Trendlyne Blog: The Baseline, Latest on stock market and finance in India and the world.

22 May 2024

Should we worry about foreign investors exiting markets?| Screener: stocks where FIIs have cut stake

The election this year has come with much nail-biting. It’s not just political parties that are having the jitters – investors are also facing sharp market swings and volatility. The Nifty VIX rose to a 15-month high of 22.3 points as of Tuesday, while the Nifty 50 has been range-bound since the start of the polling season.

Foreign institutional investors in particular have grown wary of the volatility. They are at their most pessimistic level since 2012, shorting Indian stocks significantly, and have withdrawn around $3.5 billion from Indian equities in May alone. For now, foreign outflows have not dented valuations much, as inflows from domestic institutions have jumped.

Rising bond yields in the US have also contributed to FII withdrawal. Bond yields are up as the timing of likely rate cuts by the US Fed keeps getting postponed, shifting from June-July to September-October. And despite tensions between the US and China, cheaper valuations of Chinese and Hong Kong equities (currently trading at 10 PE) have been tempting foreign investors.

Mihir Vora, Chief Investment Officer of Trust Mutual Fund, says, “ FII outflows are on account of election uncertainty. India in the longer term will see FII inflows, as it is one of the fastest growing countries among large economies”.

Historically, FIIs have returned to Indian markets post elections. Will this year be different?

In this week’s Analyticks:

FIIs exit stocks: How is the exodus impacting Indian markets?
Screener: Stocks where FII/FPIs are decreasing shareholding, with falling stock prices over the past month

Let’s get into it.

Election-led volatility, rising US bond yields trigger FII outflows

Volatility – a good measure of risk in the market – has risen significantly over the past month for India. But this is not the first time an election has driven the Nifty VIX up. The volatility index shot up during the 2014 election (a change election), to 38 points. In 2019, when the BJP won reelection, it rose to 29 points. Comparatively, the current rise of the Nifty VIX is on the lower side.

But foreign investors hate uncertainty, and net outflows are likely to persist until the results are announced. If a single party wins, FIIs might return quickly to Indian equities.

Nifty VIX on the lower side so far, compared to the past two general elections

The strengthening US dollar has also fuelled FII outflows since a depreciating rupee eats into investor gains. Another reason for the outflow has been rising bond yields in the US.

Sticky inflation and a strong American job market have put the US Fed in a tight spot as far as cutting interest rates is concerned. Rate cuts are now expected only in September, and the expected rate cut size has gone down from 90 bps at the start of 2024 to around 44 bpsnow. As a result, US treasury yields shot up from 3.8% at the start of 2024 to 4.7% by the end of April. The rising yield has attracted foreign investors.

Historically, Indian indices fall with a rise in US treasury bond yields, due to FII outflows. Recent DII inflows have buffered the fall, as domestic institutions invested Rs 2,50,903 crores from April 2023 to April 2024.

Rising US bond yields have triggered FII selling

Largecaps impacted by FII outflow, DIIs protect the fall

Since the start of 2024, FIIs have withdrawn nearly Rs 84,318 crore worth of equity from the Indian market. In the same period, DIIs invested around Rs 1,52,620 crore.

DIIs sustain Indian markets amid FII outflows in the past 12 months

The Nifty 50 has risen 3.3% from the start of 2024, while Nifty Midcap 100 and Nifty Smallcap 100 have gained 11.5% and 11% respectively. FII money has mainly been in largecap and midcap stocks, while DIIs have invested in midcap and smallcap.

As a result, the FII outflow from largecaps has been cushioned only a bit by DIIs. The midcap and smallcap rallies have been backed by DII inflows, despite concerns about their expensive valuations.

Telecommunication and consumer services sectors get maximum inflows, while FMCG and financial services see an exodus.

The telecom services sector saw the highest inflows from FIIs in 2024. The inflows were driven by Vodafone Idea’s FPO. The Vodafone issue saw FIIs buying 65% (Rs 11,700 crore) of the Rs 18,000 crore FPO. The sector also saw FII investments in Bharti Airtel, which has gained significant market share in the past year, even as it raised overall tariff rates.

The capital goods (general industrial) sector saw investments in the defence industries. The defence industry was aided by large orders from the government – Indian defence firms won orders of more than $7 billion in FY24. Capital goods firms involved in infrastructure and real estate also saw increased volumes, due to higher election spending by the government and an uptick in real estate activity.

The telecommunication sector has led FPI inflows since January 2024

The financial services sector on the other hand, saw the highest selling in 2024. Most of the selling came in private banks and NBFCs, which have faced liquidity concerns and stiff competition from public sector banks. HDFC Bank – usually an FII favourite – saw the biggest exodus. HDFC Bank’s margins are under pressure, while merger woes continue.

The FMCG sector also saw pressure as rural consumption slowed. The premiumization of products led to lower offtake in price-sensitive rural geography. However, higher consumption in urban areas has offset this a bit.

FIIs may choose India over China in the long run

Chinese stocks are now at at an attractive valuation compared to India. The government stimulus in China (around $138 billion) and the recent pick-up in industrial production have driven foreign inflows up. But the economic woes in the country and the rising threat of a US-China trade war may dent enthusiasm for the Chinese market in the longer term.

The International Monetary Fund (IMF) has guided India’s GDP growth of 6.8% for 2024, which is the highest among emerging economies. In comparison, China is expected to slow down to 4.6% GDP growth in 2024, from 5.2% in 2023. India’s inflation, currently at 4.8%, is also predicted to decline post-monsoons due to an expected fall in vegetable prices.

While most emerging economies are struggling with price rises, slowdowns and geo-political tensions, India has so far not seen a major dent in growth. Increased tariffs on Chinese goods from the US and EU have impacted its growth prospects, and India is being seen by the world as a good alternative.

In this scenario, current FII outflows are not a big worry. DIIs have been actively investing without any signs of slowing down. Foreign investors are expected to return in two phases, first, post-election, and then after the Fed starts rate cuts in the second half of 2024. Until then, DIIs will run the show.

Screener: FII/FPI decreasing shareholding QoQ with falling stock prices over the past month

Banking and finance stocks see highest FII outflows in Q4FY24

As the shareholding data for the final quarter of FY24 has come out, we take a look at stocks that saw a decline in their foreign institutional investor (FII) holdings during the quarter. This screener shows stocks where FII decreased their stake QoQ, where share prices declined over the past month.

The screener is dominated by stocks from the banking & finance, software & services, textiles, apparels & accessories and diversified consumer services sectors. Major stocks that appear in the screener are Aster DM Healthcare, Route Mobile, Kalyan Jewellers, PVR INOX, HDFC Bank, Star Health and Allied Insurance, Indus Towers and Indiabulls Housing Finance.

Aster DM Healthcare’s FII holding contracted the most by 7.5 percentage points in Q4FY24, while its stock price also plunged by 30.8% over the past month. The fall in stock price is mainly due to the company giving out a special dividend of Rs 118 per share on April 23. Olympus Capital Asia Investments was the largest seller in the healthcare stock with a sale of an 8.9% stake in the company. The sold shares were picked up by mutual funds like Nippon Life India Trustee Ltd-A/C Nippon India Small Cap Fund (2.1% stake) and Franklin India Smaller Companies Fund (0.6% stake), and retail investors (1% stake).

FIIs sold a 5% stake in PVR INOX in Q4FY24, the stock has also fallen 5.3% over the past month. Funds like Plenty Private Equity Fund I and Multiples Private Equity Fund II LLP, among others sold a total of 2.3% stake in the movies & entertainment company. The sold stake was picked up by mutual funds like Nippon Life India Trustee Ltd-A/C Nippon India Mul (1.5% stake), HDFC Trustee Company Ltd. A/C Hdfc Capital Builder (3.8% stake and ICICI Prudential Multicap Fund (1.4% stake).

You can find more screeners here.

The Baseline

22 May 2024

Chart of the Week: 13 of the 15 stocks constituting the Nifty Metal index trade near all-time highs

By Satyam Kumar

A week ago, US President Joe Biden imposed a new tariff hike on Chinese products, which is projected to affect around $18 billion in annual imports from China. He accused China of heavily subsidising products, causing Chinese companies to produce more than what the market can absorb and then dumping the excess at unfairly low prices. He said, “When you follow tactics like this, you’re not competing. It’s not competition, it’s cheating.”

Since the tariff hike on May 14, the Nifty Metal index as of May 22 has posted a sharp rally of 9.1%, as Indian exporters stand to gain from a fairer playing field. However, experts caution about US tariffs diverting the dumping of Chinese goods to India.

In this edition of Chart of the Week, we will be looking at the performance of India’s metal index, Nifty Metal, over the past year. As of May 22, the index has risen 76.6%, outperforming the benchmark Nifty 50, which has increased by 24.1%. This rise is mainly due to quick government intervention against Chinese dumping and surging commodity prices globally.

Hindustan Zinc and Vedanta drove index gains in the past quarter

In the past quarter, the metal index rose 24.4%, with approximately 70% of the gains driven by Vedanta and its subsidiary Hindustan Zinc. Since March 28, 2024, Vedanta and Hindustan Zinc have surged by 81% and 154%, respectively. This rally can be attributed to clarifications on debt distribution post-demerger and rising prices of base metals such as zinc, lead and silver.

On September 29, 2023, Vedanta's Chairman, Anil Agarwal, announced the creation of independent verticals through the demerger of Vedanta and Hindustan Zinc. He expects the demerger to be completed by the end of this year. The company also clarified that debt will be divided among demerged entities based on the ratio of assets allocated. In Q4FY24, the company reduced its debt by 10% QoQ to Rs 56,338 crore.

Hindustan Copper is the best-performing stock in the index, with gains of 299% in the past year. The company's shares have consistently risen in line with increased demand and movements in copper prices. Copper, an essential base metal, plays a pivotal role in the energy transition ecosystem, serving as a key component in manufacturing electric vehicles, power grids, and wind turbines. Recently, speculations of a shortage fueled by talks of output cuts by smelters have led copper prices to surge by over 25% since the start of the year.

Commodity trading company Adani Enterprises also gained 59.4% in the past year. On May 22, the company surged 18.9% as the conglomerate received a clean chit from the Supreme Court of India regarding the Hindenburg case. The apex court appointed a six-member committee following allegations of stock manipulation and accounting fraud by U.S.-based short-seller Hindenburg Research.

Selling by FPIs led index to decline in the Sept-Oct 2023 period

Among all the sectors, the metals and mining sector saw the highest FPI outflow of Rs 8,531 crore in FY24. Companies faced major hurdles due to the dumping of steel at cheaper rates and sub-standard imports from China. Between April and July 2023, steel imports from China to India rose 62% YoY, leading to a significant sell-off by foreign portfolio investors (FPI) of Rs 12,009 crore in August and September last year.

In response, the Indian government imposed a five-year anti-dumping duty on specific types of Chinese steel in September 2023. This tax, levied on imported goods priced below fair market value, aims to curb Chinese imports. The industry is also expected to address production gaps in 2024, supported by policy reforms, incentives, and expansion plans by industry giants such as Tata Steel, Vedanta, and JSW Steel.

Expanding manufacturing PMI boosts outlook for the metal sector

Manufacturing activity, which is indicated by the Purchasing Managers’ Index (PMI), is said to be expanding when it is higher than 50. The PMI for India has been above 50 for all of the past year, signifying robust growth in the manufacturing space. Rising PMI is often directly correlated to the higher demand for metals. On April 1, the metal index rose 3.7% after both the US and China posted expansion in their manufacturing activity in March 2024.

The US saw its manufacturing activity expand in March 2024 as it posted a PMI of 50.3 for the first time since September 2022. Although this figure is just above the threshold of 50, which separates expansion from contraction (PMI below 50), it ended a 16-month streak of shrinking activity.

Similarly, China's manufacturing activity expanded in March for the first time since September 2023, as its manufacturing PMI rose to 50.8 from 49.1 in February. The data offered some relief to China’s policymakers, even as a crisis in the property sector remains a drag on the economy.

Higher steel prices & anti-dumping duty help steel makers

In November 2023, the metal index posted a monthly gain of 8.8%. This rise came after steel-producing constituents witnessed a significant uptick in their share prices as they benefitted from the surging steel prices. This rise in steel prices was due to a rapid decline in inventories and a recovery in end-consumer demand. Since November 2023, companies like Steel Authority of India (SAIL), Tata Steel and JSW Steel have risen 110.3%, 49.5% and 27.5% respectively.

Another factor that is playing in their favour is the higher tariff imposed by governments across the globe to curb Chinese dumping. India saw a 62% rise in steel imports from China to India between April and July 2023, compared to the same period last year. The Indian government imposed an anti-dumping duty of $613 per tonne on flat base steel wheels from China for five years. Similarly, the US government on May 14 raised tariffs on some steel and aluminium products to 25%, citing China's "unfair" policies that were harming workers and businesses in the US. The rising anti-China mood in the commodity market has boosted Indian metal stocks, a trend that is likely to continue in the coming quarters.

The Baseline

20 May 2024

Five high-upside stocks from analysts this week - May 20, 2024

By Abhiraj Panchal

Today we take a look at five stock picks from analysts with high upside potential.

1. DLF:

Edelweiss maintains a ‘Buy’ rating on this realty developer with a target price of Rs 1,081, indicating a potential upside of 27%. In Q4FY24, the company reported revenue growth of 47% YoY to Rs 2,316.7 crore, with net profit rising 61.5% YoY to Rs 920.7 crore. Analysts Amit Agarwal and Rishith Shah say, “We are upbeat on the company’s growth story given its robust launch pipeline, brand recall, favourable dynamics in its home turf, improving annuity income, and market consolidation.” DLF’s recent luxury projects in North India have sold out within a few days.

Analysts are optimistic about the company’s steady presales of Rs 14,777 crore, down 2% YoY primarily due to a higher base in the previous year. New launches of around 6 million square feet (msf) constituted 82% of presales, while the remaining 18% came from existing projects.

Agarwal and Shah are positive about the company’s outlook as the management forecasted a launch pipeline of Rs 36,000 crore for FY25. They also forecast a revenue CAGR of 11% for FY25-26 owing to the launch pipeline of Rs 94,000 crore with an additional land bank of 132 msf, for which development plans are yet to be finalised.

2. Safari Industries (India):

IDBI Capital maintains a ‘Buy’ call on this luggage maker with a target price of Rs 2,535, indicating an upside of 20%. The company’s net profit grew by 13.4% YoY to Rs 43.2 crore in Q4FY24, while its revenue improved by 21.3% YoY to Rs 370.5 crore.

Analyst Ajit Sahu says, “Safari Industries Q4FY24 sales were in line with our expectations.” He believes that the growth occurred due to improvements in tourism activities. He also notes, “Over the past two years, Safari has gained market share from its peers”. The analyst states that Safari Industries' sales grew by 21% YoY outperforming VIP Industries’ sales growth of 15% YoY in FY24.

Sahu is optimistic about the company as it sets up a greenfield manufacturing unit in Jaipur. He believes that future growth will come from its initiative to sell premium products like Urban Jungle (the premium luggage collection). He applauds the management’s ability to outperform industry sales growth and also expand operating margins to higher levels. He estimates profit and revenue to grow at a 26.5% and 19% CAGR, respectively, over FY25-26.

3. CreditAccess Grameen:

KR Choksey maintains its ‘Buy’ call on this finance company with a target price of Rs 1,850, indicating an upside of 29.9%. In Q4FY24, the company’s net profit grew by 33.9% YoY to Rs 397.1 crore (1.1% above the brokerage’s estimates), while total revenue improved by 36.9% YoY to Rs 1,459.1 crore. Analyst Unnati Jadhav says, “CreditAccess Grameen reported stellar operating performance during the quarter, but saw deterioration in asset quality led by higher slippages.”

The analyst is optimistic about the company's expansion strategy and expects it to be key to business momentum going forward. The company added 194 branches during FY24, bringing its total infrastructure strength to 1,967 branches. The analyst also says that the NBFC succeeded in controlling its borrowing costs through a cost-effective borrowing mix, and expects it to remain stable and bring predictability to its overall margins in FY25.

Jadhav continues to be positive about CreditAccess Grameen due to its leadership, improving geographical footprint, superior return ratios, consistent operating performance, and industry tailwinds.

4. Sansera Engineering:

Axis Direct maintains a ‘Buy’ rating on this auto parts and equipment manufacturer with a target price of Rs 1,270. This indicates a potential upside of 19.8%. In Q4FY24, the firm reported revenue growth of 19.7% YoY to Rs 745.6 crore, with net profit rising 31.1% YoY to Rs 46.1 crore.

Analysts Shridhar Kallani and Aditya Welekar note, “For FY24, the share of auto components has reduced to 75%, while non-auto & tech and aerospace segment has increased to 20% and 5%, respectively.”

Kallani and Welekar are upbeat on the company’s capex plan of Rs 400 crore in FY25 and Rs 350 crore in FY26, mainly towards electric vehicle components and non-auto products. They expect the company to post a CAGR of around 20.8% for EBITDA and 29.4% for net profit over FY25-26. They attribute this growth to the sales mix tilting towards non-auto components, growth in the export business, and recovery in its its Sweden operations led by improved operational efficiency.

5. NCC:

ICICI Direct maintains its ‘Buy’ call on this construction and engineering company with a target price of Rs 320. This indicates a potential upside of 15.2%. In Q4FY24, the firm’s net profit increased by 25.3% YoY to Rs 239.2 crore, while revenue grew by 31.1% YoY.

Analysts Bhupendra Tiwary and Hammaad Ahmed Ulde are optimistic about NCC’s order book. Its order book stands at Rs 57,536 crore, largely driven by Rs 18,439 crore worth of orders secured in FY24, a growth of 37% YoY. The management has guided for an order book inflow of Rs 20,000-22,000 crore, with ordering likely to be impacted owing to elections in the first half. Considering the order book, the analysts expect a revenue CAGR of 15% over FY25-26. With healthy execution, the analysts estimate EBITDA margins at 10% and 10.5% in FY25 and FY26, respectively, and expect a 26% earnings CAGR over FY25-26.

The analysts say, “NCC is a key beneficiary of the tailwinds in the buildings, roads, water, mining and electrical segments. Given strong order book visibility and improving balance sheet strength, it is poised for healthy growth ahead.”

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

(You can find all analyst picks here)

The Baseline

18 May 2024

How bad is India's wealth divide? | Screener: High and consistent dividend stocks

The recent Ambani wedding - of their youngest son Anant - was a media event that seemed impossible to avoid. It wasn't just the tabloids and the TV channels that were doing what felt like round the clock coverage. Even the business dailies couldn't stay away. There were so many questions: did the bride plagiarize her speech? What shoes did Nita wear to the sangeet? Etc.

One eye-catching moment was completely unchoreographed. It was Meta CEO Mark Zuckerberg and his wife admiring the bridegroom's $1M Richard Mille watch. The tweets and articles this moment alone generated, is a symptom of our current billionaire obsession.

My mother used to say that it is unseemly to count other people's money. Here however, I have a good reason for doing it. Recently, some economists like Adam Tooze have made the argument that billionaires shouldn't exist. The inequality that results from the oversized share billionaires have over a country's resources, they argue, damages the economy, and results in much fewer resources for the rest of us.

In this week's Analyticks:

How big - and damaging - is India's wealth divide?

Screener: The highest and most consistent dividend stocks

Let's do some counting.

How big is India's wealth divide, really?

Those of us who live in urban India are used to seeing slum towns in one area of the city, and fancy gated communities with several swimming pools on the very next road. It is also something that visitors to India love to talk about as evidence of our high inequality levels.

But in reality, India is not as unequal as some other countries in share of wealth.

A troubling sign however, is when we look at annual incomes rather than wealth. Here, the share of India's richest is far higher than countries like the US and China. The top 10% of Indians are cornering a big share of national income every year.

The average annual income in India is just around Rs. 2.34 lakh -- a pretty small number. But the divide between the top 1% and everyone else is pretty large. And the top .001% of the population eclipses even them.

India’s richest 1% people have 22.6% of our national income, the highest in over a century .

Indians tend to invest most of the money that they make in land -- land and buildings together are 90% of Indian household wealth. This percentage hasn't changed much in 60 years. The share of financial assets for Indian households has increased from 4% in 1981 to around 10% today. When we look at total accumulated household wealth, the class divide is large.

The wealthiest 10,000 individuals in India own on average, assets of Rs. 2,260 crore each (Rs 22.6 billion), or 16,763 times the wealth of the average Indian. These are the people wearing Mielle watches, Lora Piana sweaters and taking chartered flights. For this group, queuing up for a first class seat on a commercial airline means failure, not success.

India's wealth divide didn't start with any one government

The vast accumulation of resources by a small group of people did not happen with one government, or in a few years. The problem of the Indian middle class steadily losing out, and the top 10% getting richer has been happening since the early 1990s. No Indian government from any political party has so far, been able to pause this.

Some of the wealth gains for the top 10% and top 1% of the population, has been driven by the stock markets -- the Sensex for instance, has grown by 7300% between 1990 and 2023.

But a group cornering more resources is a self-fulfilling problem, since they use these resources and influence to get even more. This means that over time, the influence of the top 1% on policies, governments and even elections become disproportionately high.

In India, we see this skew everywhere. In the stock market, just 32% of listed companies -- 1,700 companies -- have a market cap of over Rs. 500 crore. Both market capitalization and profits are skewed towards the largest conglomerates in India.

The rise of these billionaire entrepreneurs means they are busy influencing policy in every aspect of the government, and attempting to push out competition in entire sectors - telecom, power, gas, retail etc. Tariffs that benefit companies and promoters but hurt consumers have been on the rise. Subsidy policies disproportionately favour large corporations over SMEs, like PLI schemes.

To tackle the problem we must first acknowledge it. For example, economists have pointed out that a wealth tax of just 2% on the total net wealth of the 162 wealthiest Indian families in 2022 "would have provided revenue equal to 0.5% of the national income -- more than twice the central government’s budget expenditures on the NREGA".

A wealth tax is nothing new and has been implemented even in Ancient Greece, when the 'eisphora' wealth tax was levied on the richest 4% of the Athens population. A practical wealth tax would tax liquid assets above a certain threshold, the enormous amount of wealth that is idle and "trapped" in bank accounts. But this is just a beginning. For these curves to really shift, we must start the conversation.

Screener: High and consistent dividend yield stocks

PSUs lead in 3-yr dividend yield %

This screener shows stocks with high and consistent dividend yields over one, two and five years. It features the top 10 stocks with the highest dividend yield in the last three years. These companies have also outperformed the Nifty 50 in the past year.

The screener excludes stocks that have given a very high one-time/special dividend in the past two years. A high one-time dividend can inflate historical dividend yield, and such stocks may not be consistent high dividend stocks.

The screener is optimised to show 10 stocks with high 3-year dividend yield %. Seven of the 10 stocks currently in the screener are from the public sector. Major stocks that appear in the screener are Vedanta, Coal India, ICICI Securities, Power Grid Corp of India, Oil & Natural Gas Corp and Power Finance Corp.

FY24 has seen an increase in government budgets, contributing to growth in stock prices for these public sector companies. These public companies also have to give out a certain percentage of dividends every year – according to government guidelines, all public sector companies must give out at least 30% of their net profit or 5% of net worth (whichever is higher) for annual dividends. As a result, they tend to dominate the screener. Non-PSU stocks in the screener are ICICI Securities (capital markets), Tech Mahindra (IT consulting & software) and Gujarat Pipavav (marine port & services).

This screener also appears in Starfolio’s free featured baskets. This basket is great for long-term investors looking for high dividend-paying companies to generate passive income. This particular basket was created on March 10, 2023, with an annual rebalancing frequency. Its latest rebalance was on May 3, 2024, and the next scheduled one is on May 1, 2025. Each stock in the basket holds an equal weight of 10%, with seven being large-cap and three mid-cap stocks.

Since its creation, the basket has given pretty impressive returns of 249.1% (not including dividends) over the past 14 months. The basket outperformed the Nifty 50 index by 221.3 percentage points in the same period.

You can find more screenershere.

The Baseline

17 May 2024

Five Interesting Stocks Today - May 17, 2024

1. Oberoi Realty:

This Mumbai-based realty developer hit a new 52-week high of Rs 1771.5 on Friday after surging 19.5% over the week, following the release of its Q4 and FY24 results. In Q4FY24, the company reported operating revenue growth of 36.8% YoY to Rs 1,314.8 crore, surpassing Trendlyne’s Forecaster estimate by 2.8%. Its net profit rose 64.1% YoY to Rs 788 crore, beating forecaster estimates by 136%. The company got a boost from strong demand for its luxury projects and was able to reduce inventory significantly, leading to lower operating costs.

Oberoi Realty’s rental portfolio, which contributed around 12% of Q4 revenue, grew 68% YoY to Rs 155 crore. Occupancy levels at Commerz I and II have increased by 8% and 6% respectively on an annual basis. A new entrant to their leasing portfolio, Commerz III, has already reached an occupancy of 50% with Morgan Stanley occupying most of it. The management aims to expand occupancy levels to 80-85% in the next two quarters.

The company’s board has approved a fundraising of up to Rs 4,000 crore by issuing non-convertible debentures and a qualified institutional placement of equity shares. The funds will be used for ongoing and upcoming projects.

Chairman and Managing Director, Vikas Oberoi says, “The company will be able to achieve the Rs 1,000 crore mark from its rental portfolio from its current levels of 450 crore by the end of FY25.” He also highlighted that most of its realty peers have already sold their properties, leaving them with little to no competition. As a result, the company expects to sell its inventory of Rs 5,000 crore, mostly ready-to-move properties, in the next 24-30 months.

Zee Business reports that HDFC Securities maintains a ‘Buy’ rating on Oberoi Realty. Analysts are optimistic due to the cash flow visibility from ready-to-move-in inventory in the 360 West and Mulund projects, along with other new projects. With a target price of Rs 1,833, this real estate developer has a potential upside of 5.2%.

2. Polycab India:

This consumer durables company surged by 11.8% over the past week and hit a new 52-week high of Rs 6,542.9 on Friday. This comes after its net profit rose 29.1% YoY to Rs 553.5 crore in Q4FY24, beating Trendlyne’s Forecaster estimates by 13.5%. Its revenue also rose by 29% YoY during the quarter, driven by the wires and cables segment. As a result of the rise in share price, Polycab India features in a screener of stocks with prices above short, medium, and long-term moving averages.

The company’s wires and cables (W&C) segment, which constitutes around 85% of the revenue, grew by 19.3% YoY during the quarter. In comparison, its peers Havells India and KEI Industries saw W&C segment growth of 14.1% and 17.9%, respectively YoY. In FY24, Polycab’s market share in the W&C industry improved to 25-26% (compared to 22-24% in FY23).

Cables and wires manufacturers have gained overall, from the increased demand in the real estate and infrastructure sectors, as well as increased government capex. Polycab’s FMEG segment also witnessed healthy growth at 17.3% YoY due to higher demand.

According to Gandharv Tongia, the CFO, “Rural market is growing, and with consumer goods players witnessing a good run, more investments are likely. In addition to domestic markets, we see a lot of demand coming in from Europe, Australia, and other countries. All this is expected to help sustain the demand momentum in the cables and wire segment.” The consumer durables maker expects to achieve its target of Rs 20,000 crore in revenue, as per its Project Leap by the end of FY26. It has also guided a capex of Rs 10,000-11,000 crore over the next two years.

Earlier this year, the Income Tax Department allegedly detected unaccounted cash sales by the company and conducted raids at various premises. The management highlighted that it was instructed to provide explanations for certain queries. Polycab has not been charged any penalty so far.

Post the company’s results, Prabhudas Lilladher maintains its ‘Buy’ rating on Polycab with an upgraded target price of Rs 7,086. The brokerage sees revenue and PAT CAGR of 17.9% and 16.6%, respectively, over FY25-26, led by a strong domestic demand environment and expected improvement in international business.

3. Siemens:

This heavy electrical equipment company surged 17.2% over the past week and hit its all-time high of Rs 7,249.1 per share on Thursday as its net profit rose 70.2% YoY to Rs 802.5 crore in Q4FY24. Revenue increased by 18.6% YoY to Rs 5,681 crore, driven by improvements in the energy, smart infrastructure, mobility, and digital segments.

The company’s net profit beat Trendlyne’s Forecaster estimates by 36.3%. However, revenue missed estimates by 0.6%. The revenue miss was due to a decline in order booking to Rs 5,180 crore in Q4FY24 compared to an order inflow of Rs 25,400 crore in Q3FY24 which, according to the management, was due to delays in deal finalisation. It shows up in a screener of stocks with negative to positive growth in sales and net profit with strong price momentum.

Siemens also approved a capex of Rs 550 crore for capacity expansion. It also plans the demerger of its energy business into a separate listed entity, Siemens Energy. The company’s board of directors approved issuing one share of Siemens Energy for one share held in Siemens. In FY24, the company’s energy business recorded a revenue of Rs 6,080.3 crore, contributing to 33.2% of its total revenue.

Speaking on the company’s capex plans, Sunil Mathur, MD and CEO, said, “Siemens is focused on expanding its operations, with the expansion of the gas insulated switchgear (GIS) factory in Goa (approx. Rs 330 crore) and a new metro train manufacturing facility in Aurangabad (approx. Rs 190 crore), which is set to serve multiple international markets.”

Post results, Motilal Oswal maintains its ‘Buy’ call on the stock with an upgraded target price of Rs 7,800 per share. This indicates a potential upside of 8.6%. The brokerage remains positive on the company due to its spending in the transmission and business and its strong positioning to win orders in the railway segment. It expects the company’s revenue to grow at a CAGR of 13.1% over FY25-26.

4. Zomato:

This internet software and services company fell 3.5% on Monday after announcing its results. In the past year, the firm's share price has risen by 209.3%, outperforming its industry by 91.6 percentage points. In Q4FY24, the company reported a net profit of Rs 175 crore, compared to a loss of Rs 188.2 crore in Q4FY23. The company’s revenue grew 70.5% YoY. It appears in a screener for stocks with increasing revenue every quarter for the past eight quarters. However, the company missed Trendlyne Forecaster’s net profit estimate by 13%. The estimates miss was due to a higher employee stock option plan (ESOP) cost. The total ESOP charge for Q4FY24 was Rs 161 crore.

Zomato’s revenue from the food delivery business grew 48.4% YoY, while Hyperpure (its B2B business) increased by 99% YoY. Blinkit, its quick commerce segment, grew by 111.9% YoY and turned EBITDA positive in March 2024. It added 75 stores in Q4, taking its total store count to 526.

The company expects to add another 100 stores in the next quarter and reach 1,000 stores by the end of FY25. CEO Deepinder Goyal said, “With the aggressive store expansion plans, the EBITDA is likely to be lower for the next few quarters.” In steady state, he expects it to be 4-5% as a percentage of gross order value.

Among other news, in the past week, Zomato surrendered its payment aggregator license and its application for the mobile wallet license. The management believes that it doesn't have a significant competitive advantage in the payments space and hence does not foresee the payments business as commercially viable.

CLSA upgraded its rating to a 'Buy' due to Zomato's strong guidance for Blinkit and steady performance in food delivery, despite ESOP costs impacting profits in Q4. Analysts are optimistic about the company’s achievement of breakeven for Blinkit and plan to prioritize its growth. They also believe that the expansion will impact the short-term profitability of the company but say that it will help the business become a quick-commerce leader.

5. JK Cement:

This cement & cement products company rose by 2.4% on Monday after it announced its result on May 12. The firm beat Trendlyne’s Forecaster estimates for Q4FY24 for revenue by 0.8%, but missed the net profit estimate by 20.8%. For Q4FY24, the company’s net profit rose by 95.7% YoY to Rs 219.8 crore on the back of 29% decline in power and fuel costs, while revenue rose by 11.9% YoY. The stock shows up in a screener for companies with strong annual EPS growth.

The company saw a 19% increase in volumes in FY24, thanks to the recent expansion of cement capacity in central India, where utilization rates reached 85%. Additionally, its new expansion plan aims to boost total Grey Cement capacity from 22 mtpa to 30 mtpa, at a capital cost of Rs 2,850 crore.

The company expects demand to pick up in Q3FY25 post the elections and monsoon in Q1 & Q2. With the government's increased attention on infrastructure development in states like UP and Maharashtra, there's anticipation of accelerated per-capita cement consumption in the future. The company’s upcoming Prayagraj unit is expected to commence in Q2FY25.

The company’s management expects volume growth of ~10% vs. industry growth of ~7% in FY25 along with further cost reduction of Rs 150-200/tn by FY26. For its paint business, the management expects the sales to reach Rs 300 crore in FY25 and Rs 500 crore in FY26. In Q1FY25, the company anticipates a slight decrease in power and fuel expenses.

Axis Direct has retained its "Buy" rating on JK Cement with a price target of Rs 4,340. The brokerage expects the company’s revenue to reach a CAGR of 14% over FY25-26 and expects the company to report an EBITDA margin in the range of 18-20% with EBITDA/tonne of Rs 1,140/1215 in FY25E/FY26E, driven by higher volumes, stable realizations, and lower costs.

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

The Baseline

16 May 2024

Chart of the Week: Consumer Durables and General Industrials emerge as top gainers in the past quarter and year

By Satyam Kumar

Indian equity markets have stood out as a bright spot in the global investment landscape. India’s flagship index Nifty 500 has delivered gains of 34% in the past year, outperforming global counterparts like Nikkei 225, S&P 500 and others. However, volatility has spiked recently, with India VIX surpassing the 20-point mark, reaching its highest level since early 2023. The surge in volatility can be attributed to concerns that the ruling party might win fewer seats than initially expected. Analysts also worry about lower voter turnout, heightening the possibility of negative surprises.

Given the recent volatility, it is important to look at both the past quarter and past year to assess the performance of stocks and sectors. In this edition of Chart of the Week, we dive into Trendlyne’s indices and sector dashboard to identify the top-performing sectors. We also take a look at the companies driving growth within each sector. Simultaneously, we identify the reasons for the stocks that have demonstrated resilience over the long term and during periods of heightened volatility.

It's crucial to examine the sectors that have thrived despite recent volatility. Analysing sectors helps diversify investments, make informed decisions, and grasp broader trends. So we have selected the top nine sectors over the past quarter as well as the past year, highlighting the stocks that have contributed the most to the sectoral gains.

Consumer Durables, Realty & Auto stocks benefit from rising demand in premium segments

Consumer Durables stands out as the top-performing sector, after posting a 355% gain over the past year. Polycab India gained from the demand surge in real estate and infrastructure sectors, marking a 42.9% rise in the past quarter and a 91.8% surge over the past year. Similarly, Dixon Technologies (India) rose 34.1% in the last quarter and surged 191% in the past year. Dixon Technologies has benefitted from the manufacturing boost buoyed by the ‘Make in India’ initiative and the ‘China+1’ strategy. In the ‘China+1’ strategy, companies are shifting a significant portion of their manufacturing from China to other developing nations like India, Indonesia, Bangladesh, etc.

Likewise, electrical appliances manufacturer Havells India, saw a 25.2% uptick in its share price in the last quarter, accounting for 20.7% of the sector's 18.9% gains during the same period. This growth was largely fueled by increased demand for summer appliances due to rising temperatures nationwide and the uptick in discretionary spending among Indian consumers.

The Realty sector soared by 124% in the past year, driven by heightened demand for luxury residences as appetite for a higher standard of living increases. DLF, Macrotech Developers, and Prestige Estates Projects were major contributors, with respective gains of 90.2%, 130.7%, and 211.8% over the past year.

However, the realty sector's gains moderated in the last quarter as presales consolidated due to a lack of new launches. Despite this, the sector managed a 6.9% increase, with Prestige Estate Projects and Godrej Properties accounting for more than half of the gains. These companies benefited from increased realisations per square foot in metropolitan areas and their expansion in tier-I and tier-II cities.

The automobile and auto components sector has been consistently rising with gains of 14.4% in the past quarter and 71% in the past year. This was driven by higher sales in the premium segment and stable raw material prices, resulting in higher realisations. However, sluggish monsoons impacted sales in the entry-level segment, with surges observed only during festive seasons. Tata Motors and Mahindra & Mahindra emerged as consistent gainers, contributing to over one-third of the sector's gains in both the last quarter and the past year.

Rising demand for electricity drives utilities, mining and general industrials higher

According to Trendlyne’s Sector and Indices Dashboard, the metals and mining sector has risen 18.2% in the past quarter and 85% in the past year. In terms of total production, India's mining sector grew by 7.5% in FY24 with robust demand in steel, cement, and aluminium industries, highlighting strong economic activity. Hindustan Zinc was the best-performing stock in the past quarter as it rose 68%. Coal India also outperformed its peers in the past year with 90% gains as production rose 10% on an annual basis driven by demand from thermal power plants.

Meanwhile, the utilities sector, which is a direct beneficiary of rising electricity demand, rose 7.1% in the past quarter and 116% in the past year. NTPC has consistently contributed to sectoral growth as it gained 9.4% in the past quarter and 101% in the past year.

State-run NTPC has announced plans to add 5 gigawatts (GW) of installed capacity in FY25. Of this, the company plans to install 3 GW of renewable energy capacity and the remaining 2 GW of thermal power capacity.

General Industrials, on the other hand, is the best-performing sector in the past quarter with gains of 24.6%. Siemens, ABB India, and Hindustan Aeronautics (HAL) are the top sector drivers with each contributing 16%, 15% and 13.1% to the sectoral rise. If we look at the performance over the past year, the sector has risen by 120%. Bharat Heavy Electricals (BHEL), HAL, and Suzlon Energy are the highest contributing stocks as they rose 162.2%, 240.3% and 377.8% in the past year. Rising demand for heavy electrical equipment from the utilities sector drove BHEL and Suzlon Energy higher.

Similarly, defence company HAL witnessed its order book swell over Rs 94,000 crore at the end of FY24 as it received orders for its armoured helicopters and fighter jets amid rising geopolitical tensions.

Industry leaders such as Indigo, Bharti Airtel and Dmart drive sectoral gains

The transportation sector surged by 95% in the past year. Adani Ports & SEZ and InterGlobe Aviation (Indigo) emerged as key drivers, responsible for over 50% of the sector’s total growth. While Adani Ports has posted moderate gains amid high volatility in the past quarter, Indigo soared by 29.4%, contributing 67.5% to the sector's 10% gains in the same period. The expansion of new airports has improved connectivity which in turn has increased the preference for air travel, resulting in a rise of air passenger traffic to pre-COVID levels. In addition, stable fuel prices and expansion into international routes have also played a role in Indigo's share price uptick.

The telecom services sector, which rose 16.6% in the past quarter, switched places in the chart with the commercial services and supplies sector as their major contributor, Adani Enterprises which gained 48% in the past year, consolidated in the past quarter. Bharti Airtel, contributing 68.4% to the telecom sector's rise, gained as Chairman Sunil Mittal indicated a potential tariff hike post-elections in Q2. This strategic move aims to enhance their RoCE (return on capital employed) amidst substantial investments in 5G and increased customer acquisition costs.

Meanwhile, the retailing sector demonstrated steady growth, advancing 18% in the past quarter and 76% over the past year. Trent and Avenue Supermarts (Dmart) emerged as consistent performers, accounting for over 90% of sectoral gains in both periods. The continuous momentum in discounted mass-consumer products and the surge in urban consumer spending due to rising income levels have driven the sales volume of retail giants like Dmart and Trent.

The Baseline created a screener Market Capitalization over Rs. …

15 May 2024

Market Capitalization over Rs. 500 crore

The Baseline

14 May 2024

5 stocks to buy from analysts this week

By Satyam Kumar

1. ICICI Bank:

KR Choksey maintains a ‘Buy’ rating on this bank with a target price of Rs 1,355, indicating a potential upside of 20.1%. In Q4FY24, the company's revenue surged by 24.6% year on year to Rs 67,181.7 crore, while its net profit grew by 29.2% YoY to Rs 12,728.6 crore. Analyst Unnati Jadhav is optimistic as the bank's performance was in line with expectations. She suggests that lower-than-expected provisions led net profits to rise in Q4, exceeding estimates by 2%.

Jadhav identifies the retail loan segment as a key growth driver for the bank – it recorded significant growth of 19.4% YoY and 3.7% QoQ. The retail loan portfolio constitutes 46.8% of the total portfolio. She anticipates the cost-to-income ratio to rise to 40.5% for FY26 due to ongoing investments in branch expansion and digital banking strategies. Jadhav estimates a profit CAGR of 14.5% over FY25-26, and a 16.4% CAGR in advances.

2. TVS Motor Company:

Geojit BNP Paribas maintains a ‘Buy’ rating on this 2/3-wheeler manufacturer, with a target price of Rs 2,265, indicating an upside of 9.5%. In Q4FY24, the company reported a revenue growth of 23.5% YoY, coming just shy of the Rs. 10k crore mark to Rs 9,999 crore. It also saw a 15.1% YoY increase in its net profit to Rs 387 crore. Analyst Antu Eapen Thomas attributes the Q4FY24 revenue jump to strong volume growth, a superior product mix, and improved realisation.

Thomas notes that the EBITDA margin met their expectations, rising by 105 basis points YoY to 11.3%, supported by softening raw material prices and effective cost control measures. He highlights the company's outperformance compared to its peers in Q4, with market share in the motorcycles segment rising by 50 basis points to 13.7% due to urban commuter growth and a strong product mix in the 125 cc category.

Thomas is optimistic as the company plans to launch several new products ranging from 5KW to 25KW on the EV platform by FY25. He notes that the company aims to expand its dealer network from 400 to 800 by year-end and currently derives 10% of its volume from EVs.

3. KPR Mill:

Sharekhan reiterates its ‘Buy’ rating on this textiles company with a target price of Rs 965, suggesting a potential upside of 19.9%. In Q4FY24, the company's revenue experienced a 12.7% YoY decline to Rs 1,708.6 crore, while net profit increased by 1.9% YoY to Rs 213.6 crore.

Analysts at Sharekhan attribute this rise in net profit to improved EBITDA margins, which increased by 332 basis points YoY to 19.7%. They express optimism as lower raw material costs contributed to a 541 basis points YoY rise in gross margins.

Analysts at Sharkhan note, “In the medium to long term, the China+1 factor, the likely signing of the free trade agreement (FTA) with the UK, and increasing opportunities in the US market provide scope for consistent growth in its high-margin garment business (~40% of the total revenue).” They are bullish on the company as the brownfield capacity addition of 30 million pieces is set to be completed by H1FY25. Following the expansion, analysts expect that the company will produce 40 million pieces per quarter in H1FY25 and 45 million pieces per quarter in H2FY25.

4. Kajaria Ceramics:

ICICI Direct maintains a ‘Buy’ rating on this tiles company with a target price of Rs 1,440, indicating a 24.1% upside. In Q4FY24, the company's revenue grew by 3.5% YoY to Rs 1,258.3 crore. However, its net profit declined by 5.2% YoY to Rs 102.4 crore. Analysts Bhupendra Tiwary and Hammaad Ahmed Ulde attributed this profit decrease to relatively lower tile prices, which impacted margins. During Q4FY24, tile sales volumes increased by 5.5% YoY to 29.6 million square meters (MSM).

Tiwary and Ulde are optimistic as the management outlined a 3-year plan to achieve a volume of 150 million square meters (MSM) of tiles by FY27, implying a volume CAGR of 11.5% and a tiles revenue CAGR of around 11% over FY25-27, reaching Rs 5,500 crore. They note the company’s intentions to expand its presence in tier-II and tier-III cities. Kajaria has indicated that demand recovery is likely post-elections, in Q2FY25. With stable gas prices and benefits driven by operating leverage, they anticipate EBITDA margins to improve to 16% and 16.5% in FY25 and FY26, respectively, from the current 15.3% in FY24.

5. Aarti Drugs:

Axis Direct maintains its 'Buy' rating on this pharmaceutical company with a target price of Rs 570, indicating an upside of 20.8%. In Q4FY24, the company witnessed a 16.4% YoY decline in revenue to Rs 621.1 crore, while its net profit decreased by 15.7% YoY to Rs 47.3 crore. But analyst Ankush Mahajan highlights that the company surpassed expectations on a sequential basis, with a 2.3% revenue growth and 34.4% net profit growth QoQ in the March quarter.

Mahajan is optimistic as the company's gross margins improved by 282 bps QoQ due to a better product mix and declining input costs. He also noted a 227 bps QoQ improvement in EBITDA margin, driven by operating leverage from enhanced capacity utilisation.

Mahajan is also positive as the company announced a greenfield project for dermatology products at its Tarapur facility, with plans to ramp up operations by H1FY25. He expects growth in the API segment due to an anticipated positive shift in the export landscape, supported by likely interest rate cuts, low stock levels, and rising demand.

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

(You can find all analyst picks here)

The Baseline

10 May 2024

Five Interesting Stocks Today - May 10, 2024

1. Hero MotoCorp:

This two-wheeler manufacturer rose by 6.9% in the past week and hit an all-time high of Rs 4,954.4 today. The company’s net profit improved by 16.1% YoY to Rs 935 crore and its revenue increased 12.9% YoY in Q4FY24 to Rs 9,794 crore. It beat Trendlyne Forecaster’s net profit estimates by 18.8%. The company recorded its highest-ever quarterly wholesales as it grew by 9.6% YoY to 13.9 lakh units. Growth has continued in April, when wholesales surged by 34.7% YoY.

CEO Niranjan Gupta says, “We expect double-digit revenue growth for the industry in FY25. With our upcoming product launches, we aim to outperform the industry and gain market share. We should maintain EBITDA margins at 14-16% in the long term.”

Hero Motocorp’s Q4 EBITDA margin grew by 120 bps YoY to 14.3%. However, increased spending in the electric vehicles (EV) and premium motorcycle segments, and marketing expenditure has offset this. Margins are expected to stabilise with upgrades to current stores, premium product launches and a better product mix. The company plans to expand its network of EVs to 100 cities in FY25 and launch new products in the premium, EV and entry-level segments.

The management has guided for a capex of Rs 1,000-1,500 crore for FY25. It also foresees export contribution to increase to 10% of overall revenue in the medium to long term. The company has received approval to form a subsidiary in Brazil, which will focus on premium products.

Motilal Oswal maintains a ‘Buy’ call on Hero MotoCorp and expects it to deliver a volume CAGR of 9% over FY25-26, driven by new launches and a ramp-up in exports. The brokerage expects revenue and profit CAGR to be 13.5% and 17%, respectively over FY25-26. The company appears in a screener for stocks with broker prices or recommendation upgrades in the past month.

2. Westlife Foodworld:

This restaurant chain has fallen by 2.5% in the last two days after announcing its Q4FY24 results. Westlife Foodworld’s net profit plunged 96.2% YoY to Rs 0.8 crore, down from Rs 20.1 crore in Q4FY23. Trendlyne’s Forecaster had estimated net profit at Rs 13.1 crore for the quarter. The sharp decline was due to the rapid addition of new stores amid a muted demand environment, higher marketing spends, finance costs, and depreciation & amortisation expenses.

During the quarter, Westlife’s revenue grew just 1.1% YoY. Its SSSG (same-store sales growth) contracted by 5% YoY. This was led by a decline in dine-in sales (-2% YoY) and bad publicity the company faced around its cheese.

Earlier this year, allegations surfaced in Maharashtra that McDonald’s used substitutes in place of real cheese in its burgers and nuggets. But it was later confirmed that the company used 100% real cheese. Saurabh Kalra, the Managing Director, said, “Around 70–80 restaurants were impacted by these challenges, particularly in the western region.” Rumours are hard to kill – the management says that these concerns still persist, even after Westlife’s efforts to address the cheese controversy through targeted campaigns.

The restaurant major also witnessed pressures as customers reduced their spending on dining out and delivery services, despite attractive discounts. In fact, the QSR industry has been witnessing demand pressures in the past few quarters. According to Prabhudas Lilladher, “QSR demand remains subdued due to inflationary pressures, lower eat-out frequency, and increasing competition from unorganized players/cloud kitchens”.

Meanwhile, the McDonald’s operator has continued to expand its store network and added 17 restaurants in Q4 FY24. The company aims to add 45-50 stores in FY25 with a focus on South India, smaller towns, and drive-thrus. The company has guided capex of Rs 200-250 crore for FY25.

Post the company’s result announcement, Dolat Capital maintains its ‘Sell’ rating with a target price of Rs 764. The brokerage believes the company has an attractive menu offering and strong brand extensions like Mc Café, but it will have to battle a high SSSG base and subdued demand.

3. Marico:

This FMCG company surged 10% on Tuesday after it reported quarterly and annual results. Marico's revenue for Q4FY24 came in line with Trendlyne’s Forecaster estimates at Rs 2,293 crore, up 1.7% on a YoY basis. Meanwhile, its net profit increased 5.3% YoY to Rs 318 crore, missing estimates by 10.5%. This was due to lukewarm rural demand in the previous quarter. Parachute coconut oil, contributing 34% to its total revenue, witnessed volume and value growth of 2% each in Q4.

Consumer intelligence firm NielsenIQ has reported a 6.6% growth in the industry's value driven by a 6.5% increase in volumes in the March quarter. Roosevelt D’Souza, head of customer success India at NielsenIQ, stated, “The FMCG industry's growth in rural areas surpassed that of urban growth for the first time in the past five quarters.”

Marico’s Managing Director & CEO Saugata Gupta, said, “We have lost market share in the bottom of the pyramid segment in value-added hair oils, where there has been significant competitive intensity.” To counter this, the company implemented project SETU at the start of the fiscal year to improve direct reach to 1.5 million outlets by FY27, from 1 million outlets currently. The expected outlay for the project is Rs 80-100 crore spread over the next three years, which will be funded through internal accruals.

Gupta expects project SETU to enhance direct reach and weighted distribution, as well as help in market share gains across categories in urban and rural markets. Gupta anticipates Marico’s food business to grow at a compound annual growth rate (CAGR) of more than 20%, reaching 2X the current scale by 2027.

Sharekhan maintains a ‘Buy’ rating on Marico as it expects a revenue CAGR of 12.2% in FY25-26, led by growth in the core portfolio and 20%-plus growth in new business segments. They see the portfolio diversification into premium foods and personal care products improving the company’s revenue trajectory in the long term. With a target price of Rs 620, this FMCG player has a potential upside of 5.6%.

4. Kotak Mahindra Bank:

This bank stock fell by 8.6% over the past month after the Reserve Bank of India (RBI) ordered the bank to stop onboarding new customers through its online and mobile banking channels, and issuing new credit cards on April 25. This follows the RBI's observation of deficiencies in the bank's income tax examination. The company’s joint Managing Director Krishnan Venkat Subramanian resigned a few days after the news, on April 30 to ‘pursue other opportunities’.

The bank’s management says that the ban will affect the company’s pace of customer additions, and estimates a Rs 300-450 crore decrease in its profit before tax in FY25. Speaking on the RBI directive on the bank’s earnings call, Shanti Ekambaram, Deputy Managing Director of the bank said, “Given the recent RBI directive, the focus on cards will be on servicing and nurturing our existing customers through customer engagement and loyalty programs. Our focus on personal loans and business loans will continue as is.”

The stock, however, recovered to rise by 5% on Monday, after its net profit grew by 18.2% YoY to Rs 4,133.3 crore in Q4FY24. Revenue also increased by 25.3% YoY to Rs 12,307.1 crore, helped by the treasury, corporate and retail banking segments. The growth in net profit and revenue helped it to beat Trendlyne’s Forecaster estimates by 22.8% and 32.8%, respectively. The bank's asset quality also improved as its gross and net NPAs contracted by 39 bps YoY and 3 bps YoY to 1.4% and 0.3%. It appears in ascreener of stocks with increasing revenue for the past eight quarters.

The company’s advances grew by 17.6% YoY to Rs 3.8 lakh crore, with traction across all segments. Its deposits growth (23.6% YoY) outpaced advances growth (17.6% YoY) causing its credit-deposit (CD) ratio to fall by 400 bps YoY to 84%. This will help in improving the liquidity of the bank.

Post results, ICICI Direct has downgraded the bank to a ‘Hold’ rating with a lower target price of Rs 1,800 per share. This indicates a potential upside of 9.6%. The brokerage believes that while the regulatory ban is expected to impact growth, the company’s fundamentals remain strong with the ability to drive healthy business growth. It expects the bank’s net interest income (NII) to grow at a CAGR of 13% over FY24-26.

5. Mangalore Refinery And Petrochemicals (MRPL):

This Refineries & Petroleum-products company fell by 17.1% over the past week after it announced its results on 3rd May. The firm beat Trendlyne Forecaster estimates for Q4FY24 for revenue by 13.5% and the net profit estimate by 83.6%.

For Q4FY24 the company’s net profit fell by 40.5% YoY to Rs 1138.5 crore on the back of a rise in raw material costs by 7.8%, while its revenue fell by 0.5% YoY. The stock shows up in a screener for companies having a PE higher than the industry PE.

The firm’s Gross Refinery Margin (GRM) has contracted to $11.35 per bbl in Q4FY24, compared to $15.12 per bb in Q3. The GRM decline was due to the rise in crude oil prices by an average of 17% QoQ in Q4FY24. When compared to its peers, MRPL’s GRM was still higher than most OMCs this quarter, like Indian Oil Corp.(IOCL) at $8.4 per bb and Hindustan Petroleum (HPCL) at $6.9 per bb.

The company has processed three new crudes during the year, including Siberian Light from Russia, KG-D6 from Reliance's KG-D6 block, and KG-D98 from ONGC's East Coast block. The company’s management notes that their Russian crude usage has been at around 30-40%, which has been similar for the oil industry as a whole.

The company’s management has guided an increase in their number of retail outlets from the present 100 in FY24 to 1000 by FY27. Vivek Tongaonkar, Director Finance at MRPL said “We are excited about our strategic direction for the future. Significant planning is underway for new projects aimed at enhancing our refinery's GRMs by enhancing the PET-CHEM intensity from the current 10% to 12.5%. We anticipate an investment of approximately Rs 8,000 crore over the next five years, primarily funded through internal accruals.“

Motilal Oswal has maintained a "sell" rating with a price target of Rs 175. The brokerage said: “ While MRPL delivered a solid beat vs our estimates, we believe its earnings are set to decline from Q!FY25 amid weaker GRM QoQ. We are estimating a GRM of $8/bbl in FY25/26, leading to an RoE of 18.2%/15.4%. We value the stock at 6.5x FY26E EBITDA of Rs 61 billion, to arrive at our TP of Rs 175.”

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

The Baseline

10 May 2024

The US dollar is beating the world's currencies | Screener: Export stocks with bullish analyst calls

By Tejas MD

The US dollar is showing a lot of muscle in 2024.

Every major currency in the world (including the Indian rupee) has depreciated versus the US dollar this year. Emerging markets are the hardest hit, but developed regions like Japan and Europe are also feeling the dollar's heat.

On April 29, the Japanese yen fell below 160 yen to the dollar for the first time since 1990. The main reason for the yen hitting multi-decade lows is the difference in interest rates between the US (5.5%) and Japan (0%). While Japan is among the worst performers, the effects are also visible elsewhere.

High US interest rates are typically not good news for currency values around the world. And right now, the US rate of 5.5% is at its highest since the past two decades, to curb inflation.

The high rate means that American investments such as government bonds are offering better risk-adjusted returns than most of the world. So investors are doing the logical thing: selling their country’s currency and buying US dollars, to invest in higher return US securities. This rising demand for the USD is strengthening the dollar.

It's no surprise then, that whatever the US Federal Reserve says about possible interest rate cuts is being tracked around the world. Fed Chairman Jerome Powell is probably the most closely watched person globally right now (the media even attempted detailed personal profiles of him - rare for a bureaucrat - but eventually concluded with a compliment that might also be an insult: that he is "likable without being very interesting").

The appreciation of the US dollar caused the Indian rupee to hit its record low of 83.48 against the dollar on March 22. In an unusual move, South Korea warned against depreciating the won, and Indonesia’s Central bank entered the forex market to support the rupiah.

But despite hitting a record low, the rupee is among the best-performing currencies in 2024.

How has this happened? And is the dollar rally set to continue?

In this week’s Analyticks,

The Dollar Crush: How long will the world have to put up with a rising dollar?
Screener: Exporters outperforming their industries in the past month, with a high number of 'Buy' ratings from analysts

Rising inflation delays Fed’s rate cut plans, strengthens dollar

The recent fall in global currencies came after the US consumer price index (CPI inflation) rose higher than expected in March (up 3.5% YoY). With US inflation hanging around like the guest that doesn't leave, interest rate cuts had to be delayed.

US and India’s CPI inflation yet to reach their Central Banks’ targets

So on May 2, the US Fed left the benchmark interest rates unchanged at 5.5% for the sixth straight meeting, in line with Wall Street estimates. But all eyes were on Fed Chair Jerome Powell’s comments about future rate cuts. And Powell was decidedly hawkish, saying, ‘We do not expect to reduce the target range until we have greater confidence that inflation is moving sustainably toward 2%.’

US Fed holds interest rates at a 23-year high due to stubborn inflation

Higher interest rates are pulling investors back to the US, leading to a strong dollar. In reaction, major currencies have extended their losses against the dollar.

“It has never been truer that the Fed is the world’s central bank”, Jesse Rogers, an economist at Moody’s Analytics, said.

Indian rupee: The most resilient among major currencies

The Indian rupee stands out in the pack, as it stayed steady in 2023 and has been resilient against the dollar in 2024 compared to other currencies.

Major currencies across the globe depreciate against the US dollar in 2024

According to CareEdge Ratings, high FPI inflows, India’s inclusion in the global bond index, a strong growth outlook and favourable current account deficit have supported the value of the Indian rupee.

Another major factor is the RBI’s intervention in the forex market. RBI can stop the fall of our domestic currency by selling USD from its reserve and buying INR. This increases the supply of USD and reduces the supply of INR, thereby increasing the value of the rupee.

RBI is likely to have intervened in March to arrest the rupee's fall as it headed towards its all-time lows. Kishore Narne, director of commodities and currency at Motilal Oswal said, “The RBI generally tends to control the volatility, they won’t let it slip beyond 84.”

The inclusion of Indian government bonds in JPMorgan's emerging market debt index is also a bright spot for the rupee, as it is expected to bring in foreign funds. Bloomberg Index Services has also followed suit, announcing it will add Indian government bonds to its Emerging Market Local Currency Government Index from Jan 31, 2025. These inclusions are expected to bring in foreign inflows worth over $25 billion to India over the next year. This is keeping the rupee resilient.

However a strong dollar has been more difficult to deal with for other countries.

Indonesia raises interest rates, while Europe's Central Bank reconsiders cutting them

Indonesia’s central bank unexpectedly raised rates on April 24, to support the country’s depreciating currency. Other currencies that have fallen sharply this year include the Egyptian Pound, the Lebanese Pound and Nigerian Naira, where volatile political environments have worsened depreciation.

In Europe, policymakers at the European Central Bank have hinted that they could cut rates at their next meeting in June. But even as inflation has cooled in the EU, officials worry that lowering their interest rates before the US Fed would widen the rate difference between the EU and the United States, weakening the euro further.

Will the US dollar’s dominance continue? This depends on the rate cut path by the US Fed. If US inflation remains high, backed by a resilient US job market and strong economic growth, interest rates won’t go down any time soon.

The whole world has to worry about US inflation. If the Fed doesn't cut, other Central Banks will think twice about cutting interest rates even with cooling inflation in their countries, as they want to avoid further currency depreciation. So consumers, including in India, are stuck with higher borrowing costs, and are paying more to buy an apartment or purchase a car on loan. The phrase ‘America sneezes and the world catches a cold’ continues to hold.

Economists and analysts will be closely watching the US inflation numbers for April, which will be released on May 14. Fingers crossed.

Screener: Exporters outperforming their industries in the past month, with a high number of 'Buy' ratings from Forecaster

Electrical stocks have the highest number of ‘Buy’ calls among exporters

Volatility in Indian markets is up – the Nifty VIX has risen by 52.3% over the past. Currencies have also grown volatile, which can impact those companies that get significant revenue from exports. But some exporters are more resilient than others.

This screener shows exporters outperforming their industries in the last month with a high number of 'Buy' ratings from Trendlyne's Forecaster.

Major stocks that appear in the screener are Voltas, Deepak Nitrite, Polycab India, Mahindra & Mahindra, Havells India, Torrent Pharmaceuticals, Aarti Industries, and Alkem Laboratories.

Polycab India rose by 11% over the past month with five analysts giving the stock a ‘Buy’ rating according to Trendlyne’s Forecaster. Motilal Oswal believes that a strong distribution network and higher capex, with a focus on backward integration, will drive growth for the electrical equipment manufacturer. It also expects the company’s exports to improve on the back of capacity expansion and new distribution channels. The brokerage sees the company benefiting from favourable industry trends, and predicts a revenue CAGR of 14.4% over FY24-26.

Torrent Pharmaceuticals’ stock price increased by 4.4% over the past month and has seven ‘Buy’ ratings from analysts according to Trendlyne’s Forecaster. Prabhudas Lilladher believes that the pharmaceuticals company’s strong presence in highly profitable branded business in the domestic, Brazil and ROW markets will help expand its margins on a YoY basis. It expects the company’s net profit to grow at a CAGR of 28% over FY24-26.

You can find more screeners here.