1. UNO Minda: KRChoksey upgrades its rating on this auto parts & equipment manufacturer to ‘Buy’ from ‘Accumulate’ with a target price of Rs 680, implying an upside of 21.5%. According to Trendlyne’s Forecaster, the consensus recommendation on the stock is ‘Buy’ from 19 analysts, including 14 that are ‘Strong Buy’, three ‘Buy’ and two ‘Hold’.
   
   In Q4FY23, the company’s net profit increased by 26.5% YoY to Rs 182.7 crore, while revenue grew by 19.6%. Analyst Abhishek Agarwal is optimistic about the company's long-term growth prospects due to the easing of supply chain shortages and its focus on the electric vehicle (EV) segment. “The company is well set to see sustained revenue growth with a couple of CAPEX plans in line, and by catering to the expected demand from different original equipment manufacturers,” he adds. 

Agarwal expects the firm to benefit from the multi-fold growth expected in the EV segment, particularly in  two-wheelers and three-wheelers. The analyst sees the robust order book of Rs 1,000 crore in the company's EV vertical and the management’s plan to invest an additional Rs 500 crore over five years towards EV as key positives. He expects the firm’s revenue to grow at a CAGR of 25% over FY23-25. 

2. Route Mobile: HDFC Securities maintains its ‘Buy’ rating on this internet software & services company with a target price of Rs 1,735, implying an upside of 20.2%. According to Trendlyne’s Forecaster, the consensus recommendation on the stock is ‘Buy’ from five analysts, which includes four that are ‘Strong Buy’ and one ‘Hold’. In Q4FY23, the company’s net profit surged by 122.4% YoY to Rs 101.6 crore and revenue jumped by 61.1% YoY. 

Analysts Amit Chandra and Vivek Sethia believe the company posted better than expected revenue growth and margin expansion in a seasonally weak quarter. They note that the decline in billable transactions and new product sales due to seasonality was offset by better realisations, market share gains and new client additions.

The analysts believe the launch of new products like Trusense (used for identity and fraud detection) will aid growth. They also expect the firm to see organic growth of 18% in FY24 “led by strong tailwinds in the domestic termination business and expansion of international operations.” Chandra and Sethia project a CAGR of 18% for revenue during FY23-25.

3. PI Industries: Axis Direct keeps its ‘Buy’ rating on this agro-chemicals manufacturer with a target price of Rs 3,800, implying an upside of 9.4%. According to Trendlyne’s Forecaster, the consensus recommendation on the stock is ‘Buy’ from 25 analysts, including 14 that are ‘Strong Buy’, five ‘Buy’, four ‘Hold’ and two ‘Strong Sell’. In Q4FY23, the company’s net profit rose 37.3% YoY to Rs 280.6 crore and revenue grew 12.2% YoY. 

Analysts Prathamesh Sawant and Shivani More maintain a positive outlook on the company’s prospects, even though it missed their revenue estimates by 10.8%. They attribute this shortfall to a slowdown in domestic growth due to industry-wide high inventory problems. However, they believe the company’s brand value in the custom synthesis manufacturing (CSM) segment remains strong, and the management has a bright outlook for it. 

The analysts also anticipate improved margins in the traditional portfolio in the coming quarters due to the “introduction of new value-added branded products and acquisitions in the pharmaceuticals space, which will add to inorganic growth in the medium to long term”. They estimate the firm’s net profit to grow at a CAGR of 20.8% over FY23-25. 

4. Motherson Sumi Wiring India: ICICI Direct keeps its ‘Buy’ call on this auto parts manufacturer with a target price of Rs 70, indicating an upside of 21.4%. According to Trendlyne’s Forecaster, it has a consensus recommendation of ‘Buy’ from 12 analysts, including eight that are ‘Strong Buy’, three ‘Buy’ and one ‘Strong Sell’. In Q4FY23, the company’s profit increased by almost 3x YoY to Rs 138.5 crore, while its revenue grew by 12.4% YoY. 

Analysts Shashank Kanodia and Raghvendra Goyal remain positive due to the company's impressive return ratio (RoCE 42.2%), the growing electrification of vehicles, and the potential for increased content per vehicle in the domestic auto market.

The analysts expect a net sales CAGR of 16.5% in FY24-25 on the back of OEM ramp-up, focus on premiumisation and a greater share in utility vehicles. They believe, “Motherson Sumi Wiring’s asset-light model with expandable capacity, along with operating leverage gains, will push margins.”

5. Krishna Institute of Medical Sciences (KIMS): Edelweiss maintains a ‘Buy’ call on this healthcare facilities provider with a target price of Rs 1,935. This indicates an upside of 20.6%. According to Trendlyne’s Forecaster, the stock has a consensus recommendation of ‘Buy’ from six analysts, including five that are ‘Strong Buy’ and one ‘Hold’. In Q4FY23, the company reported a net profit growth of 15.6% YoY to Rs 93.3 crore and revenue growth of 52.6% YoY. According to analysts Thakur Ranvir Singh and Harsh Shah, “The YoY growth in revenue was driven by a rise in in-patient volume, out-patient volume and ARPOB.”

The analysts remain positive on KIMS due to its healthy expansion plan, improved occupancy, and higher operating margin, with a focus on operational efficiency. They expect an annual capex of Rs 700–800 crore over the next two-three years, with plans to add 1,600 beds during FY24-25. 

Singh and Shah remain cautious regarding lower occupancy due to the closure of the Karim Nagar facility and assume that the new facilities may have low occupancy during the first year of its operations.

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

(You can find all analyst picks here)

Adani Group stocks were hit hard by the Hindenburg report, whose explosive allegations made headlines on January 25. The report said that the Adani Group had engaged in stock manipulation, insider trading via companies based out of Mauritius, and accounting fraud. In reaction to the report, Adani Group stocks lost more than half their value over just 30 days. 

The controversy pushed Group Chairman Gautam Adani several ranks down in the Bloomberg Billionaires list, where he had overtaken Amazon’s Jeff Bezos and Microsoft’s Bill Gates in December 2022 with a $120 billion+ fortune.  

Four months later, Adani stocks are on the road to recovery, with two stocks (Adani Ports and Adani Power) just 6% lower than their pre-Hindenburg levels. But other group stocks still have a lot of lost ground to cover. 

In this edition of the Chart of the Week, we take a look at the conglomerate’s journey since the report’s release. Adani Enterprises, the conglomerate's premier stock, has recovered 79.1% in the past three months, while Adani Wilmar, the newest addition to the group, has seen a gain of approximately 29% over the same period. However, these two stocks are still 28% and 15% below their Pre-Hindenburg levels, respectively. 

The Hindenburg report's release on January 25 caused Adani Group stocks to lose Rs 12 lakh crore in market cap. On January 31, the Group launched a follow-on public offer (FPO), which was fully subscribed with the help of qualified institutional buyers (QIBs). However, in the late hours of the day, Adani called off the FPO, causing the stock to plunge 28% on February 1. 

Pressure on the conglomerate increased further as Credit Suisse’s private bank ceased margin loans on Adani Group bonds on February 2, causing the stock to fall by 26%. The decline in stock prices continued until February 14 when the Q3FY23 results of Adani Enterprises were declared. The positive results provided some Valentine’s Day relief, and the stocks began to recover.

But on February 16, Adani Enterprises froze the capex on new road projects, causing the stocks to fall 4.1% in the next session. On the same day, in an attempt to restore confidence, Adani Enterprises unpledged 1.4% of its shares and clarified rumours about Grant Thornton being their independent auditor. However, the stocks continued declines due to allegations of the Adani Group’s PR team trying to manipulate Wikipedia articles. 

Following the fall in stock prices, reports emerged that Adani was planning to repay share-backed loans worth $690-790 million on February 28. On the same day, 8 of 10 Adani stocks in the market rose, with Adani Enterprises gaining nearly 9%. 

GQG partners, a US-based asset management firm, engaged in talks to invest $1.87 billion into the conglomerate on March 13. This news provided a two-week relief rally and led to a gain of approximately 40-45% across all Adani stocks.

Later, on March 29, the group repaid $2.15 billion in margin-linked share-backed loans, and another $200 million loan related to Holcim's Indian stake. These repayments contributed to the rise in stock prices for various subsidiaries. Moreover, on May 13, Adani’s board of directors approved another round of fundraising worth Rs 12,500 crore through Qualified Institutional Placements (QIPs).

On May 19, the Supreme Court panel said that it could not find price manipulation in Adani group stocks (although the panel noted that it could not follow the money trail of the Mauritius companies identified in the Hindenburg report, and the investment bankers that it invited for testimony turned the panel down). This news resulted in a gain of 3.5-7% across all Adani stocks.

However, on the same Sunday, the MSCI announced the removal of two of the group's stocks, namely Adani Transmission and Adani Total Gas, from its index. This news did not have a significant impact on the stocks as GQG Partners was in talks with the group to increase their stake in the conglomerate by 10%, amounting to $3.5 billion.

GQG Partners also plans to inject an additional $1 billion into the group, as they have already received returns of Rs 10,000 crore from their holdings in Adani stocks in less than three months.

Adani stocks have witnessed a QoQ reduction in promoter-pledged shares over the past quarter, with the highest decline observed in Adani Ports at 12.65 percentage points. Adani Transmission followed with a reduction of 2.87 percentage points, and Adani Enterprises decreased by 2.02 percentage points. 

Though Adani Group stocks have been on the rise over the past three months, major stocks still need to recover significantly to reach their pre-Hindenburg levels.

1. Deepak Nitrite: This chemical manufacturer rose by 9.5% in trade on Wednesday, marking its highest single-day gain in over 26 months. This uptrend follows the company’s announcement that its subsidiary, Deepak Chem Tech, has signed an MoU with the Gujarat Government to invest around Rs 5,000 crore in the state over the next four years. The company plans to manufacture specialty chemicals like phenol, acetone and bisphenol in Dahej and Nandesari, Gujarat.
   
   This sharp surge in the stock price comes despite the company’s subdued performance in Q4FY23. Its net profit has fallen 12.5% YoY to Rs 233.9 crore due to high input costs. Its revenue marginally increased by 4.8% YoY in Q4. However, it beat Trendlyne’s Forecaster profit estimates by 5.8%. The stock also shows up in a screener for companies with increasing net cash flows over the past two years.
   
   Going forward, the company plans to become the largest producer of solvents, as it believes this will help it benefit from import substitution. To achieve this goal, the management is aggressively expanding the firm’s production capacity. However, the expansion plans have encountered project delays, with the management announcing a delay in three of its projects. This includes the debottlenecking of its phenol plant, which was supposed to be commissioned in Q4FY23. It has now been delayed to Q1FY24. Similarly, the commissioning of its methyl isobutyl ketone (MIKB) and methyl isobutyl carbinol (MIBC) plants has been delayed by one quarter to Q1FY25. Only the commissioning of its photo chlorination and fluorination units seems to be on track.
   
2. EIH: This hotel company rose 7.5% on May 18 and touched its 52-week high of Rs 218.5 per share as it posted a 5.7x growth in net profit to Rs 84.4 crore in Q4FY23. Revenue has shot up 111.7% YoY to Rs 637.1 crore, driven by industry-leading revenue per available room (RevPAR) of Rs 15,284. This growth has exceeded Trendlyne’s Forecaster estimates by 20.7% for revenue and 6.4% for net profit.

The company’s net cash flow turned positive for the first time in the past five quarters, owing to a reduction in debt. This has helped the company show up in a screener of stocks with improving return on capital employed (RoCE) in the past two years. EIH also leads the industry in RevPAR and average room rate (ARR), demonstrating its ability to command a premium.

MD and CEO Vikram Oberoi, expects further growth in occupancy levels and ARR, backed by strong domestic demand and the recovery of foreign occupancy in the winter season.

According to ICICI Direct, profitability is expected to remain healthy due to strong ARR and occupancy levels, particularly in key cities like Mumbai and Delhi with consistent demand. The broker has upgraded its rating on the hotel company to ‘Buy’ from ‘Hold’ with a target price of Rs 240, implying a potential upside of 18%.

3. Dixon Technologies: This consumer electronics company has risen 10% since announcing its results on Tuesday evening and 20.6% over the past week till Friday. Its PE ratio is 85.3 (above the industry median), but it is trading below its 3 and 5-year historical PE averages. In Q4FY23, its net profit increased by 28.1% YoY to Rs 80.6 crore, while its revenue grew by 3.8% YoY. It beat Trendlyne Forecaster’s revenue and profit estimates by 1.5% and 9.6% respectively. The firm also shows up in a screener for companies with improving cash flows and high durability scores. 

This healthy Q4 performance was led by growth in home appliances and mobile business verticals. An increase in revenue contribution from original design manufacturers (ODM) has aided in margin improvement. Its EBITDA margin expanded by 110 bps YoY to 5.1%. But the growth in the white goods and lightning segments was subdued due to weak demand. 

Despite the healthy performance in Q4 and the stock’s uptrend, analysts’ views on the company’s prospects differ. While BoB Capital Markets maintains a ‘Buy’ rating on the firm due to its dominant position in the electronics manufacturing space and growing revenue contribution from the ODMs, ICICI Securities maintains its pessimistic outlook toward the company. It believes weakness in demand for white goods and durables will impact revenue growth in the near term.

The management expects to deliver ‘industry-leading’ growth in FY24 on the back of its robust order book, new client additions, and increasing production capacity. It expects further expansion of the EBITDA margin in FY24 given the increasing contribution from the ODM business and its backward integration efforts. 

4. Aditya Birla Fashion & Retail (ABFRL): This retailing company hit a new 52-week low on Tuesday after reporting a net loss of Rs 187 crore in Q4FY23, compared to a net profit of Rs 43.6 crore in Q4FY22. This was due to an increase in expenses, which offset the demand for its apparel and lifestyle products. The company features in a screener of stocks with declining profits for the past three quarters. However, its revenue has increased by 26.2% YoY, beating Trendlyne’s Forecaster estimates by 3.9%. 

The company’s management states that the overall demand continues to be weak in the value and premium categories, which could likely affect the SSSG (same-store sales growth) and new store additions, especially for Pantaloons. Jagdish Bajaj, Managing Director, said, “The performance in metro cities continued to remain strong, but sales in Tier-2 and Tier-3 cities remained sluggish as inflationary pressures and weak consumer sentiments impacted demand.”

On the bright side, the Lifestyle brand posted its highest-ever Q4 revenue of Rs 1,535 crore, led by robust retail and strong e-commerce performance, while the Pantaloons segment has grown by 18% YoY, with an SSSG of 13% during the quarter.

Following the company’s results, ICICI Securities has downgraded its rating to ‘Add’ from ‘Buy’ and lowered the target price to Rs 220. The brokerage expects increased competitive intensity from online/offline players and a slower improvement in the profitability of emerging business. As a result, the company features in a screener of stocks where brokers have downgraded the target price or recommendation in the past month. 

5. Narayana Hrudayalaya: This healthcare facilities provider has risen 9.3% until Friday after posting results on Monday. It also touched its new all-time high of Rs 880.8 on Wednesday. In Q4FY23, Narayana Hrudayalaya’s profit rose 151.2% YoY to Rs 173.1 crore, while its revenue increased by 30.1% YoY. It beat Trendlyne’s net profit Forecaster estimate by 11.5%. The company’s YoY profit growth also beat its industry’s profit growth of 41.4% YoY. The multispeciality private hospital appears in a screener for stocks with growth in quarterly profit and profit margin. 

According to Emmanuel Rupert, Managing Director and Group CEO, Narayana Hrudayalaya achieved its highest-ever revenue and profitability due to a rise in patient footfalls, along with improvements in the specialty and payor mix. He added, “The performance improvement is supported by the growth in business across our flagship units, other hospitals, and newer hospitals, in addition to the increased contribution of international patients.” The average revenue per occupied bed has increased by 11% YoY to Rs 36,986 per day.

The management expects the India business to grow at the current pace and has guided an aggressive capex of Rs 1,100 crore for FY24.

ICICI Direct maintains a ‘Buy’ call on the healthcare facilities provider on the back of improved occupancy levels, ramp-up in new hospitals, and consistent performance at the Cayman Islands facility. According to Trendlyne’s Forecaster, the company has a consensus recommendation of ‘Strong Buy’ from nine analysts, of which five are ‘Strong Buy’, three ‘Buy’ and one ‘Hold’.

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

Industrial companies are not a much talked about sector - but there are signs that it came out of the shadows in FY23. The S&P BSE Industrials index has been steadily growing, despite ongoing economic setbacks since 2020. Its growth story gained momentum in early 2021, and the index has more than doubled since then.

Over the past year, it has ranked among the top five outperformers and surpassed benchmark returns in the past quarter. 

What changed the game? Consecutive hikes in capex budgets made by the Centre to spur post-Covid growth has played a key role. The private sector also joined the party in 2022. Companies in the metals, cement and energy sectors unveiled fresh investment plans, sensing robust demand from the infrastructure space. 

India’s #capex cycle is led strongly by the central govt, pvt sector following selectively and states yet to join, Siemens India MD & CEO Sunil Mathur tells @latha_venkatesh. Here’s more on Siemens’ stellar results in the March qtr and the #India capex story. (1/2) pic.twitter.com/yQSlZtys1u

— CNBC-TV18 (@CNBCTV18News) May 16, 2023

Fueled by this positive momentum, FY23 proved to be a landmark year for the capital goods sector and the electrical equipment industry. Notably, heavy electrical equipment is the largest sub-sector within capital goods, and will be our main focus area here.  

Companies in this industry manufacture equipment ranging from motors, drives, turbines, generators, compressors, waste heat recovery plants, transformers, switchgears, boilers, and chillers. Most players in this industry saw record order inflows and a robust pace of execution in FY23. The cooling off in commodity prices was the icing on the cake. 

But will this growth juggernaut continue to roll in FY24?  

Electrical goods makers post an impressive performance in Q4FY23

Players clocked over 15% revenue growth in Q4 across the board, driven by a strong pace in order book execution. Triveni Turbine, a relatively smaller player, grew the fastest among the pack, led by robust momentum in its exports market and aftermarket sales. 

Companies following the Indian fiscal year - CG Power, Thermax and Triveni - closed the financial year with robust top-line growth of more than 25%. Triveni, a manufacturer of steam turbines, outshined others on this count yet again.

Electrical goods manufacturers also saw their EBITDA margins improve YoY in Q4, led by lower input costs, operating efficiencies and better price realizations. CG Power stood out with a margin uptick of over 3.5 percentage points, the highest among its peers. This margin expansion enabled companies to register over 30% growth in their quarterly EBITDA. 

Domestic growth takes the lead, exports business stays muted

Domestic markets have been the primary growth driver for equipment makers in both Q4 and FY23. Apart from Triveni, other players generated less than 25%-26% of their sales from exports, indicating a relatively small portion of their business. 

Commenting on the company’s export segment, Ashish Bhandari, Managing Director at Thermax, said, “The overall export piece has been soft for some time. For whatever reason, even on the large projects, we have seen a bit of a slowdown.” 

The subdued growth in exports may have a deeper reason beyond just a demand slowdown. For instance, consider India’s market share in global electrical machinery and electronics exports. It has stayed largely flat between 2011 and 2021. In contrast, Vietnam has won nearly 4% share and became the sixth largest exporter in just 10 years. 

Interestingly, India has gained market share in segments like electrical gensets, electrical ignitions, steam turbines, and power transmission equipment. But overall progress has been limited, highlighting our poor competitiveness on the international stage. 

Factors like slower customs clearance, higher import duties on components, lack of deep-sea ports, and products not meeting international standards are working against us. 

Take the case of higher duties on parts used in mobile phones. According to a report from India Cellular and Electronics Association, the Centre increased duties on circuit boards, camera modules and connectors to 2.5% from 0% in the FY22 budget. Such a step increases the cost of production for companies and hampers their prospects in the export market.  

Rail and metro projects propel order inflows for big players in Q4

In terms of order inflows, Siemens stole the show by winning a large multi-year contract of Rs 25,460 crore to make electric locomotives for the Indian Railways. Even after adjusting for this contract, Siemens’ orders grew by a commendable 8% in Q4FY23. 

According to Roland Busch, President at Siemens AG, Siemens India will continue to bid aggressively for railway tenders in the near future. The company’s mobility division (which houses its rail business) has expanded rapidly in the past couple of quarters. Given the company’s goals, this segment does hold a lot of growth potential. 

Another major player, ABB India, saw  strong growth of over 35% in its Q4 order inflows. The orders were mostly for the short-cycle business, with strong contributions from ABB’s electrification and motion segments. Notably, order wins from railways and metro segments propelled the overall growth within the motion segment. 

Among the top players, only Thermax saw a fall in Q4 order bookings due to a slowdown in the oil refining and petrochemicals sectors. However, the company anticipates a gradual recovery in the order pipeline for waste heat recovery and biomass projects. 

Equipment makers upbeat about Centre’s infra push and rise of new-age sectors 

Companies are optimistic about the demand prospects in India. Roland Busch, President at Siemens AG, sees India as the multinational’s fastest-growing market. Themes like de-carbonization, energy efficiency, and digitalization are emerging as key growth drivers. 

Regarding the de-carbonization theme, Busch explained, “Going renewable means you have to invest in transmission and distribution grids, but you want to do it in a smart way so that they can manage the peak demand well. This is where Siemens is a market leader; we help in automating such grids.”

The management of ABB India sees the call for energy efficiency as a big growth driver. Sanjeev Sharma, Country Managing Director at ABB, in a recent earnings call, said, “New buildings and hotels which are coming up are demanding our building management system. The system allows you to reduce 25% to 35% of your energy footprint.” 

Equipment makers foresee a good pipeline in new-age industries like data centres, logistics and electric vehicles. ABB offers robotic solutions for EV manufacturing and identifies this as a high-growth area. CG Power also aims to leverage this opportunity by doubling its motors capacity in the next 2-3 years with a special focus on EVs and exports. 

Additionally, the Centre’s infrastructure push will drive demand in core industries like metals and cement. Thermax and Triveni Turbine expect healthy order inflows for waste heat recovery systems from the upcoming steel and cement capacities. 

Railways also hold importance in the infrastructure plan, with many electrification and signaling projects underway. These projects can bolster the order books of Siemens, ABB and CG Power. 

Robust growth to continue in FY24, but is it worth the price?

Given the encouraging demand trends, Analysts anticipate top electrical equipment manufacturers to achieve strong double-digit topline growth. They also expect a slight moderation in growth due to the high base of FY23. 

Of the players with Indian promoters, Triveni may grow the fastest in FY24. For the Indian arms of foreign MNCs, Siemens may outpace ABB India. But the key concern lies in the high valuations of these stocks. The industry itself now trades at a whopping PE multiple of 70X, and none of the key stocks are in the buy zone currently. Investors should ideally wait for good entry points.

The heavy electrical industry is closely tied to the growth in domestic manufacturing and capital investments. As the current government accelerates spending in the last year of its term, this industry is set to continue its stellar run.   

This analysis by Trendlyne is meant for investor education - to help understand companies and make informed investment decisions on their own. It should not be considered an investment recommendation.

In the first two months of 2023, Indian indices fell around 4.5%. Market observers suggested that India was 'out' as the emerging market investors were betting on. The new favorites would be China and Taiwan.

But fast forward to now, and there's been a remarkable recovery - the benchmark Nifty 50 index has risen over 9% from the year’s low, and now stands 3% away from its all-time high, which it hit in December last year.

What is driving the momentum? A key factor is the increasing bullishness of foreign institutional investors (FII) on India. FII inflows into Indian equities accelerated in May. And one reason the Indian market is becoming more attractive to foreign investors, is the risk of the US defaulting on its debt.  

If President Joe Biden and House Speaker Kevin McCarthy cannot reach a deal to raise the US debt ceiling by June 1, there is a real possibility that the US Treasury will run out of money, and default on its payments.

However, such back-and-forth negotiations and threats are typical in the United States before an agreement. The last debt-ceiling standoff happened as recently as 2021. While the likelihood of a default is low - few US elected officials actually want to see a humiliating default happen on their watch - the uncertainty has cast a shadow over the US stock market and prompted investors to move money into alternate investment destinations until an agreement is reached.

But this is not the only reason FIIs are investing in Indian equities.

Let’s dive in.

In this week’s Analyticks:

• FIIs have increased their investments into India. Is this a blip, or will it last?
• Screener: Stocks with rising FII holding, strong performance in Q4FY23 and outperforming the Nifty 50

Will the FII inflow into Indian equities continue?

The IMF Managing Director Kristalina Georgieva was not a cheerful person at the start of the new year. She had some tough words about the global economy: "2023 is going to be harder and more stressful than 2022," she said, "with recessions in multiple parts of the world." 

As economies slow down, investors are struggling to find 'safe' securities and countries to invest in. India, which is expected to be among the fastest-growing economies in the world in 2023 and has zero likelihood of a recession, is an attractive option.  

India’s retail inflation also fell to 4.7% in April and is currently below the RBI’s upper tolerance limit of 6% for the second consecutive month. The RBI paused repo rate hikes as inflation went down, which has attracted foreign investors.

Logically, another investment destination would be China, where the interest rate is currently at 3.65% and has been on pause for nine months. But China is not very popular these days in the West after the supply chain issues during the pandemic, and as the US-China relationship deteriorated.

India in comparison, looks like a Goldilocks destination for institutional investors - not too hot, not too cold, a low-inflation, growing economy that’s not picking fights. 

As the Adani cloud lifts, FIIs turn bullish

The recent rise in FII inflows comes after investors pulled money out of Indian equities in January. China was reopening, and the Adani-Hindenburg crisis had raised questions about the health of the Indian stock market.

But since March, there has been a consistent inflow of FII funds into Indian stocks. This has continued through April and May. 

In May, FIIs have invested (net) in Indian equities in every single trading session. In fact, their 16-day buying streak is still active as of May 22, and is the longest streak in three years. FIIs are favoring the auto and auto components sector as the sector saw FII inflows every month.  

US investors may be parking money into foreign equities (like India) until a last-minute agreement is reached to raise the debt ceiling. This could mean a sharp outflow of FII funds once US President Biden and House Republican Speaker McCarthy make a deal. 

Despite potential short-term outflow concerns, FII inflows into India could continue to rise as the country is expected to be one of the fastest-growing economies in the world this year. This is despite the IMF and foreign brokeragesloweringIndia’s GDP growth projection for 2023. 

Indian retail inflation moderates, RBI pauses rate hike

The RBI’s decision to pause interest rate hikes in its May meeting, has boosted investments into India. Devang Shah, co-head of fixed income at Axis MF, evenanticipates 50 bps of rate cuts in the next 12 months.

Morgan Stanley also expects rate cuts in early 2024. Usually, equity markets become more attractive as interest rates decrease, and investors increase their asset allocation in stocks. 

The US Fed and the European Central Bank, on the other hand, have continued with their rate hikes in May. While the US Fed is expected to keep the same rate at its next meeting, a rate hike is on the cards for the ECB due to high inflation levels in Europe. 

India seems to be doing better here. Inflation in India has fallen due to decreasing fuel and food prices, which are major components of the CPI. 

While inflation in the US, UK and EU softenedover the past six months, it is still over expected levels. When asked about the rocketing food prices in the UK, former minister for employment, Anne Widdecombe, said, “Don’t make cheese sandwiches if you can’t afford them.”

The global landscape looks chaotic. Biden and McCarthy are fighting in the media, China is battling sanctions, and the UK is worried about the price of sandwiches. India looks like a safer bet in comparison for foreign investors, and the benchmark Nifty 50 index reflects that belief.  

Screener: Stocks with rising FII holding, strong performance in Q4FY23 and outperforming the Nifty 50

With the shareholding data for Q4FY23 in hand, we take a look at stocks that have seen the highest rise in foreign institutional investor (FII) holdings. This screenerconsists of stocks that FIIs bought in Q4, with strong financial performance, and which also outperformed their industries and the Nifty 50 index.

The stocks in the screener are from industries like banks, IT consulting & software, auto parts & equipment, pharmaceuticals and heavy electrical equipment. Major stocks in the screener are Equitas Small Finance Bank, Sona BLW Precision Forgings, Syngene International, KPIT Technologies, CG Power & Industrial Solutionsand Adani Enterprises. 

Equitas Small Finance Bank saw the highest rise in FII holding, with an increase of 18.6 percentage points QoQ to reach 22.7% in Q4FY23. While funds like Ellipsis Partners LlC and Massachusetts Institute of Technology bought a 2.5% stake each, Rimco India purchased 2.1%. The bank’s stock price surged 17% over the past month, boosted by strong Q4FY23 results.

Sona BLW Precision Forgings saw its FII holding rise by 13.4 percentage points QoQ to 35.3% during the quarter. While major buyers of the auto parts & equipment stock were the Government of Singapore and Fidelity Funds, which bought 4.1% and 1.3% stake respectively, BNP Paribas Arbitrage increased its stake by 130 bps. The stock grew 14.4% over the past month, owing to a 35.3% YoY improvement in revenue for the quarter.

Syngene International saw a 6.4 percentage point QoQ improvement in its FII holding, totalling to 23.3% in Q4FY23. The Government of Singapore was the biggest buyer as it bought a 3.9% stake in the pharmaceutical company. Its net profit rose 20.9% YoY, while revenue surged 31.2% YoY in Q4FY23. This helped the stock grow by 13.3% over the past month.

You can find more screeners here.

1. Indian Oil Corp: ICICI Securities maintains its ‘Buy’ rating on this oil marketing and distribution company with a target price of Rs 115, implying an upside of 29.2%. The company’s net profit for Q4FY23 has increased by 54.8% YoY to Rs 10,289.82 crore, while operating revenue rose by 16.3% YoY.  It beat Trendlyne Forecaster’s profit estimates by 87.8%. Analysts Probal Sen and Hardik Solanki say that IOC has shown an overall improvement in operational metrics.

The analysts estimate a 21% YoY improvement in gross margins. They believe that the continued growth in volumes and considerably higher retail margins to date in Q1FY24 will boost earnings growth over the next two years. They forecast retail margins to increase to Rs 2.5-3 per litre for both FY24 and FY25. They also expect earnings per share to increase by 14% in FY25 due to stronger marketing margins and normalised gross refining margins.

The analysts consider Indian Oil Corporation to be trading at attractive valuations, with a forecasted dividend yield of 7.4% in FY24/FY25. The support from Chennai Petroleum Corp earnings makes the risk-reward here favourable.

2. APL Apollo Tubes: IDBI Capital maintains its ‘Buy’ rating on this iron & steel products manufacturer and raises the target price to Rs 1,491. This implies an upside of 29.3%. In Q4FY23, the firm’s net profit rose 23.8% YoY to Rs 201.8 crore and revenue grew by 5.1%. It beat Trendlyne Forecaster’s profit estimates by 0.6%. 

Analyst Bhavesh Chauhan believes that the company’s healthy performance in Q4 has been driven by rising sales volume, led by robust demand across product categories. But he adds that margins are relatively weak despite volume growth, with EBITDA/tonne growing by only 3% YoY due to a weaker product mix. Nevertheless, he expects the EBITDA/tonne to cross Rs 5,000 in the medium-to-long term.

Chauhan is optimistic about margin improvement given the company’s capacity expansion initiatives. “The company targets 400 kt (kilo-tonnes) of volumes from the Raipur plant in FY24, which should aid margin improvement. It targets a sales volume of 3 million tonnes in FY24 and 4 million tonnes in FY25,” he says. The analyst expects the firm’s revenue to grow at a CAGR of 18.3% over FY23-25. 

3. Bank of Baroda: Motilal Oswal keeps its ‘Buy’ rating on this bank with a target price of Rs 240, implying an upside of 30.9%. In Q4FY23, the company’s standalone net profit jumped 168.5% YoY to Rs 4,775.3 crore, and revenue grew by 42.3% YoY. It beat Trendlyne Forecaster’s net profit estimates by 18.9%.

Analysts Nitin Aggarwal and Yash Agarwal attribute the bank’s robust growth in profitability to lower provisions, higher other income, and healthy growth in loan disbursements across segments. They also see margin expansion and an improvement in the CASA mix as key positives.

The analysts point out that the bank’s asset quality has improved on the back of controlled slippages and healthy recoveries. They add, “The bank’s slippages were limited at Rs 2,740 crore, which coupled with healthy recoveries led to a 74 bps and 10 bps QoQ improvement in Gross NPA and Net NPA to 3.8% and 0.9% respectively.” They expect the bank’s net profit to grow at a CAGR of 18.2% over FY23-25. 

4. Granules India: ICICI Direct maintains a ‘Buy’ call on this pharmaceutical company with a target price of Rs 360, indicating an upside of 30.5%. In Q4FY23, the company’s net profit grew by 7.8% YoY to Rs 119.6 crore, while the revenue increased by 15.9% YoY. It has missed Trendlyne Forecaster’s profit estimates by 14.6%. Analysts Siddhant Khandekar, Kushal Shah and Utkarsh Jain say, “The overall growth is primarily from improved performance in the US and European geographies.” 

The analysts believe that Granules’ plan to extend its core products via additional strength forms in the US, and launches in other geographies, will provide better operating leverage. They also remain positive on the company due to its geographical expansion, change in product mix, and a compelling risk-reward matrix.

The company’s progress in improving margins and executing its aggressive capex of Rs 700 crore will be key.

5. Cipla: KR Choksey maintains its ‘Buy’ call on this pharmaceutical company but revises the target price down to Rs 1,167 from Rs 1,289 earlier. This indicates an upside of 25.4%. In Q4FY23, the company’s profit increased by 44% YoY to Rs 521.5 crore, while its revenue increased by 10.3% YoY. It has missed Trendlyne Forecaster’s profit estimates by 32%. According to analyst Abhishek Agarwal, the revenue has been driven by good traction in the US markets. He, however, notes that the quarterly margins shrank due to the high inflationary environment and rise in R&D spend.

Despite his cautious stance, Agarwal is optimistic about new product launches. During FY23, Cipla  launched over 50 new products in the Indian trade generics market. He adds, “Cipla has a strong product launch pipeline for the US and emerging markets, which is expected to boost the revenues as well as the profitability of the company.” 

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

(You can find all analyst picks here)

Looking into the portfolios of Superstar investors gives us insights into the sectors and stocks they are bullish or bearish on. This can help us better understand their sentiments around the market, especially as it has turned volatile. 

Previously, we looked at the key superstar buys in Q4FY23. Now, let's  analyze their sells. 

Rakesh Jhunjhunwala/RARE Enterprises makes some key sells

Rakesh Jhunjhunwala’s portfolio sold stakes in seven companies in Q4FY23. The late investor’s portfolio is currently managed by the investment firm Rare Enterprises and Rekha Jhunjhunwala (his wife). The portfolio reduced its stake to below 1% in Dishman Carbogen Amcis (from 1.6%), a small-cap pharmaceuticals firm, which rose by 24.7% over the past six months till Friday. 

The big bull’s portfolio also pared its stake by 0.96% in Singer India  to 6.95% and in Autoline Industries by 0.35%, bringing its holding to 3.96%. Additionally, its stake in Edelweiss Financial Services was cut by 0.2% to 1.3%. 

Rare Enterprises also sold minor stakes in Nazara Technologies, D B Realty and Aptech in Q4FY23.

Sunil Singhania sells minor stakes in micro and small-cap companies 

Sunil Singhania’s Abakkus Fund sold a 0.35% stake in IT consulting and software company Tracxn Technologies in Q4FY23. He added the company to his portfolio in Q3FY23 by buying a 1.63% stake, and now holds 1.27% after selling a portion. 

Singhania also cut stake in The Anup Engineering by selling a 0.17% stake. He has been gradually reducing his stake in the industrial machinery company for three consecutive quarters, and now holds a 4.06% stake against 5.72% in Q1FY23.

Singhania also sold a 0.09% and 0.05% stake in Carysil (consumer durables manufacturer) and Rajshree Polypack (containers and packaging company), respectively. He now holds 6.14% and 7.62% in these companies, respectively.

Ashish Kacholia cuts his stake to below 1% in two companies 

Ashish Kacholia cut stake in consumer durables company Hindware Home Innovation to below 1% in Q4FY23. He also sold the stake in pharma company IOL Chemicals and Pharmaceuticals to below 1% during the same period. Prior to the Q4 sell-off, he consistently held 1.3% and 2%, respectively, in these companies for four consecutive quarters.

The ace investor also sold a 0.3% stake in Safari Industries (India), a textile manufacturer, bringing down his stake to 2.3%. He sold a stake in Xpro India for the first time since adding it to his portfolio and now holds 4.3%. He had been gradually increasing his stake in the packaging company each quarter since his initial purchase in Q2FY22. 

He also sold a 0.1% stake in Raghav Productivity Enhancers, leaving him with a 2% stake.

Kacholia also trimmed stakes in Genesys International Corp and Stove Kraft, where he now holds 1.6% and 1.8% respectively. 

Vijay Kedia makes minor changes to the portfolio in terms of stake sell

Vijay Kedia sold a 0.3% stake in  Ramco Systems (IT consultant) in Q4FY23, reducing his holdings in the company to 1.1%. He also reduced his stake in Tejas Networks (a telecom hardware company) by 0.3% to 2%. Kedia has been reducing minor stakes in both of these companies since Q4FY22. 

Ramco Systems has consistently reported losses since Q1FY22, while Tejas Networks has been loss-making since Q3FY22, except in Q2FY23.