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The Baseline
21 Jul 2023
Five Interesting Stocks Today
  1. Polycab India: This consumer durables company has surged over 19% since Tuesday and touched a new all-time high of Rs 4,717.4 on Thursday. This comes after it reported strong Q1FY24 results, beating analyst estimates. 

During the quarter, Polycab’s revenue increased 42% YoY to Rs 3,889.4 crore, led by the wires & cables and international businesses. The company’s net profit also grew by 81% YoY to Rs 399.3 crore. Both revenue and net profit beat Trendlyne’s Forecaster estimates by 24.8% and 45.9% respectively. EBITDA margins also improved by 270 bps YoY due to a fall in commodity prices, and price hikes by the firm. 

Polycab’s cables & wires segment, which contributes 89% of its total revenue pie, has clocked a 47% rise in revenue on the back of strong volume growth in both domestic and international markets. The FMEG (fast-moving electrical goods) segment saw a 2% increase due to subdued demand. Commenting on the company’s performance, Inder T Jaisinghani, Chairman and MD, said: “The company registered its best-ever first quarterly revenues and profitability. Centre’s focus on infrastructure development and structural reforms, improving private capex and continued momentum in real estate has given us favourable results.”

Several analysts are bullish following the company’s strong performance and expect a recovery in the FMEG segment in the near future. BoB Capital maintains its ‘Buy’ rating but raises the target price to Rs 5,000. The brokerage believes that Polycab will achieve its revenue target of Rs 20,000 crore before FY26, as guided in FY21 under Project Leap. As a result, the company features in a screener of stocks where brokers have upgraded recommendations or target prices in the past month.

  1. CIE Automotive India Ltd: Thisauto part and equipment manufacturer has risen by 33% in the past quarter, while the broader benchmarkNifty Auto increased by 19.6%. The stock is trading at a 52-week high, according toTrendlyne’s Technicals. The firm’s Q2CY23 earnings released on Tuesday, showed its revenue and profits increasing by 5% and 16% YoY respectively. The boost in net profit was aided by a margin expansion of 260 bps. The revenue slump was due to a slowdown in the EU business, while  in India the company was impacted by lower demand from 2- wheelers and commercial vehicles.

The firm is adding new orders from EV manufacturers under its aluminum and steel forging segment. It received a new EV transmission system order worth $20 million (apart from the existing $80 million order) from US-based gear manufacturer Metalcastello. CAIL has also won orders from Bosch, Royal Enfield, Stellantis, and Tata Motors. 

The firm is focusing on profitability rather than scaling up low-margin businesses. It expects 50% of its new business to come from EVs (currently 30%) in the next two years. It shows up in ascreener of stocks with growth in net profit and profit margin

Mahindra & Mahindra recently exited from CIE Automotive and is no longer considered a promoter of the firm. This has positioned CIE as a pure-play MNC with no conflict of interest. As a result, CIE India now directly operates under CIE Spain, granting it access to the European market and technology.

According toICICI Securities, the firm’s growth will be driven by its EV portfolio expansion, new order execution, 2-wheeler revival, and new passenger vehicle launches. It is expected to expand its margin to 18-19% from the current 17.7%. The brokerage maintains a ‘Buy’ rating on the firm.

  1. LTIMindtree: This IT consulting & software stock fell 2.6% on Tuesday despite its net profit growing 3.4% QoQ to Rs 1,151.5 crore in Q1FY24, as it missed Trendlyne’s Forecaster estimates by 3.1%. Revenue was flat, while also missing Forecaster estimates marginally by 0.7%. 

The rise in net profit has helped the company appear in a screener of stocks with increasing net profit over the past two quarters. Muted growth in the banking, financial services & insurance segment, which constitutes 38% of the company’s revenue, hit revenue growth.

The company’s EBITDA margin expanded by 90 bps QoQ to 20% in Q1, owing to reduced subcontracting expenses. It also booked new orders worth $1.4 billion during the quarter, reflecting a rise of 4.9% QoQ. The management remains confident of regaining demand momentum and profit margin in the medium to long term, driven by previously won orders. Citing these reasons, the management has given a revenue guidance of single-digit to low double-digit growth for FY24.

However, ICICI Securities believes that the company is unlikely to achieve its double-digit guidance in FY24 owing to the Q1 estimates miss and the muted demand outlook for the BFSI segment in Q2 as well. But it maintains its ‘Add’ rating on the stock post results and lowers the target price to Rs 5,325 from Rs 5,582 per share. This indicates a potential upside of 8.2%. It expects some revenue pick up in H2FY24, from a strong order book, healthy deal pipeline, and revival in broader tech demand. The broker expects the company’s revenue to grow at a CAGR of 10.3% over FY23-26.

  1. Kajaria Ceramics: This tiles & ceramics manufacturer has risen 10.2% over the past week till Friday, ahead of its Q1FY24 results on July 26. The firm is expected to benefit from the decline in commodity prices like oil and natural gas amid rising domestic demand. The company’s profitability and margins are likely to increase due to the correction in natural gas prices, which account for roughly 20-25% of its costs. The management expects to save Rs 130-140 crore in power and fuel costs in FY24 and has guided for EBITDA margins in the range of 14-16%, compared to 13.5% in FY23. 

In Kajaria’s Q4FY23 earnings call, it provided volume growth guidance of 13-15% for FY24. This growth is expected to be led by demand from tier-2 and tier-3 cities, an enhanced distribution network, and strong brand recall. Moreover, there is a steady shift in demand towards the organised sector, which is favourable for large organised players like Kajaria Ceramics, according to reports. The management has given a revenue growth guidance of 14-16% for FY24. 

According to Trendlyne’s Forecaster, the ceramic maker’s revenue and net profit are expected to rise by 14.4% YoY and 42.5% YoY respectively. The stock also shows up in a screener for companies with low debt. 

ICICI Direct believes the company will be a major beneficiary of these industry tailwinds, given its healthy balance sheet, superior brand, and its expanding reach. The consensus recommendation from 27 analysts on the company is ‘Buy’.

  1. CCL Products India: This coffee products manufacturer’s stock price fell by 15.1% in the past week despite a 15.1% YoY rise in Q1FY24 net profit to Rs 60.7 crore. Its revenue also increased by 28.6% YoY. The drop in price was likely due to a decline of 551 basis points in EBITDA margins, which now stands at 16.2%. The company also missed Trendlyne’s Forecaster’s net profit estimate by 20%. 

The fall in price can also be attributed to the management's decision to increase the debt guidance to Rs 2,000 crore for FY25, due to rising capex. It plans to expand the capacity to approx 77,000 metric tonnes (MT) by FY25 in Vietnam and India. This includes a 16,500 MT facility in Tirupati and capacity expansion in the Vietnam plant by FY24. 

CCL Products aims to double its market share to 15% and targets substantial volume growth. Speaking about this, Managing Director Praveen Jaipuriar says, “We are looking to end the year at somewhere between 20 to 25% volume growth.” The company also plans to increase outlets in the domestic market by 30-40%. It is also trying to expand its footprint in the United Kingdom by acquiring Lofbergs Group’s six coffee brands. 

IDBI Capital maintains a ‘Buy’ call on CCL Products India due to its aggressive capacity expansion and strong growth visibility. The brokerage expects sales and net profit to grow at a CAGR of 19% and 27%, respectively, over FY24-25. The company also features in a screener for stocks with broker target price or recommendation upgrades in the past month. According to Trendlyne’s Forecaster, it has a consensus recommendation of ‘Buy’ from 10 analysts.

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

 
Trendlyne Marketwatch
Trendlyne Marketwatch
21 Jul 2023
Market closes lower, ICICI Securities maintains its ‘Buy’ rating on Finolex Industries

Trendlyne Analysis

Nifty 50 closed at 19,745.00 (-234.2, -1.2%), BSE Sensex closed at 66,684.26 (-887.6, -1.3%) while the broader Nifty 500 closed at 16,904.30 (-138.3, -0.8%). Of the 1,937 stocks traded today, 862 were in the positive territory and 1,014 were negative.

Indian indices extended their losses from the afternoon session and closed in the red, with the Nifty 50 closing at 19,745. The volatility index, Nifty VIX, dropped by 2.9% and closed at 11.4 points. JSW Steel’s net profit surged 2.9x YoY to Rs 2,428 crore in Q1FY24.

Nifty Smallcap 100 closed in the green, while Nifty Midcap 100 closed lower, following the benchmark index. Nifty IT and Nifty FMCG closed sharply lower compared to Thursday’s closing levels. According to Trendlyne’s sector dashboard, healthcare equipment and supplies emerged as the top-performing sector of the day, with a rise of over 2.1%.

Most European indices trade in the green, except for Germany’s DAX trading lower. US indices futures trade higher, indicating a positive start. Tesla shares traded 9.7% lower post results, despite reporting earnings of $0.91 per share, beating the consensus estimates of $0.79

  • Money flow index (MFI) indicates that stocks like Polycab India, Mahindra Holidays & Resorts India, Sterling and Wilson Renewable Energy and Zensar Technologies are in the overbought zone.

  • Can Fin Homes and APL Apollo Tubes touch their 52-week highs of Rs 845.45 and Rs 1,438.80 respectively. The former has risen 11.7% over the past month, while the latter increased by 5%.

  • Glenmark Lifesciences falls despite its profit increasing by 23.4% YoY to Rs 135.5 crore in Q1FY24 due to falling inventory expenses. Its revenue rises by 18.1% YoY. The company appears in a screener of stocks with increasing quarterly revenue.

  • UltraTech Cement is falling despite its Q1FY24 net profit rising by 6.6% YoY to Rs 1,688.5 crore and revenue growing 17% YoY. However, the EBITDA margin declines 320 bps YoY to 17.2% due to rising raw material costs, power & fuel expense and freight costs. The stock shows up in a screener for companies with declining net cash flows.

  • HDFC Life Insurance's Q1FY24 profit rises 15.4% YoY to Rs 415.3 crore and assets under management increase by 19% YoY. Total annualized premium equivalent and value of new business also improve in line with profit. The company features in a screener for stocks with low debt.

  • Hindustan Zinc is falling as its net profit declines by 36.5% YoY to Rs 1,964 crore in Q1FY24. Revenue also plunges by 23% YoY due to lower lead, zinc and silver volumes. Its EBITDA margin contracts 876 bps on account of higher raw material and inventory costs. The company features in a screener of stocks with high increase in promoter pledges.

  • Ashok Leyland rises as its net profit increases by 699.3% YoY to Rs 543.9 crore in Q1FY24. Its revenue also grows by 34.3% YoY on the back of robust growth in the commercial vehicles and financial services segment. The company appears in a screener of stocks with strong momentum.

  • Capital goods stocks like Suzlon Energy, Larsen & Toubro, Sona BLW Precision Forgings andLakshmi Machine Works are rising in trade. The broader sectoral index BSE Capital Goods is also trading in the green.

  • ICICI Securities maintains its ‘Buy’ rating on Finolex Industries and raises the target price to Rs 230 from Rs 210. This implies an upside of 22.3%. The brokerage remains positive about the firm’s prospects, citing demand and margin tailwinds driven by lower raw material prices in the agri and non-agri segments.

  • PVR INOX rises over 4% in trade following the announcement of a 12-screen Superplex in Bangalore. The upcoming theatrical releases are also supporting the rise in share price.

  • JSW Steel rises to its all-time high of Rs 823.4 per share as its net profit surges 2.9x YoY to Rs 2428 crore in Q1FY24. Revenue grows 10.8% YoY on the back of improvement in steel sales. Its EBITDA margin expands by 538 bps YoY, owing to reduced power and fuel expenses. The company features in a screener of stocks where FIIs and FPIs are increasing their shareholdings.

  • Persistent Systems plunges as its net profit falls 9% QoQ to Rs 228.8 crore in Q1FY24. Revenue grows 3% QoQ owing to improvements in the banking, financial services & insurance (BFSI) and software, hi-tech and emerging industries segments. The company appears in a screener of stocks with decreasing net profit and profit margin (QoQ).

  • IT stocks like Infosys, Persistent Systems, Tech Mahindra, HCL Technologies and Coforge are falling in trade. The broader sectoral index, Nifty IT, is also trading in the red.

  • REC plans to sign MoUs worth Rs 2 lakh crore with over 20 renewable energy companies (from both public and private sectors) to support their energy transformation projects, say reports. These projects include renewable energy sources like solar, wind, green hydrogen, decarbonization, and battery storage.

  • Mphasis rises as its net profit increases by 2.4% QoQ to Rs 456.3 crore in Q1FY24. However, its revenue falls by 3.2% QoQ due to a decline in the banking and financial services segment. Its EBITDA margins improve by 50 bps on the back of reduced employee benefit expenses. The company appears in a screener of stocks with growing quarterly net profit.

  • Tanla Platforms is rising as its net profit grows by 12.6% QoQ to Rs 135.4 crore in Q1FY24. Revenue improves by 9.3% QoQ aided by growth in the digital platforms and enterprise communications segments. It features in a screener of stocks with increasing net profit for the past four quarters.

  • Larsen & Toubro touches a new 52-week high today as it wins an order worth more than Rs 7,000 crore from the National High-Speed Corp for the construction of a 135.45 km stretch of Mumbai-Ahmedabad high-speed rail project. It appears in a screener of stocks with strong momentum.

  • A Manimekhalai, MD and CEO of Union Bank of India, says the bank targets to maintain its credit costs at 1% or lower, and net interest margins at 3%. She highlights that it has delivered a strong performance in Q1FY24, with advances and deposits surpassing the guidance.

  • Dolly Khanna buys a 0.3% stake in Monte Carlo Fashions in Q1FY24. She now holds a 2.4% stake in the company.

  • Shares of Utkarsh Small Finance Bank debut on the bourses at a 60% premium to the issue price of Rs 25. The Rs 500 crore IPO has received bids for 101.9 times the total shares on offer.

  • Sunil Singhania cuts stake in Tracxn Technologies to below 1% in Q1FY24, as compared to 1.3% held in Q4FY23.

  • Nomura maintains its 'Buy' rating on Coforge with a target price of Rs 5,300. The brokerage says that the company has reported healthy Q1FY24 earnings with robust revenue growth due to strong order booking. It expects AI to drive revenue in the medium term. Meanwhile, Motilal Oswal reiterates its 'Neutral' stance, stating that the strong earnings are already factored into the stock price.

  • Mohnish Pabrai buys a 0.6% stake in Edelweiss Financial Services in Q1FY24. He now holds a 7.6% stake in the company.

  • Jindal Stainless is rising as it acquires a 74% stake in Jindal United Steel (JUSL) for Rs 958 crore. Earlier, Jindal Stainless held a 26% stake in JUSL, making it now a 100% owned subsidiary. Abhyuday Jindal, MD of Jindal Stainless, says, “This acquisition would result in improved synergies between both the companies and a preferred governance structure, thereby enhancing value for all stakeholders.”

  • Hindustan Unilever’s Q1FY24 net profit rises by 7.3% YoY to Rs 2,554 crore, as raw material costs and inventory expenses fall. Its revenue grows by 6% YoY, driven by robust growth in the home care segment. The stock shows up in a screener for companies with improving cash flows over the past two years.

  • Infosys’ Q1FY24 net profit falls 3% QoQ to Rs 5,945 crore due to rising employee expenses and sub-contractor costs. The firm’s revenue grows 10% QoQ, led by the manufacturing and hi-tech business verticals. The management says the impact is on the back of slow decision-making and low client spending, and revises its FY24 revenue guidance to 1-3.5% from 4-7% in constant currency.

Riding High:

Largecap and midcap gainers today include United Spirits Ltd. (1,039.05, 6.56%), Atul Ltd. (7,014.15, 6.56%) and MphasiS Ltd. (2,330.85, 5.28%).

Downers:

Largecap and midcap losers today include Infosys Ltd. (1,331.60, -8.13%), Persistent Systems Ltd. (4,749.60, -5.83%) and Dalmia Bharat Ltd. (1,920.00, -5.00%).

Volume Rockets

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

Top high volume gainers on BSE included Tanla Platforms Ltd. (1,266.10, 13.32%), IndiaMART InterMESH Ltd. (3,151.00, 8.64%) and Rites Ltd. (454.70, 7.19%).

Top high volume losers on BSE were Infosys Ltd. (1,331.60, -8.13%), Dalmia Bharat Ltd. (1,920.00, -5.00%) and Hindustan Unilever Ltd. (2,604.00, -3.67%).

Atul Ltd. (7,014.15, 6.56%) was trading at 19.8 times of weekly average. General Insurance Corporation of India (194.15, 3.66%) and Indian Railway Finance Corporation Ltd. (34.95, 5.11%) were trading with volumes 10.6 and 7.9 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

40 stocks overperformed with 52-week highs, while 1 stock tanked below their 52-week lows.

Stocks touching their year highs included - Ashok Leyland Ltd. (181.85, 3.50%), Aurobindo Pharma Ltd. (779.55, 0.90%) and Bharat Heavy Electricals Ltd. (94.50, -1.31%).

Stock making new 52 weeks lows included - Atul Ltd. (7,014.15, 6.56%).

4 stocks climbed above their 200 day SMA including MMTC Ltd. (34.15, 3.02%) and Trident Ltd. (33.25, 1.37%). 5 stocks slipped below their 200 SMA including Infosys Ltd. (1,331.60, -8.13%) and TTK Prestige Ltd. (784.35, -1.82%).

 
Trendlyne Marketwatch
Trendlyne Marketwatch
20 Jul 2023
Market sees a record close, HDFC Securities keeps ‘Buy’ rating on Tanla Platforms

Trendlyne Analysis

Nifty 50 closed at 19,979.15 (146, 0.7%), BSE Sensex closed at 67,571.90 (474.5, 0.7%) while the broader Nifty 500 closed at 17,042.55 (89.1, 0.5%). Of the 1,951 stocks traded today, 951 were on the uptick, and 925 were down.

Indian indices rose towards the final hour of the trading session and closed in the green for a sixth consecutive session. The benchmark Nifty 50 index rose over 145 points and closed above the 19,950 mark. Can Fin Homes closed in the green after its Q1FY24 net profit rose 13.1% YoY to Rs 183.5 crore and revenue increased by 34.8% YoY driven by healthy demand for housing loans.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, following the benchmark index. Nifty FMCG and Nifty Pharma closed above Wednesday’s close. According to Trendlyne's sector dashboard, Food, Beverages & Tobacco was the top-performing sector of the day. 

European indices traded in the green, despite the Asian indices closing mixed. US index futures traded in the red as investors assessed Q1FY24 earnings from major US companies. Netflix shares fell nearly 9% in after-hours trading on Wednesday after its revenue fell short of analyst estimates. Brent crude oil futures recovered from its day low and traded flat on a volatile day of trade.

  • ABB India sees a short buildup in its July 27 future series as its open interest rises 16.5% with a put-call ratio of 0.42.

  • Kirloskar Pneumatic Co falls despite its Q1FY24 net profit rising by 10% YoY to Rs 17.9 crore. However, its revenue drops by 10% YoY on the back of a decline in the compression systems segment. The company appears in a screener of stocks in the 'Sell' zone.

  • Zensar Technologies is rising as its Q1FY24 net profit increases 31% QoQ to Rs 156.2 crore due to reduced employee costs and the purchase of traded goods. Its revenue also improves by 1.2% QoQ, as growth in its digital and application services segment remains flat. The stock shows up in a screener for companies with high promoter stock pledges.

  • Sun Pharmaceutical Industries and Century Textiles and Industries touch their 52-week highs of Rs 1,102.7 and Rs 990.9 respectively. The former has risen 9.2% over the past month, while the latter increased by 16.8%.

  • Media, software & services and hardware technology & equipment sectors rise by more than 5.8% over the past week.

  • Havells India falls despite an 18% YoY rise in net profit to Rs 287.1 crore in Q1FY24 due to lower inventory expenses. Its revenue grows by 13.9% YoY on the back of strong performance in cables and Lloyd consumer segments. It appears in a screener of stocks with increasing quarterly profits.

  • India’s domestic crude oil production stands at 2.4 MMT (million metric tonnes) in June, according to the data released by the Oil Ministry. Meanwhile, crude oil imports increase marginally by 0.6% YoY.

  • Sensex and Nifty 50 hit all-time highs of 67,171.4 and 19,972.8, respectively. Nifty Bank also reaches a record high of 46,214.5.

  • HDFC Securities keeps its ‘Buy’ rating on Tanla Platforms and increases the target price to Rs 1,350 from Rs 1,050. This implies an upside of 19%. The brokerage expects the company’s growth to accelerate, driven by a revival in its enterprise business due to rising volumes. It also sees traction in the platform vertical, led by new product launches. It anticipates the company’s revenue to grow at a CAGR of 23.7% over FY23-26.

  • Can Fin Homes is rising as its Q1FY24 net profit grows 13.1% YoY to Rs 183.5 crore and revenue increases by 34.8% YoY driven by healthy demand for housing loans, increased focus on retail lending and improving asset quality. The stock shows up in a screener for companies with profits increasing sequentially over the past three quarters.

  • SJVN touches a new all-time high of Rs 50.9 per share as its subsidiary, SJVN Green Energy, signs two power purchase agreements (PPA) worth Rs 1,950 crore for 300 MW renewable energy projects. The first PPA is for a 200 MW ground-mounted solar project for Maharashtra State Electricity Distribution. The second PPA is for a 100MW wind power project in Delhi with Solar Energy Corp of India on a build, own and operate basis.

  • Hatsun Agro Products surges more than 7% as its net profit jumps 54.3% YoY to Rs 80.1 crore in Q1FY24. Revenue grows 6.8% YoY, helped by improvement in sales of milk and milk products. The company's EBITDA margin expands 230 bps YoY on the back of reduced expenses. It appears in a screener of stocks with high volume and gain.

  • Jefferies maintains its ‘Buy’ rating on Newgen Software Technologies with a target price of Rs 860. The brokerage says that the company’s revenue is driven by its license sales and anticipates further growth driven by its banking vertical in the coming quarters.

  • Olectra Greentech awards a Rs 395.1 crore order to Megha Engineering & Infrastructure for the construction of a greenfield EV manufacturing facility in Seetharampur, Hyderabad. It is expected to be completed within two years.

  • As the special pre-open call auction held by the National Stock Exchange for Reliance Industries ends, Jio Financial Services’ shares are valued at Rs 261.85 each. According to reports, the share price of the demerged entity beat brokerages’ estimates of Rs 160-190 per share.

  • Finolex Industries is rising as its net profit grows 16.2% YoY to Rs 115.3 crore in Q1FY24. However, revenue remains flat due to decreased revenue from the PVC resin segment and a correction in the prices of PVC pipes. Its EBITDA margin improves by 230 bps YoY, aided by a dip in raw material and finance costs. The company features in a screener of weekly momentum gainers.

  • Dr. Reddy's Laboratories touches a 52-week high today as the USFDA completes a pre-approval inspection (PAI) and routine GMP inspection at their API manufacturing facility in Srikakulam, Andhra Pradesh. It has given a classification of 'no action indicated' (NAI) for the facility. It appears in a screener of stocks with strong momentum.

  • The Ministry of Heavy Industries is expected to issue a tender for applications for the Rs 18,000 crore Advanced Chemistry Cells (ACC) project under the PLI scheme. The scheme aims to provide incentives for the production of 20GWh battery storage capacity. In the first round, Ola Electric, Reliance New Energy, and Rajesh Exports have been deemed eligible for incentives.

  • PNC Infratech rises to a new 52-week high of Rs 368.6 as it signs a concession agreement with National Highway Authority of India for three hybrid annuity mode projects costing Rs 3,264.4 crore. The projects include six-lane greenfield construction on the Varanasi-Kolkata highway in three packages.

  • Vijay Kedia reduces his stake in Ramco Systems to below 1% in Q1FY24, compared to 1.1% held in Q4FY23.

  • Nuvama Wealth upgrades its rating on Bajaj Consumer Care to 'Buy' with a target price of Rs 258. The brokerage believes that Q1FY24 will be the beginning of a promising year for the company. It anticipates a recovery in volumes and robust growth.

  • Ashish Kacholia adds Venus Pipes & Tubes to his portfolio in Q1FY24. He buys a 2% stake in the company.

  • Porinju Veliyath adds Centum Electronics to his portfolio in Q1FY24. He buys a 1% stake in the company.

  • Mastek rises despite a 9.2% YoY drop in its net profit to Rs 70.1 crore in Q1FY24. However, its revenue rises by 22.1% YoY on the back of robust growth in UK & Europe, North America, and Middle East operations. It also signs a definitive agreement to acquire USA-based BizAnalytica for an upfront payment of $16.7 million (Rs 137.2 crore). The company appears in a screener of stocks with negative profit growth and decreasing promoter shareholdings.

  • Tata Communications is rising despite a 29.8% YoY decline in its net profit to Rs 381.7 crore in Q1FY24. However, revenue grows 10.7% YoY on the back of increased revenue from the data services and transformation services segments. Its EBITDA margin plunges 450 bps YoY due to increased expenses. The company appears in a screener of stocks with declining net profit and profit margin (YoY).

Riding High:

Largecap and midcap gainers today include Polycab India Ltd. (4,717.35, 9.48%), HDFC Asset Management Company Ltd. (2,520.15, 4.65%) and PB Fintech Ltd. (776.45, 4.20%).

Downers:

Largecap and midcap losers today include ABB India Ltd. (4,204.00, -6.44%), Shree Cements Ltd. (23,409.05, -2.58%) and ICICI Prudential Life Insurance Company Ltd. (547.75, -2.09%).

Crowd Puller Stocks

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

Top high volume gainers on BSE included Polycab India Ltd. (4,717.35, 9.48%), Hatsun Agro Products Ltd. (1,049.30, 7.52%) and Rail Vikas Nigam Ltd. (128.70, 7.34%).

Top high volume losers on BSE were ABB India Ltd. (4,204.00, -6.44%), Shree Cements Ltd. (23,409.05, -2.58%) and L&T Finance Holdings Ltd. (131.15, -1.76%).

Alembic Pharmaceuticals Ltd. (711.50, 7.33%) was trading at 14.7 times of weekly average. Nippon Life India Asset Management Ltd. (311.30, 4.80%) and Borosil Renewables Ltd. (499.80, 6.06%) were trading with volumes 7.6 and 7.4 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

48 stocks hit their 52-week highs,

Stocks touching their year highs included - Alembic Pharmaceuticals Ltd. (711.50, 7.33%), Ashok Leyland Ltd. (175.70, 1.44%) and Aurobindo Pharma Ltd. (772.60, 2.86%).

11 stocks climbed above their 200 day SMA including Restaurant Brands Asia Ltd. (114.10, 2.93%) and TTK Prestige Ltd. (798.90, 1.76%). 2 stocks slipped below their 200 SMA including Garware Technical Fibres Ltd. (3,091.95, -1.76%) and Network 18 Media & Investments Ltd. (59.70, 0.34%).

 
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The Baseline
20 Jul 2023
Bajaj, Hero come for Royal Enfield | Stocks gaining momentum ahead of results
By Tejas MD

Michael Burry deletes his tweets, because he hates being wrong. But the investor, who became famous for predicting the 2008 financial crisis, is closely followed, and the media documented him in June 2022 warning investors about the coming stock market crash, which he had called “the mother of all crashes”. In March this year, Burry admitted he was wrong to tell investors to sell their stocks. 

In the ever-changing world of stock markets, narratives can quickly shift. US indices are currently at their 52-week highs and Nifty 50 is hovering around its all-time high. 

Last year at this time, it wasn’t just Burry who was worried. Analysts believed a recession was about to hit the global economy, as central banks raised interest rates to combat inflation. 

But the tide turned. As inflation continues to fall, economists say a ‘soft landing’ is likely. Goldman’s Sach has increased its odds of the US avoiding a recession in the next 12 months, to 80%, and India is expected to be the world’s fastest growing economy in FY24.

One sector that has benefited from the changing conditions is the auto sector, which tracks the broader economy - when GDP grows, cars, bikes and tractors start selling. The positive outlook for Indian auto has prompted foreign investors to raise their portfolio allocation to the sector to a record high of 6.5% in June 2023 from 5.2% in June 2022. Domestic investors’ allocation also increased to a multi-month high of 8.2% in June, as they expect strong Q1FY24 earnings for auto companies.

Within India's auto industry, the two-wheeler premium segment has been a hotbed of activity, offering higher margins and a better growth outlook. Top two-wheeler manufacturers are going after this segment with guns blazing. 

Amid the fierce competition, can the undisputed king of premium bikes, Royal Enfield, dodge the ‘bullet’ and remain at the top? Let’s find out. 

In this week’s Analyticks,

  • Ready to rumble: Bajaj and Hero partner with foreign players to take on Royal Enfield 
  • Screener: Nifty 500 outperformers ahead of results with rising Trendlyne momentum score and high durability

Bajaj and Hero go after Royal Enfield to win buyers of premium bikes

Shares of Eicher Motors, which makes Royal Enfield motorcycles, plunged 5% on July 4 after Bajaj Auto and Hero Motocorp announced new motorcycle launches. These were no ordinary launches - Bajaj and Hero have partnered with foreign players Triumph and Harley Davidson to challenge Royal Enfield, the dominant player in the premium motorcycle segment (> 250 cc) with an 86% market share.

These parnerships present the first big threat to Royal Enfield's India dominance - Triumph and Harley are iconic, global bike brands. Who can forget the Terminator riding in on a Harley Davidson FatBoy?

Under threat, Eicher Motors has underperformed both Nifty 50 and Nifty Auto in the past quarter. 

While Hero unveiled the Harley-Davidson X 440, Bajaj Auto launched its Triumph Speed 400 in the first week of July. The pricing of both motorcycles came in lower than expected, at around Rs 2.3 lakh ex-showroom. These two bikes will directly compete with Royal Enfield’s top-selling models - Classic 350 (Rs 1.93 lakh), Himalayan, and Meteor 350. 

The strategic pricing of these new bikes shows how badly Bajaj and Hero’s want to capture market share from Royal Enfield. During the post-launch meeting, Rajiv Bajaj, the CEO of Bajaj Auto, did not hold back. He compared his approach to the infamous American bank robber William Sutton. He said, “When asked, why do you rob banks, he (William Sutton) said, that's where the money is. So if Royal Enfield is where the money is, then we have no choice but to rob that bank."

Niranjan Gupta, Hero’s CEO, said, “We are here to win in the premium segment, whatever it takes.”

It is obvious that the CEOs of these two-wheeler manufacturers are now laser-focused on a segment that was left to Royal Enfield for the past decade. Why the change of heart? 

Premium two-wheelers beat industry’s volume growth, with higher margins

Domestic two-wheeler volumes grew 17% in FY23 after falling for three consecutive years. However, the numbers are still below FY15. During the three years of declining volumes, the premium motorcycle segment fell more slowly, compared to the overall numbers. 

In FY23, premium motorbikes made a strong comeback, rising 37% compared to industry volume growth of 17%. This segment is projected to keep growing faster than the industry.  

Analysts see rising purchasing power and growing incomes driving these sales. India is getting richer, and people's tastes are changing. During 2018-22, India is estimated to have produced 70 new millionaires every day.

A People Research on India’s Consumer Economy (PRICE) report suggests that by 2030, the country's demographics could change from the current inverted pyramid - with a small rich class and a large low-income class - to a rudimentary diamond, where a big part of the low-income group moves up to become middle class. 

These shifts explain the premiumization trend that is gaining momentum across consumer sectors like FMCG and hotels. The auto industry is no different. 

Royal Enfield, which focuses only on the premium segment, is the established leader in this space with a market share of 86%, followed by Jawa (5%), Honda (5%), and Bajaj (3%). Bajaj and Hero are now hoping to put a serious dent in RE’s market share. 

Can Harley and Triumph break Royal Enfield's dominance?

Barring Hero, the other companies below saw rising domestic sales volumes YoY in Q1FY24, indicating robust Indian demand. However, exports for all four two-wheeler manufacturers has been disappointing, falling YoY. Analysts expect muted export growth in FY24.

Following the new vehicle launches, Prabhudas Lilladher saidin its report that the competition will disrupt the market for Royal Enfield, and that the company will need to move fast to maintain its dominance. The brokerage reduced its target price on Eicher Motors by 14% to Rs 3,460. HDFC Securities also reduced its target price as it believes aggressive competition could hurt growth.  

However, ICICI Securities is asking everyone to calm down, and believes that the steep reaction in Eicher Motors’ share price is unwarranted. It expects that the premium 2W market in India will increase in size as consumers have new choices.

The brokerage also predicts that the introductory promotional pricing for Triumph and Harley bikes will end after selling a pre-specified number of units. Notably, only 10% of RE’s domestic sales come from bike models priced at Rs 2.6 lakh on-road. As Bajaj and Hero raise the prices of their new premium bikes from the current Rs 2.3 lakh, the price gap with RE could widen, allowing the company to recapture its market. 

Royal Enfield is fighting back with a plan to roll out two to three motorcycles in the next five months. Right now, RE stands out from the competition with its cult following and the history it brings to the table. Originally a British company, it was acquired by Eicher Motors in 1995, but reached new heights only in the past decade. RE’s units sold rose from 25,000 in 2005 to 8,34,895 in FY23. 

Even though Honda and Jawa tried to compete with Royal Enfield in recent years, they were unable to match its scale and popularity. But Triumph and Harley have arrived in India with their own history and fanbase. The new players have the real potential to accelerate the competition in the premium 2W segment. 

Screener: Nifty 500 outperformers ahead of results, with rising Trendlyne momentum score and high durability

As the Q1 results season takes off, we look at stocks that are rising ahead of their upcoming earnings announcements. The stocks in this screener have outperformed the Nifty 500 over the past week ahead of their results, with increasing Trendlyne momentum scores and high durability. 

The screener shows 28 stocks from the Nifty 500 index and four from the Nifty 50 index. It features stocks from the banking & finance, automobile & auto components and software & services sectors. Major stocks that appear in the screener are Zensar Technologies, Mahindra Holidays & Resorts India, RBL Bank,  MphasiS, Aarti Drugs and Craftsman Automation.

Zensar Technologies has risen 12.7% over the past week, with its Trendlyne momentum score improving by 8.7 points over the past month, in anticipation of the company’s result on Thursday. Axis Securities expects the company’s revenue to grow by 1.8%, owing to increased revenue from the hi-tech segment. The brokerage also expects a recovery in the digital business, driven by the banking, financial services and insurance (BFSI) segment. 

MphasiS has gained  12.2% over the past week, ahead of its result on Thursday. It has also seen a 17-point rise in its Trendlyne momentum score to 51.6 over the past month. Investors expect the company to beat the modest revenue and net profit projections given by analysts, after bellwether TCS easily beat its estimates.

Craftsman Automation comes in with a 9.9% surge in the past week, leading up to its results on July 24. It has a high Trendlyne momentum score of 66.9. Motilal Oswal expects the company’s revenue to jump 10% YoY due to the realisation of revenue from DR Axion India’s acquisition, and growth in the storage segment. The brokerage also estimates its EBITDA margin to remain flat, despite the softening of aluminium costs due to a weak product mix.

You can find some popular screeners here.

Signing off this week,

The Trendlyne Team

 
Trendlyne Marketwatch
Trendlyne Marketwatch
19 Jul 2023
Market closes higher, Bank of Maharashtra's Q1 net profit up by 95.2% YoY

Trendlyne Analysis

Nifty 50 closed at 19,833.15 (83.9, 0.4%), BSE Sensex closed at 67,097.44 (302.3, 0.5%) while the broader Nifty 500 closed at 16,953.50 (81.5, 0.5%). Of the 1,945 stocks traded today, 1,099 showed gains, and 785 showed losses.

Indian indices extended their gains from the afternoon session and closed in the green, with the Nifty 50 closing at an all-time high of 19,846. The volatility index, Nifty 50 VIX, dropped by 0.9% and closed at 11.6 points. Bank of Maharashtra’s net profit increased by 95.2% YoY to Rs 882 crore in Q1FY24.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, following the benchmark index. Nifty Media and Nifty Energy closed sharply higher compared to Tuesday’s closing levels. According to Trendlyne’s sector dashboard, hardware technology & equipment emerged as the top-performing sector of the day with a rise of over 4.1%.

Most European indices trade in the green. US indices futures trade mixed as investor brace for earnings report from Goldman Sachs, Tesla and Netflix. Microsoft shares closed at an all-time high on Tuesday after it announced pricing for its AI suite tools.

  • Money flow index (MFI) indicates that stocks like Aarti Drugs, Sun TV Network, Mahindra Holidays & Resorts Indiaand Bayer Cropscience are in the overbought zone.

  • Century Textiles & Industries rises to a new 52-week high of Rs 979, despite reporting a net loss of Rs 5.9 crore in Q1FY24. This is in contrast with a net profit of Rs 46.3 crore in Q1FY23. Its net sales decrease by 6% YoY due to a drop in the textiles and pulp & paper segments. The company appears in a screener of stocks with declining net cash flow.

  • Jubilant Pharmova is falling as its Q1FY24 net profit declines 86.4% YoY to Rs 6.4 crore on a high base, as it received a deferred tax credit of Rs 16.6 crore in Q1FY23. Profitability also takes a hit due to rising raw material prices, finance costs and employee expenses. Its revenue grows 8.7% YoY, led by the radio pharma and generics segments.

  • Network 18 Media & Investments plunges more than 5% as its net loss widens by 11.7x YoY to Rs 38.7 crore in Q1FY24 due to a 3.9x YoY surge in operational costs. However, its revenue rises 141.7% YoY to Rs 3,790.1 crore. The company shows up in a screener of stocks with high interest payments compared to earnings.

  • Bank of Maharashtra rises as its net profit increases by 95.2% YoY to Rs 882.1 crore in Q1FY24. Its net interest income also improves by 38.8% YoY on the back of growth in the treasury and corporate banking segments. The company appears in a screener of stocks with strong annual EPS growth.

  • Netweb Technologies India's Rs 631 crore IPO gets bids for 90.4X the available 88.6 lakh shares on offer on the third day of bidding. The retail investor quota gets bids for 19.2X of the available 44.9 lakh shares on offer.

  • Infosys, Coforge, United Spirits and Tanla Platforms' weekly average delivery volumes rise ahead of their Q1FY24 results tomorrow.

  • Asian Development Bank (ADB) maintains its forecast for India's economic growth at 6.4% in FY24 on the back of robust domestic demand. The bank predicts a further decline in inflation as energy and food costs decrease. ADB expects India's GDP to reach 6.7% in FY25.

  • TV18 Broadcast rises to a new 52-week high of Rs 45.2 as its net profit increases 31.7% YoY to Rs 44.3 crore in Q1FY24. Its revenue is up by 160.8% YoY. However, its EBITDA margin falls by 240 bps on the back of increased operational and marketing, distribution & promotional expenses. The company appears in a screener of stocks with increasing yearly and quarterly net profits.

  • ICICI Securities downgrades its rating on Just Dial to ‘Add’ from ‘Buy’ with a target price of Rs 870. This implies an upside of 8.5%. The brokerage believes the stock has a limited upside, given its recent uptrend. While acknowledging the stability of the company's core business, ICICI Securities expects delays in commercial launches of new initiatives.

  • Ramkrishna Forgings is rising as it commences commercial operations at its Jharkhand plant. This will enhance the company’s output by 23,800 tonnes per year, taking its total production capacity to 2,10,900 tonnes per year. The company shows up in a screener for stocks with high consistent returns over the past five years.

  • Rakesh Jhunjhunwala's portfolio cuts its stake in Prozone Intu Properties to below 1% in Q1FY24, compared to 2.1% held in Q4FY23.

  • HSBC initiates coverage on Titagarh Rail Systems with a ‘Buy’ rating and a target price of Rs 730. The brokerage believes that the Centre’s plan to increase the number of freight trains and order prospects from the metro segment will augur well for the firm.

  • CIE Automotive India rises to its all-time high of Rs 579.8 per share as its net profit surges 59.7% YoY to Rs 301.7 crore in Q1FY24. Its revenue also grows 4.7% YoY, aided by improvement in the India and Europe segments. Its EBIDTA margin expands 250 bps YoY, helped by a drop in raw materials prices. The company appears in a screener of stocks with consistently high returns over the past five years.

  • Adani Transmission rises as its smart meter contract value stands at Rs 3,700 crore in Q1FY24. Its energy sales grow by 7.6% YoY to 275.4 crore units on the back of expansion of operational distribution networks.

  • Rakesh Jhunjhunwala's portfolio sells a 4.8% stake in Metro Brands in Q1FY24. It now holds a 9.6% stake in the company.

  • Bikaji Foods International rises over 8% and touches its 52-week high as the company acquires a 49% stake amounting to Rs 5.1 crore in Bhujialalji.

  • Porinju Veliyath adds Kokuyo Camlin to his portfolio in Q1FY24, buys a 1% stake

  • B L Kashyap & Sons rises as it bags an order worth Rs 369 crore from DLF Home Developers. The order involves civil structure and waterproofing works for DLF's The Arbour project and is expected to be completed in 33 months. The company appears in a screener of stocks with strong momentum.

  • ICICI Lombard General Insurance is falling despite its net profit growing 11.8% YoY to Rs 390 crore in Q1FY24. Its gross direct premium income increases by 18.9% YoY, aided by improvement in premiums from the retail & corporate health and motor segments. It features in a screener of stocks near their 52-week highs with significant volumes.

  • Jio Financial Services is set to demerge from Reliance Industries on Thursday. The NSE and BSE will hold a special pre-open session for Reliance Industries to discover the share price of Jio Financial.

  • Media stocks like TV18 Broadcast, Network 18 Media & Investments, Zee Entertainment Enterprises, Navneet Education and Sun TV Network are rising in trade. All the constituents of the broader index, Nifty Media, are also trading in the green.

  • L&T Technology Services falls despite its net profit rising by 0.5% QoQ to Rs 311.1 crore in Q1FY24. Its revenue increases by 9.5% QoQ on the back of robust growth in the transportation segment. The company appears in a screener of stocks with improving quarterly revenue.

  • IndusInd Bank’s Q1FY24 net profit rises 32.5% YoY to Rs 2,123.6 crore, while its net interest income grows 18% YoY. The bank’s robust performance is driven by healthy growth in the retail banking and corporate/wholesale banking segments. Its asset quality also improves, with Gross and Net NPAs declining by 41 bps and 9 bps YoY respectively.

Riding High:

Largecap and midcap gainers today include Polycab India Ltd. (4,308.85, 4.38%), Punjab National Bank (64.15, 4.14%) and Patanjali Foods Ltd. (1,323.00, 3.95%).

Downers:

Largecap and midcap losers today include ICICI Prudential Life Insurance Company Ltd. (559.45, -2.66%), Endurance Technologies Ltd. (1,661.05, -1.97%) and Tube Investments of India Ltd. (3,192.00, -1.82%).

Movers and Shakers

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

Top high volume gainers on BSE included Tata Teleservices (Maharashtra) Ltd. (80.95, 10.44%), TV18 Broadcast Ltd. (42.90, 9.16%) and Finolex Cables Ltd. (977.65, 9.03%).

Top high volume losers on BSE were Network 18 Media & Investments Ltd. (59.50, -7.54%), Jubilant Pharmova Ltd. (386.85, -2.83%) and CIE Automotive India Ltd. (517.85, -2.36%).

KEI Industries Ltd. (2,563.10, 5.07%) was trading at 14.6 times of weekly average. Bikaji Foods International Ltd. (448.65, 5.24%) and KRBL Ltd. (373.60, 5.18%) were trading with volumes 9.8 and 6.0 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

46 stocks made 52-week highs,

Stocks touching their year highs included - Ashok Leyland Ltd. (173.20, -0.14%), Aurobindo Pharma Ltd. (751.10, -0.27%) and Zydus Lifesciences Ltd. (607.50, 0.91%).

9 stocks climbed above their 200 day SMA including Tata Teleservices (Maharashtra) Ltd. (80.95, 10.44%) and Rain Industries Ltd. (167.65, 2.73%). 12 stocks slipped below their 200 SMA including Network 18 Media & Investments Ltd. (59.50, -7.54%) and MMTC Ltd. (33.45, -1.33%).

 
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The Baseline
18 Jul 2023
Five analyst picks with high upsides
By Suhas Reddy

This week we take a look at five analyst picks with high upsides

  1. Piramal Pharma: Edelweiss initiates a ‘Buy’ call on this pharma company with a target price of Rs 130, indicating an upside of 29.9%. The brokerage recommends the company as a long-term investment. Analysts Thakur Ranvir Singh and Harsh Shah say, “Piramal Pharma recorded a revenue CAGR of 15% over the past 10 years, with multiple acquisitions and spin-offs. However, the past few quarters were challenging.” But the analysts expect a strong recovery in the overall business in the coming years. 

Singh and Shah are positive about the company due to a strong product pipeline and increased order inflows as the manufacturing base returns to normal after facing higher attrition during the pandemic. According to analysts, Piramal Pharma faced multiple headwinds over the past couple of years, which hit its valuation. But with the improving performance, they expect the valuation to gradually catch up. 

The analysts expect the macro-environment to improve over the next year and,a significant recovery in Piramal Pharma’s return ratios as the company executes major capex projects. 

  1. Kajaria Ceramics: ICICI Direct maintains a ‘Buy’ call on this ceramic and tiles manufacturer with a target price of Rs 1,680, indicating an upside of 24.1%. Analyst Bhupendra Tiwary says that “Kajaria, with a net cash balance sheet and superior brand, is well positioned in the tiles sector with expanding reach to tier-2 and 3 cities.” The management has guided for a 13-15% YoY volume growth in the tiles segment during FY24, driven by increased demand, capacity utilization, and an enhanced distribution network. They expect exports to grow by 25% in FY24. 

The analyst is also optimistic about the company due to the significant decline in gas prices over the past two quarters. With lower fuel costs, he expects the company to achieve net gains of Rs 130-140 crore in power and fuel expenses in FY24, and pass on net benefits of Rs 50 crore to dealers through trade discounts. Tiwary remains positive as Kajaria is a net cash company (Rs 236 crore in FY23) with a healthy balance sheet.  

  1. Federal Bank: Sharekhan maintains its ‘Buy’ rating on this bank with a target price of Rs 170, implying an upside of 26%. In Q1FY24, its standalone net profit rose 42.1% YoY to Rs 853.7 crore and revenue grew by 38.5% YoY. 

Analysts at Sharekhan maintain their positive outlook due to its sustained loan growth momentum and healthy core fee income. They believe the company will maintain its healthy return ratios despite margin headwinds, thanks to its asset quality and lower credit costs. 

Although the bank’s net interest margin fell in Q1, the analysts are confident that the NIM will rise from H2FY24, supported by higher incremental yields. They added, “We believe the bank still has potential for positive surprises, led by operating leverage and higher core fee income.” The analysts expect the company’s net profit to grow at a CAGR of 17.5% over FY23-25. 

  1. Lemon Tree Hotels: Motilal Oswal keeps its ‘Buy’ rating on this hotel chain with a target price of Rs 115, implying an upside of 25.3%. Analysts Suman Kumar, Meet Jain and Omkar Shintre believe the addition of Aurika MIAL (its largest hotel with 699 rooms) through a management contract will be a game changer for the company. “The addition will improve average room rates (ARR), brand mix and margins at the consolidated level, paving the way for management contracts and exponential growth of management fees,” the analysts add.

They also believe that the company’s restructuring plan will accelerate its debt repayment process. They expect the growth momentum from FY23 to continue in FY24. The analysts anticipate the firm’s revenue to grow at a CAGR of 28.2% over FY23-25. 

  1. Central Depository Services (India) (CDSL): HDFC Securities upgrades its rating on this investment company to 'Buy', with a target price of Rs 1,470, indicating a 22% upside. Analysts Amit Chandra and Vivek Sethia express optimism and expect a recovery akin to the company’s robust performance one year ago in FY21-22.

    Despite a slump in growth in FY23 due to decreased market-linked revenues such as transaction, IPO, and KYC fees, a 30% YoY increase in annuity streams offset this decline.

Chandra and Sethia predict a rebound in FY24, driven by increased Beneficiary Owner (BO) account additions, higher transaction revenues due to delivery volume growth, and a continuous surge in annuity revenue streams. With the company adding 20 lakh accounts monthly, they anticipate CDSL to dominate the BO account market with a 73% share and an 85% incremental share. Currently, only 2% of policies are in demat form. The analysts foresee a recurring opportunity of Rs 152 crore for repositories. Assuming CDSL's 25% market share, they predict an additional income of Rs 38 crore, representing 7% of FY23's revenue.

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

(You can find all analyst picks here)

 
Trendlyne Marketwatch
Trendlyne Marketwatch
18 Jul 2023
Market closes higher, Polycab India's Q1FY24 net profit grows 81% YoY to Rs 402.8 crore

Trendlyne Analysis

Nifty 50 closed at 19,749.25 (37.8, 0.2%) , BSE Sensex closed at 66,795.14 (205.2, 0.3%) while the broader Nifty 500 closed at 16,872.00 (-0.1, 0%). Of the 1,959 stocks traded today, 691 were on the uptick, and 1,208 were down.

Indian indices closed in the green, with the Nifty 50 closing at an all-time high for a third consecutive trading session. The volatility index, Nifty VIX, rose over 2.9% but closed below the 12% level. Polycab India surged to its all-time high of Rs 4,148.7 per share as its net profit grew 81% YoY to Rs 402.8 crore in Q1FY24.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the red, underperforming the benchmark index. Nifty Energy and Nifty IT closed higher than Monday’s close. According to Trendlyne’s sector dashboard, Healthcare Equipment & Supplies was the top-performing sector of the day.

Major Asian indices closed in the red, except for India’s BSE Sensex and Japan’s Nikkei 225, which closed higher. European indices traded flat as investors looked ahead to Q1FY24 earnings announcements from major companies. Brent crude oil futures traded in the green after falling over 3.5% in the past two trading sessions.

  • Relative strength index (RSI) indicates that stocks like 360 One Wam, Sunteck Realty, RBL Bank and C.E. Info Systems are in the overbought zone.

  • Adani Enterprises rises as Gautam Adani addresses shareholders, dismissing Hindenburg’s report as a "malicious attempt to damage the group's reputation". He adds, “Even during this crisis, the company raised several billions from international investors. No credit agency in India or abroad cut any ratings." He reassures shareholders that the group remains resilient and focused on its long-term goals.

  • ICICI Prudential Life Insurance Company falls despite a 31.7% YoY increase in net profit to Rs 206.2 crore in Q1FY24. Its revenue surges by 52% YoY, but the value of new business drops by 7% YoY. The company appears in a screener of stocks with rising quarterly profits.

  • Polycab India surges to its all-time high of Rs 4,128.6 per share as its net profit grows 81% YoY to Rs 402.8 crore in Q1FY24. Revenue also improves by 42% YoY on the back of an increase in revenue from the wires & cables and international businesses. It shows up in a screener of stocks with prices above short, medium and long-term moving averages.

  • Chetan Ahya, Chief Asia Economist at Morgan Stanley, maintains his forecast of 6.5% average growth for India in FY24. He expects inflation to be around 5% in Q1CY24, and RBI to begin interest rate cuts in February 2024.

  • Ganesh Housing Corp surges as its net profit jumps 12.3x to Rs 161.3 crore in Q1FY24. Revenue also grows 6.4x to Rs 270.4 crore, backed by increased pre-sales and a strong pipeline of projects. It appears in a screener of stocks that have seen improvements in quarterly revenue, net profit, and operating profit margin.

  • Satin Creditcare Network falls as Nordic Microfinance Initiative Fund III sells a 2.2% equity stake (20.4 lakh shares) worth Rs 35.8 crore in the company. The transaction was at Rs 175.5 per share for 15.6 lakh shares and Rs 176.2 per share for the remaining 4.4 lakh shares. The company appears in a screener of stocks with declining quarterly MF shareholdings.

  • Netweb Technologies India's Rs 631 crore IPO gets bids for 6.71X the available 88.6 lakh shares on offer on the second day of bidding. The retail investor quota gets bids for 6.84X of the available 44.9 lakh shares on offer.

  • HDFC Securities downgrades its rating on Angel One to ‘Add’ from ‘Buy’ but increases the target price to Rs 1,815 from Rs 1,800. This implies an upside of 20.7%. The brokerage cites moderation in the number of orders, slower customer acquisition, and increased employee costs for the downgrade. It also believes that the stock is trading at expensive levels after its uptrend over the past six months.

  • One 97 Communications (Paytm) is falling as SoftBank reportedly sells an additional 2% stake worth $250-300 million in the company. This will reduce the investment bank's ownership in the company to below 10% for the first time.

  • Ashish Kacholia adds Ugro Capital to his portfolio in Q1FY24, buying a 1.6% stake in the company. He also increases his stake in Aditya Vision to 2% by purchasing an additional 0.9% stake during the quarter.

  • Happiest Minds Technologies completes its fundraising round of Rs 500 crore through qualified institutional placements. The board has approved the allotment of 54,11,255 shares at an average price of Rs 924 per share. The company appears in a screener of stocks with increasing FII/FPI shareholdings.

  • Rama Steel Tubes is surging as it signs a memorandum of understanding (MoU) with JSW Steel to procure 1 lakh tonnes of hot rolled coils (HRC) used in the manufacturing of steel tubes and pipes. The MoU also establishes Rama Steel Tubes as the official distributor of HRC for JSW Steel in the western region.

  • Dolly Khanna buys a 0.5% stake in Deepak Spinners in Q1FY24. She now holds a 1.7% stake in the company.

  • Endurance Technologies rises as it acquires an additional 5% equity stake (6,850 shares) in Maxwell Energy Systems. The deal was executed at an average price of Rs 10,136 per share, totalling Rs 6.9 crore. Post this deal, Endurance will have a 56% equity stake in Maxwell.

  • Rallis India rises more than 3% in trade after Tata Chemicals acquires 97 lakh shares (4.9% equity) in the company, amounting to Rs 208.6 crore, through a block deal. This will increase Tata Chemicals' shareholding to 55.04%.

  • Patanjali Ayurved, promoter of Patanjali Foods, sells a 7% stake (2.5 lakh equity shares) in the company on Thursday and Friday.

  • Texmaco Rail & Engineering is falling despite its board's approval to raise funds up to Rs 500 crore through various financial instruments like preferential issue, rights issue, qualified institutional placement, follow-on public offer, or a combination of these. It appears in a screener of stocks which are in the 'Sell' zone.

  • Tata Elxsi falls as its net profit drops by 6.3% QoQ to Rs 188.9 crore in Q1FY24. Its revenue rises marginally by 1.5% QoQ on the back of muted growth in the software development & services and system integration & support services segments. The company appears in a screener of stocks with declining quarterly net profit.

  • Amara Raja Batteries falls more than 4% in trade as reports suggest that 2.72 crore shares (15.9% equity), amounting to Rs 1,788.3 crore, have changed hands in a large trade. Clarios ARBL Holding LP is the likely seller in this transaction.

  • Hindware Home Innovation appoints Salil Kappoor as the Chief Executive Officer of the company, with effect from today.

  • IDFC reappoints Mahendra N Shah as Managing Director, effective from October 1, 2023, for a period of one year. The board also appoints Bipin Gemani as the Whole Time Director and Chief Financial Officer, effective from July 17, 2023.

  • Macquarie maintains its ‘Outperform’ rating on HDFC Bank with a target price of Rs 2,110. The brokerage highlights that the bank witnessed low deposit growth due to seasonality in Q1, but loan growth improved on CRB (commercial and rural banking), and personal & home loans.

  • Infosys is rising as it enters into a framework agreement with one of its existing clients to provide AI and automation-led services. The deal is worth $2 billion (Rs 16,411 crore) over the next five years.

  • Sheela Foam rises as it acquires a controlling stake of 94.7% in Kurl-On Enterprises for Rs 2,035 crore. The company has also bought a 35% equity stake in HoK-Furlenco for Rs 300 crore. These deals allow Sheela Foam to expand its customer base and enter the branded furniture and rental furniture segment.

  • LTIMindtree’s Q1FY24 net profit rises 3.4% QoQ to Rs 1,151.5 crore, led by growth in the hi-tech, media and entertainment vertical and a fall in sub-contractor costs. Its revenue marginally increases by 0.1% QoQ due to weakness in the banking, financial services, and insurance segments. The stock shows up in a screener for companies with high momentum scores.

Riding High:

Largecap and midcap gainers today include Polycab India Ltd. (4,128.15, 5.45%), Supreme Industries Ltd. (3,479.00, 3.68%) and Infosys Ltd. (1,475.20, 3.67%).

Downers:

Largecap and midcap losers today include Indian Overseas Bank (25.70, -3.20%), LTIMindtree Ltd. (5,001.15, -2.60%) and One97 Communications Ltd. (840.40, -2.57%).

Volume Rockets

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

Top high volume gainers on BSE included Godrej Agrovet Ltd. (499.15, 5.62%), Polycab India Ltd. (4,128.15, 5.45%) and Saregama India Ltd. (447.75, 5.35%).

Top high volume losers on BSE were CCL Products India Ltd. (620.55, -8.59%), Amara Raja Batteries Ltd. (642.80, -6.16%) and Happiest Minds Technologies Ltd. (935.70, -6.00%).

Sheela Foam Ltd. (1,236.90, 4.20%) was trading at 13.6 times of weekly average. Vaibhav Global Ltd. (346.15, 4.89%) and Rallis India Ltd. (220.90, 2.72%) were trading with volumes 11.9 and 10.4 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

40 stocks hit their 52 week highs, while 1 stock hit their 52 week lows.

Stocks touching their year highs included - AIA Engineering Ltd. (3,509.00, 4.46%), Apollo Hospitals Enterprise Ltd. (5,162.60, -1.09%) and Bajaj Auto Ltd. (4,860.60, 0.57%).

Stock making new 52 weeks lows included - Rajesh Exports Ltd. (509.45, -2.06%).

15 stocks climbed above their 200 day SMA including Vaibhav Global Ltd. (346.15, 4.89%) and Sheela Foam Ltd. (1,236.90, 4.20%). 10 stocks slipped below their 200 SMA including Aptus Value Housing Finance India Ltd. (265.80, -3.68%) and India Cements Ltd. (210.10, -2.03%).

 
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The Baseline
18 Jul 2023
Chart of the Week: The biggest hits and misses by analysts over the past year
By Akshat Singh

The stock market is a fast-changing environment, where winners and losers can shift rapidly. Analysts closely monitor stocks to identify potential investment opportunities, and provide target prices that reflect their expectations for a stock's future performance. These target prices and recommendations can have a significant impact on the stock price as well.

But we all know how difficult it is, trying to predict the stock market. Picking future stock winners often feels like looking for a black cat in a dark room. In this edition of Chart of the Week, we look at a few Nifty500 stocks over the past year, comparing their actual stock performance to the analyst target upsides in June 2022. 

This analysis is based on a Trendlyne screener that tracks broker calls with the rewind feature.

Sonata Software, Varun Beverages outperform analyst targets

Sonata Software, an IT consulting & software firm, has seen a 98% rally in its stock price over the past year, surpassing the average target upside of 34.1%. It has also exceeded  KRChoksey’s expectations of an upside of 74.1% over its June ‘22 share price, beating it by 23.9 percentage points. The brokerage gave Sonata Software a target price of Rs 931 due to supply chain disruptions and a marginal increase in its international IT service segment income in Q4FY22. 

However, Sonata Software surprised analysts with an overall 20% growth in net profit in FY23. The majority of analysts including KRChoksey had projected a net profit decline of -1% to 7% in FY23. But the company benefited from lower finance and inventory expenses, and robust growth in the recently incubated healthcare and BFSI segments.

In addition, Sonata Software acquired US-based IT firm Quant Systems and received an order worth $160 million in March 2023. The company also formed multiple domestic and international partnerships. 

Now let’s consider ABB India, a heavy electricals major. It has exceeded the average target upside of 1.8% given by analysts a year ago by 73.9 percentage points. It also outperformed ICICI Direct's target upside of 16.4% by a staggering 58.6 percentage points in the past year. 

The company’s estimated net profit growth fell from 27% to 24% from May to November 2022, while the forward PE valuation stood at 65-67x during the same period. HDFC Securities believed that such high valuations would limit the upside from cyclical recovery. However, the firm surpassed analysts' average growth estimates of 24% by achieving a 95% increase in net profit, reaching Rs 1,016 crore in CY22. 

Multiple large-scale orders from companies like ArcelorMittal Nippon Steel and Kanpur Metro helped ABB record order inflows of Rs 3,125 crore, an increase of 36.4% YoY in Q1CY23. The recovery prompted UBS to upgrade the stock to ‘buy’ with a target of Rs 5,000 in June 2023. This upgrade represents an upside of 14% from the price on July 14.

The other two outperformers in our list are tyre manufacturer, Apollo Tyres and Pepsico franchisee Varun Beverages. Apollo Tyres surpassed the average broker target upside of 31.3% last year by 74.7 percentage points and the target upside of  73.6% set by ICICI Securities by 32.3 percentage points. Apollo Tyres  delivered sales growth of 17.3% YoY in FY23, as compared to estimates of 11-12%. 

The stock that surpassed broker targets the most, Varun Beverages went above the average broker target upside of 17.5% by 75.9 percentage points, also easily beating among the more optimistic calls, such as  the target upside of 23% projected by Bonanza India Research. 

 It has seen its stock price surge by 93.4% in the past year. Despite the impact of rising raw material prices on the industry, Varun Beverages remained resilient. It managed rising inflation in raw material costs, while benefiting from post-pandemic demand and expansion into other PepsiCo verticals. Along with strong revenue and net profit growth of 48% and 115.8% in 2022, the company's new ventures like the indigenous energy drink ‘Sting’ and additional PepsiCo factories contributed to the stock's rally. 

Aarti Industries, Adani Ports disappoint

From outperformers, let’s move on to the underperformers. Aarti Industries  had an average analyst upside of 42.5% one year ago, but its stock price fell by 38.8% in the past year. This specialty chemicals company fell short of the optimistic upside of 66.5% given by HDFC Securities. 

The company demerged its pharma business, Aarti Pharmalabs, which contributed around 18% to the revenue. As a result, there was an 82.3% YoY decline in net profit in Q3FY23. The net profit  fell by 58.3% in FY23, contradicting analyst expectations of 20-24% growth. 

Similarly, Amara Raja Batteries, an auto industry underperformer, saw its stock price fall by 10.3% over the year, far below the average broker target upside of 57.9%, and a target upside of 41.5% by Chola Wealth Direct in June 2022. The company’s net profit growth dropped from 52.4% QoQ in Q2 to -37.2% QoQ in Q4FY23. The  rising raw material prices due to the Russia-Ukraine war, led to shrinking margins. This downward trend in profitability has persisted from FY21 to FY23. 

Adani Ports & SEZ, an Adani Group stock, has fallen by 2% in the past year, but a year ago had an average broker target upside of 62.3% and a target upside of 26.4% by ICICI Direct. This drop was due to the shock Hindenburg report release in January 2023, which alleged accounting fraud and stock manipulation within the conglomerate. This led to an average fall in share price of 23% across the group’s stocks over the year. 


In the software & services sector, MPhasis had an average analyst upside of 52% a year ago, and a target upside of 52.6% by Anand Rathi. But it fell 10.8% in the past year with the decline in the broader IT sector. The company’s insurance and banking & financial services segments, which form around 60% of its revenue, have been sequentially declining from Q2FY22. Following the collapse of Silicon Valley Bank on March 10, the stock saw a correction of around 18.1% in the subsequent 12 trading sessions. The fall was driven by concerns regarding the company's exposure to the bank.

 
Trendlyne Marketwatch
Trendlyne Marketwatch
17 Jul 2023
Market closes higher, KRChoksey maintains its ‘Buy’ rating on Wipro

Trendlyne Analysis

Nifty 50 closed at 19,711.45 (147.0, 0.8%), BSE Sensex closed at 66,589.93 (529.0, 0.8%) while the broader Nifty 500 closed at 16,872.05 (106.6, 0.6%). Of the 1,989 stocks traded today, 1,179 were gainers and 750 were losers.

Indian indices extended their gains from the afternoon session and closed in the green, with the Nifty 50 closing at an all-time high of 19,711. The volatility index, Nifty 50 VIX, increased by 6% and closed at 11.3 points. Ashok Leyland won an order worth Rs 800 crore for the supply of logistics vehicles, field artillery tractors and gun-towing vehicles to the Indian army.

Nifty Smallcap 100 and Nifty Midcap 100 closed in the green, following the benchmark index. Nifty Media and Nifty Bank closed sharply higher compared to Friday’s closing levels. According to Trendlyne’s sector dashboard, media emerged as the top-performing sector of the day with a rise of over 2.7%.

Most European indices trade in the red as China’s GDP numbers dampened investor sentiment. US indices futures trade mixed as investors parse through earnings reports from big banks. Citi Bank held its ‘Buy’ rating on Nvidia despite its rally of 211% year to date. According to Citi, the growing demand for graphic processing units and the China ban will help sustain Nvidia’s growth momentum.

  • Ashok Leyland sees a long buildup in its July 27 future series as its open interest rises 7.7% with a put-call ratio of 0.65.

  • Ircon International is rising as it bags an order worth Rs 144 crore from N F Railway Construction for the supply, installation and commissioning of integrated tunnel communication systems in the Jiribam-Khongsang section.

  • Karur Vysya Bank rises as its net profit increases by 56.7% YoY in Q1FY24 to Rs 358.6 crore and its net interest income grows by 20.3% YoY. Its asset quality improves with net and gross NPAs declining by 134 bps and 429 bps respectively. The company appears in a screener of stocks with strong annual EPS growth.

  • KRChoksey maintains its ‘Buy’ rating on Wipro and raises the target price to Rs 486 from Rs 479. This implies an upside of 16.9%. The brokerage is positive about the IT giant’s prospects on the back of its large deal wins and increasing engagement with existing clients. It also believes that the stock is trading at an attractive valuation. It expects the company’s net profit to grow at a CAGR of 13% over FY23-25.

  • Netweb Technologies India's Rs 631 crore IPO gets bids for 2.3X the available 88.6 lakh shares on offer on the first day of bidding. The retail investor quota gets bids for 3X of the available 44.9 lakh shares on offer.

  • Power Grid Corporation of India's board approves an investment of Rs 4067.3 crore for advanced metering infrastructure projects. The board has also revised the investment proposal for a pilot data centre at Power Grid's Manesar substation to Rs 713.8 crore.

  • Mirae Asset Capital Markets India predicts a promising quarter for Varun Beverages. The company is expected to benefit from favourable weather conditions, organic growth, capacity expansions, and plans to expand distribution to remote areas of the country.

  • Rallis India is rising despite its Q1FY24 net profit declining 6% YoY to Rs 63 crore, while its revenue falls 9.4% YoY. This decline in growth is attributable to weakness in the crop care segment on the back of steep price drops, delayed monsoon and high inventories. According to Trendlyne’s Forecaster, the consensus recommendation from 14 analysts for the company is ‘Sell’.

  • Media stocks like Zee Entertainment Enterprises, TV18 Broadcast and New Delhi Television rise more than 3% in trade. All constituents of the broader Nifty Media index are also trading in the green, aiding it to rise more than 2%.

  • Citi maintains its 'Buy' rating on Federal Bank with a target price of Rs 160 as the brokerage expects it to surpass system-wide credit growth by 4-7% points across the board. It also anticipates faster TD pricing, scale-up of high-yielding products, and equity infusion to boost NIMs in the coming quarters.

  • HDFC Bank is rising as its Q1FY24 standalone net profit increases 30% YoY to Rs 11,951.8 crore and its net interest income (NII) grows by 21% YoY. The bank’s asset quality marginally improves as its Net and Gross NPAs decline by 5 bps and 11 bps YoY respectively. The stock shows up in a screener for companies with improving cash flows and high durability.

  • Larsen & Toubro rises as it bags a large order of Rs 2,500 to 5,000 crore for its water & effluent treatment business. The order is given by the State Water & Sanitation Mission, Uttar Pradesh, to construct a water supply scheme in Ballia and Firozabad. The project involves designing and constructing an intake structure, a water treatment plant, and transmission & distribution pipelines.

  • Ashok Leyland hits a 52-week high of Rs 174.6 as it wins a defence sector order worth Rs 800 crore for the supply of logistics vehicles, field artillery tractors and gun-towing vehicles to the Indian army.

  • The Union Power Ministry expects to raise approximately Rs 15,000 crore through asset monetization in FY24, a figure close to the previous year's estimate of rs 15,308 crore. They could fulfil their objective of Rs 27,000 crore in FY24 with a strong pipeline of assets from Power Grid, NHPC, SJVN, and NTPC.

  • JSW Energy is falling as its net profit decreases by 48.3% YoY to Rs 289.9 crore in Q1FY24. Its revenue also drops by 3.3% YoY due to lower realization in the thermal sector and a decline in coal prices. It appears in a screener of stocks in the 'Sell' zone.

  • Nestle India is rising as the Odisha state government approves the company’s proposal to set up a food processing unit in Mundaamba, Khordha district. The firm plans to invest Rs 894.1 crore in the plant.       

  • GTPL Hathway is surging as its revenue grows by 22.8% YoY to Rs 774.4 crore in Q1FY24, owing to increased revenue from the cable TV and internet services segments. However, the net profit falls by 17% YoY to Rs 35.9 crore due to a rise in finance, employee benefit, and operating expenses. The company features in a screener of stocks with declining net profit and profit margin (YoY).                                                                                                                

  • Jefferies maintains its 'Buy' rating on HDFC Bank with a target price of Rs 2,100. According to brokerage, it is the fastest growing bank with the highest RoE in the 100 billion dollar market cap category. It expects a 17% CAGR in profit and a 16% growth in RoE, driven by asset growth in housing, CRB, and consumption retail segments.

  • Angel One falls as the National Stock Exchange passes an order against the company for allegedly failing to monitor the operations of its Authorized Persons (APs). As a result, the company has to pay a penalty of Rs 1.7 crore and is prohibited from onboarding new APs for six months.

  • Rakesh Jhunjhunwala's portfolio sells a 1.4% stake in Autoline Industries in Q1FY24. It now holds a 2.5% stake in the company.

  • Ashish Kacholia adds SG Finserve to his portfolio in Q1FY24. He buys a 1.2% stake in the company.

  • Vijay Kedia buys a 6.5% stake in Atul Auto in Q1FY24. He now holds a 14.9% stake in the company.

  • JK Lakshmi Cement rises as it invests an additional Rs 350.1 crore in its subsidiary, Udaipur Cement Works (UCW). With this investment, the company acquires a 2.5% equity stake (19.5 crore shares) in UCW. As a result, its total shareholding in UCW increases from 72.5% to 75%.

  • Route Mobile is falling as its promoter plans to sell the entire 57.5% stake of expanded voting share capital to Proximus group. The transaction is valued at Rs 5,922 crore, with a share price of Rs 1,626.4.

  • Orient Electric's MD and CEO Rajan Gupta resigns from his position, effective from July 14. In his place, Desh Deepak Khetrapal has been appointed as the MD of the company for a one-year term.

  • Bandhan Bank is falling as its net profit declines by 18.7% YoY to Rs 721.1 crore in Q1FY24. However, revenue grows 11.5% YoY on the back of an increase in revenue from the retail and commercial segments. The bank's asset quality improves at gross NPA drops by 49 bps YoY. It shows up in a screener of stocks where mutual funds have decreased their shareholding in the past quarter.

  • Archean Chemical Industries rises as its MD and promoter Ranjit Pendurthi acquires a 1.3% equity stake (16.1 lakh shares) in the company. His shareholding now stands at approximately 23% of the paid-up share capital.

  • Avenue Supermarts is rising as its net profit grows 2.5% YoY to Rs 658.8 crore in Q1FY24. Revenue increases 18.2% YoY on the back of growth in general merchandise sales. But its EBITDA margin declines by 130 bps YoY due to higher expenses. It appears in a screener of stocks where analysts have upgraded their recommendation and target price over the past three months.

Riding High:

Largecap and midcap gainers today include Zee Entertainment Enterprises Ltd. (229.65, 6.32%), Indus Towers Ltd. (171.55, 4.73%) and Adani Transmission Ltd. (770.45, 3.79%).

Downers:

Largecap and midcap losers today include JSW Energy Ltd. (293.30, -3.71%), Avenue Supermarts Ltd. (3,713.55, -3.26%) and Zomato Ltd. (80.15, -2.91%).

Crowd Puller Stocks

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

Top high volume gainers on BSE included Sterling and Wilson Renewable Energy Ltd. (333.50, 15.66%), Indiabulls Real Estate Ltd. (68.30, 10.97%) and Piramal Pharma Ltd. (101.10, 9.18%).

Top high volume losers on BSE were Route Mobile Ltd. (1,488.00, -8.45%), Angel One Ltd. (1,587.85, -7.05%) and CCL Products India Ltd. (678.90, -6.99%).

Vaibhav Global Ltd. (330.00, 8.64%) was trading at 13.6 times of weekly average. Ratnamani Metals & Tubes Ltd. (2,628.05, 7.57%) and Latent View Analytics Ltd. (390.40, 5.50%) were trading with volumes 11.6 and 10.5 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

71 stocks took off, crossing 52-week highs,

Stocks touching their year highs included - Apollo Hospitals Enterprise Ltd. (5,219.30, 0.92%), Ashok Leyland Ltd. (172.40, 0.38%) and Bajaj Electricals Ltd. (1,288.05, 4.85%).

23 stocks climbed above their 200 day SMA including Sterling and Wilson Renewable Energy Ltd. (333.50, 15.66%) and Vaibhav Global Ltd. (330.00, 8.64%). 7 stocks slipped below their 200 SMA including Aptus Value Housing Finance India Ltd. (275.95, -3.31%) and Avenue Supermarts Ltd. (3,713.55, -3.26%).

 
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The Baseline
14 Jul 2023
Post Rakesh Jhunjhunwala, is Rare Enterprises more cautious in its stock picks?
By Abhiraj Panchal

Rakesh Jhunjhunwala, also known as the Big Bull, passed away in August 2022, after an illness. It marked the end of a storied, celebrated career as an investor - Jhunjhunwala’s picks were closely followed in the Indian stock market, and his buys and sells could trigger a market-wide frenzy. He started his investment journey in 1985 with Rs 5,000, and at the time of his death, had an estimated net worth of $5.8 billion. 

According to Forbes' Rich List, Jhunjhunwala was the 36th richest person in the country. One of his notable early successes was his investment in Tata Tea, where he purchased 5,000 shares at Rs 43 each in 1986 and saw the price rise to Rs 143 in three months. Some of his other recent portfolio investments included Crisil, Titan, Praj Industries, and Aurobindo Pharma

Jhunjhunwala owned the stock trading firm Rare Enterprises. Since his passing, his portfolio has been managed by the Rare Enterprises team, headed by Utpal Sheth and Amit Goela. 

Jhunjhunwala was a famously hands-on investor. He got into the details, regularly quizzed company management, and attended earnings calls – he would dial into the Titan quarterly earnings calls frequently. With new management now at the helm of Rare Enterprises, it is only natural to question whether its investment strategy has changed. We take a look at how the portfolio has evolved post-Rakesh Jhunjhunwala.

Net worth dropped for two consecutive quarters under Rare team

The Big Bull’s net worth rose sequentially for each quarter from Q4FY20 to Q3FY22, increasing approximately 4X during that period. But after his passing, the net worth dropped for two consecutive quarters from Rs 34,804 crore in Q3FY22, to Rs 25,397.5 crore in Q1FY23. The portfolio has since then shown some recovery as Indian markets rose.

Jhunjhunwala's portfolio net worth stood at Rs 31,988.1 crore in Q4FY23. The fall in net worth was driven by declines in holding values, not stakes sales. 

The provisional net worth for Q1FY24 stands at Rs 38,885.3 crore, up 21.6% since the previous quarter, but shareholding filings for the quarter are still pending

Slight changes in market cap preferences at Rare

In Q1FY23, Rakesh Jhunjhunwala held stakes in 9 large-cap companies, 11 mid-cap companies, 13 small-cap and 3 micro-cap companies.

Under Rare Enterprises, there have been some modifications in the portfolio's market cap preferences. The firm holds stakes in nine large-cap companies, while the number of mid-cap and small-cap companies has reduced to 7 and 11 respectively. It had also invested in a new microcap, Raghav Productivity Enhancers, by  Q1FY23. 

What stocks did Rare add and reduce stakes in? 

The management team at Rare Enterprises made changes to the portfolio by adding new stocks and reducing stakes in others. In Q3FY23, Rare purchased a 0.9% stake in Rallis India (an agrochemicals company) and Federal Bank, taking the total stakes up to 10.3% and 3.5%, respectively. It also bought 0.8% and 0.6% stakes in banking and finance companies Geojit Financial Services and Canara Bank, during the same quarter. It also increased its stakes in Tata Motors and NCC. 

Major changes in terms of additions by Rare came in Q4FY23. The firm added Raghav Productivity Enhancers (other industrial goods company) and Sun Pharma Advanced Research (a pharma company) to the portfolio. It bought 5.1% and 1.9% stake in them respectively.


During Q3FY23 and Q4FY23, Rare Enterprises cut stakes in Anant Raj (a realty company), Man Infraconstruction (construction and engineering company) and cement manufacturer Orient Cement. The firm sold a 1.6% stake in pharma company Dishman Carbogen Amcis in Q3FY23, before reducing its stake below 1% in Q4FY23.  Among other major stake cuts, Rare sold a 1% stake in Singer India (it now holds 7%). 

Sector preferences remain unchanged

There’s not much difference in the sector preferences of Rare Enterprises and Rakesh Jhunjhunwala. The top five preferred sectors are the same. Textiles, apparel and accessories continues to be the top preferred sector with 36.6% of the total portfolio value in Q4FY23, the same as Q1FY23. 

The banking and finance sector follows with a concentration of 25.7% in Q4FY23 (down 1.3 percentage points since Q1FY23). Retailing makes up 10% of the portfolio in Q4FY23, marginally lower than Q1FY23.

However, there have been some other changes in the portfolio since Rare's control. The general industrials and consumer durables sectors occupy a smaller section, while the healthcare equipment & supplies sector is no longer part of the portfolio, as compared to Q1FY23.

Rare Enterprises' newly added stock rises by 12.2% since the addition

D B Realty, Man Infraconstruction and Indian Hotels were the top three performing companies in Q1FY23, with one-year price changes of 121.1%, 98.8% and 59.7%, respectively. Currently, the best-performing stocks in the portfolio are Karur Vysya Bank, Aptech and NCC, all showing a one-year price change of above 100%. Raghav Productivity Enhancers, which was added by Rare, increased by 12.2% since its addition in Q4FY23. 

Comparing risk preferences: Rare Enterprises vs Rakesh Jhunjhunwala

When we compare the three-month and one-year beta values, Rakesh Jhunjhunwala’s portfolio had an average three-month beta of 1 and a one-year beta of 1.1 in Q1FY23, making it more volatile than the overall stock market (the stock market beta is considered to be 1, any stock with a beta more than 1 is more volatile, and less than 1 is less volatile). 

In comparison, the current average beta under Rare Enterprises is 0.6 for three months and 0.8 for one year, making it less volatile than it used to be. This suggests that Rare may be more risk averse compared to Rakesh Jhunjhunwala in their stock picks. 

Among the new stocks added by Rare Enterprises, Raghav Productivity Enhancers and Sun Pharma Advanced Research have one-year betas of 1.2 and 0.5, respectively. Stocks in which Rare reduced its stake to below 1% - Anant Raj, Man Infraconstruction and Orient Cement - have betas above 1, indicating that they are relatively riskier stocks.

Rare Enterprises takes a cautious turn

Despite a few additions to the portfolio, including a small-cap and a mid-cap company, Rare Enterprises has largely maintained the sector preferences established by Rakesh Jhunjhunwala. However, there are signs that Rare is more risk-averse compared to the renowned risk-taker and finder of diamonds in the rough, Rakesh Jhunjhunwala. 

While the long-term outcomes of this approach are yet to unfold, it remains to be seen whether Rare's more cautious approach will prove fruitful in India’s stock market. India’s GDP recovery means that established players in key sectors will rise with the rising tide of the economy. But the real skill of Jhunjhunwala as a stock market investor was in finding and betting on young, fast-growing companies early. Investors will be watching to see if the old magic is still there.