 (-332.0, -2.2%)

Market breadth is highly negative. Of the 1,957 stocks traded today, 164 were on the uptrend, and 1,772 went down.

  • PI Industriessees a short build-up in its September 29 future series as its open interest rises 32.2% with put to call ratio of 0.28.

  • Gland Pharmaand Aurobindo Pharmahit their 52-week lows of Rs 2,055.5 and Rs 497.8, respectively. Gland Pharma falls for two sessions, while Aurobindo Pharma trades lower for four sessions.

  • Revenue Secretary Tarun Bajaj says the Centre will reassess global crude oil prices around October 1 and will eliminate windfall tax on crude and petroleum exports, if required. The decision regarding windfall tax will be taken after reviewing incoming data for global crude oil prices.

  • Special Consumer Services, Other Non-Ferrous Metals, and Copperindustries fall more than 5% in trade today.

  • Hindustan Aeronautics sets up an integrated cryogenic engine manufacturing facility in Bengaluru worth Rs 208 crore. This facility will be used to manufacture and supply rocket engines to the Indian Space Research Organisation.

  • PVR plans to invest Rs 350 crore in FY23 to open 100 new screens, says CEO Gautam Dutta. The investment will be funded by cash balances from internal accruals and debt, according to reports. The company also expects its merger with Inox Leisure to be completed by February 2023.

  • Reliance Industries, ITC, and Life Insurance Corp of India trade below their second support or S2 level as markets trade lower.

  • Tata stocks likeTata Chemicals, Tata Motors, Tata Teleservices among others are falling as Tata Sons plans to reduce the number of listed companies to 15 from 29, according to reports. The report comes after Tata Steel's board approved the merger of seven subsidiaries with itself on Friday.

  • Metal stocks likeHindustan Copper, Hindalco Industries, Jindal Steel & Power, National Aluminium Co, and Vedanta are falling in trade. The broader sectoral index Nifty Metal is also trading in the red.

  • Jefferies maintains its ‘Hold’ rating on Tata Steel, with a target price of Rs 95. The brokerage feels that steel prices are sticky. It also says there is a risk in pricing due to Indian steel prices being 6-11% above import parity.

  • ICICI Securities continues to be positive about Gujarat Fluorochemicals’ growth prospects as it retains its ‘Buy’ rating on the company and increases its target price to Rs 4,270 from Rs 3,865. This implies an upside of 15.5%. The brokerage believes the company’s plans of expanding its production capacity and foray into battery chemicals manufacturing will drive revenue growth in the coming years. It expects the company’s revenue to grow at a CAGR of 27.7% over FY22-24.

  • Promoter Mayank Singhal sells a 1.3% stake (20 lakh shares) in PI Industries for Rs 630 crore in a bulk deal on Friday. The shares were picked up by Morgan Stanley Asia Singapore, Mirae Asset Mutual, BNP Paribas, and ICICI Prudential Life Insurance, among others.

  • Realty stocks like Brigade Enterprises, Oberoi Realty, Godrej Properties among others are falling in trade. All constituents of the broaderNifty Realty index are trading in the red.

  • Coal India will sign a memorandum of understanding with Bharat Heavy Electricals, Indian Oil Corp, and GAIL (India) to set up four surface coal gasification projects, according to reports.

  • Suzlon Energy’s board approves the raising of Rs 1,200 crore through a rights issue on Sunday. The company will issue 240 crore equity shares at Rs 5 per share price. The company shows up on a screener with improving book value for the last two years.

  • Britannia Industries' board appoints Rajneet Kohli as Executive Director and Chief Executive Officer. The board elevates Varun Berry to Executive Vice-Chairman, he will also continue to be Managing Director at the company.

  • Indian rupee hits a record low of 81.5 in early trade today, against the US dollar.

  • Harsha Engineers’ shares list at a 36% premium to the issue price of Rs 330, on its debut on the bourses. The Rs 755-crore IPO was subscribed for 74.7 times of the total shares on offer.

  • Nestle S.A's CEO Mark Schneider says the company plans to invest Rs 5,000 crore in India over the next three and a half years, according to reports. The investment will involve setting up new plants, acquisitions and expanding the existing product portfolio.

  • Unichem Laboratories sells a 19.97% stake in Optimus Drugs to Sekhmet Pharmaventures for Rs 270.9 crore. This is the first part of the payment received by Unichem Labs for sale. The company shows up on a screener of stocks with consistent returns over the past five years.

Riding High:

Largecap and midcap gainers today include Emami Ltd. (521.85, 5.29%), Dr. Lal Pathlabs Ltd. (2,567.20, 2.08%) and Ipca Laboratories Ltd. (891.85, 2.05%).

Downers:

Largecap and midcap losers today include JSW Energy Ltd. (296.15, -7.19%), Jindal Steel & Power Ltd. (397.30, -6.69%) and Au Small Finance Bank Ltd. (597.15, -6.38%).

Volume Shockers

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

Top high volume gainers on BSE included J B Chemicals & Pharmaceuticals Ltd. (1,916.20, 3.49%), Westlife Development Ltd. (694.40, 2.76%) and Ipca Laboratories Ltd. (891.85, 2.05%).

Top high volume losers on BSE were Thermax Ltd. (2,205.85, -7.98%), Great Eastern Shipping Company Ltd. (490.45, -6.37%) and Bandhan Bank Ltd. (261.55, -5.97%).

Mahindra CIE Automotive Ltd. (261.80, -1.00%) was trading at 7.8 times of weekly average. Power Grid Corporation of India Ltd. (200.85, -0.84%) and EPL Ltd. (165.35, 1.10%) were trading with volumes 5.2 and 5.0 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

1 stock hit its 52-week highs, while 30 stocks hit their 52-week lows.

Stock touching their year highs included - Westlife Development Ltd. (694.40, 2.76%).

Stocks making new 52 weeks lows included - Alembic Pharmaceuticals Ltd. (595.60, -2.26%) and Aurobindo Pharma Ltd. (502.15, -2.88%).

1 stock climbed above their 200 day SMA including Alkem Laboratories Ltd. (3,290.60, 1.01%). 76 stocks slipped below their 200 SMA including RBL Bank Ltd. (112.55, -8.50%) and Varroc Engineering Ltd. (350.55, -7.62%).

 
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The Baseline
23 Sep 2022
FabIndia plans IPO as industry recovers | outperformer stocks with MFs buying shares
By Tejas MD

Another bumper interest rate hike came from the US Federal Reserve on Wednesday - a 75 bps increase which took the US interest rate to 3.25%, the highest it's been since 2008. It's surprising how quickly interest rates have moved up - the rate stood at 0.25% in January 2022. 

However, Indian markets have stayed resilient with the Nifty 50 among the best performing indices globally, and flirting with all-time highs over the past few months. There’s been continued momentum in IPOs as well, and we take a closer look at a familiar name that is getting ready to list - FabIndia.

In this week’s Analyticks,

  • Dressed for success?: FabIndia hopes to take advantage of the apparel industry's recovery
  • Screener: Stocks outperforming Nifty 50 with increasing mutual fund holding, and also in the PE Buy Zone

Apparel industry bounces back post-pandemic, clearing path for IPOs 

During Covid, no one was dressing up: it was all trackpants and old t-shirts. Work calls on Zoom got taken with the video off. Events and weddings were being cancelled or postponed. This hit the apparel industry hard, including FabIndia. 

Now however, apparel companies are staging a comeback. With the exception of TCNS Clothing, top listed companies like Page Industries, Trent, and Aditya Birla Fashion and Retail (ABFRL) have outperformed the Nifty 50 by a huge margin in the past year.

Companies like Vedant Fashions and Go Fashion, which were listed less than a year ago, have also managed to beat the benchmark index comfortably in the past six months. 

FabIndia - which is known for its use of traditional materials and contemporary ethnic wear - wants to time its IPO with the apparel industry’s dramatic recovery. The company filed its draft red herring prospectus (DRHP) with market regulators for its IPO, and received the Securities Exchange Board of India’s (SEBI) nod in January 2022. According to reports, the proposed IPO is sizeable at Rs 4,000 crore. Out of this, the company plans a fresh issue worth Rs 500 crore, on a valuation of Rs 20,000 crore. 

FabIndia's fresh issue is for the voluntary redemption of non-convertible debentures or NCDs issued by the company, and prepayment of a portion of its outstanding borrowings. This means that the IPO will not change the way the company does business. 

FabIndia's "inclusive capitalism" focus 

FabIndia is planning to share the wealth from the IPO with its broader network. Promoters Bimla Nanda Bissell and Madhukar Khera are transferring 4,00,000 equity shares and 3,75,080 equity shares respectively to the artisans and farmers engaged with the company or its subsidiaries. According to FabIndia’s DRHP, the company works with 50,000 artisans and 10,300 farmers as of March 31, 2021.

FabIndia's founders have long talked about "inclusive capitalism", and the business works with a network of "community owned companies" (COCs) owned by artisans and farmers. It remains to be seen how this ownership model will evolve post IPO.

Among the investors selling shares, PI Opportunities fund and Prazim Trading and Investment Company will sell up to 40% and 100% of the equity shares held by them respectively. 

Apparel companies’ topline and bottomline jump YoY in Q1FY23 as demand recovers post-Covid

Q1FY23 was the first quarter in two years without a single Covid-19 lockdown. This helped apparel companies post strong topline and bottomline growth YoY. Revenues and net profits of these companies doubled at minimum, with Go Fashion’s revenue jumping by over 5X YoY in Q1FY23 on a low base. 

This indicates a strong comeback for apparel companies including FabIndia in FY23. According to FabIndia's DRHP, the company had posted losses in FY21 and H1FY22 due to lockdowns. 

However, recent quarterly results from its competitors point to strong revenue and net profit growth in apparels post H1FY22. Barring the two years of the pandemic, FabIndia has been profitable. 

The pandemic changes FabIndia’s revenue mix, organic food segment gains

One factor that helped the company contain its losses during the pandemic was the increased demand for healthy food, with a growing preference for organic and immunity booster items. As a result, the revenue contribution from this segment rose from 18.9% in FY20 to 31.1% in FY21.

Low demand for ethnic wear during the pandemic meant revenue contribution from the apparel segment decreased by 12 percentage points in H1FY22 to 46.5% when compared to FY19. However, with demand for clothing bouncing back, the revenue contribution from this segment is expected to recover. 

Warning sign: FabIndia’s store count is below pre-pandemic levels

The pandemic was a blow to FabIndia, and in some ways the business may not have fully recovered. Even with the strong rebound in apparel, FabIndia’s store count is not yet back to FY20 levels. As of H1FY22, its total store count stood at 309 against the pre-Covid number of 328. 

In comparison, FabIndia's listed peers saw their store count surpass pre-Covid levels in FY22. But revenue generation is not entirely dependent on the number of stores,  especially when we consider rising sales from online channels in FY21.

FabIndia’s online retail revenue contribution rose to 18% in H1FY22 from 4% in FY19. Revenue from FabIndia's online channels rose 40-50% during FY20 and FY21, similar to growth for close competitors like Vedant Fashions and TNCS. 

But retail outlets still play a major role in capturing market share, and the slow recovery here cannot be ignored.

Can FabIndia capitalize on opportunities amid competition?

The long-term growth plan for FabIndia is on track when it comes to market size, both in apparels and ethnic wear. The apparel industry’s market size bounced back in FY22, and it looks likely that demand will sustain in the coming quarters.

The ethnic wear segment’s market size is expected to grow at a CAGR of 6% over FY20-25E. In addition, the organic foods industry is also on the rise and is expected to grow at a CAGR of 24% during 2021-2026E. 

There is no dearth of opportunities for FabIndia to drive its top line and bottom line. But what investors will look for is whether the company is able to capitalize on opportunities, amid competition from its peers. FabIndia is sandwiched between two competitive segments: it directly competes with private label, large-format stores, and also with companies that offer affordable products and sell through online channels. It will have to distinguish itself in an increasingly crowded space.

Screener: Stocks outperforming Nifty 50 with increasing mutual fund holding (PE Buy Zone)

As we see the return of institutional buying in the Indian market,this screener identifies stocks that have outperformed the Nifty 50 index over the past month, and also saw increasing mutual fund holding in the last 30 days. With concerns around market valuations, we only consider stocks in the PE buy zone with a high Trendlyne Durability Score.

The screener shows 27 stocks from the Nifty 500 index. It is not dominated by any one industry but includes stocks from coal, breweries & distilleries, housing finance, and restaurants. Major stocks featured in the screener are Westlife Development, Sapphire Foods, United Spirits and Coal India.

Sapphire Foods has the highest increase in mutual fund holding of 0.9% in August. 10 mutual funds bought into the stock, of which Invesco India Contra Fund is the largest buyer (2.3 lakh shares or 0.36% stake). The stock has outperformed the Nifty 50 index by almost 15 percentage points and is in the PE buy zone with just 14.5% of total trading days spent below the current PE.

United Spirits has one of the highest increases in mutual fund holding with a 0.4% rise in holdings in August. Out of the 66 mutual funds that bought the stock, Nippon India Large Cap Fund - Growth bought the most (14.9 lakh shares or 0.2% stake). The stock has outperformed the Nifty 50 index by 9.6 percentage points and is in the PE buy zone with 16.2% of total trading days spent below the current PE.

You can find more screeners here.