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

27 Oct 2023

Chart of the week: India’s Nifty500 outperforms global indices in the past quarter despite recent weakness

2023 started off on a strong note for global equities, as inflation moderated and investors looked forward to a pause in interest rates globally. Indian indices followed the global trend, and sector indices like the Nifty Auto, Nifty Bank and Nifty PSU Bank hit their all-time highs.

However, the uptrend in global equities quickly turned sour as inflation proved to be pretty sticky. The recent fighting between Israel and Hamas in the Middle East is also spooking markets, as analysts worry that US, Iran and other countries will get pulled into the conflict. Central banks around the world have continued with their hawkish stance, and have suggested holding interest rates higher for a longer period. The Indian indices started falling in the past month as foreign investors began a sell-off in indian equities. This fall came after indices hit record highs in September.

The unpredictable global environment has in recent weeks, triggered a global sell-off across indices as people hunt for less risky options like bonds. This has put world indices under pressure.

The Nifty 500 index has hung on to some of its early gains - it’s up by 8% in 2023 overall, as of October 25. However, it has lost 0.8% in the past three months. Despite the marginal fall, and journalists announcing that it’s dark days on Dalal Street, the Nifty 500 has still outperformed most global indices over the past quarter. The index also outperformed the US Tech 100 (Nasdaq 100) and S&P 500 in 2022. However, over the past two months, foreign investors have offloaded equities worth Rs 25,960.9 crore, causing Indian indices to fall.

The US’s US Tech 100 and S&P 500 indices have risen the most by 33.9% and 10% respectively in 2023. However, these indices have fallen by 8.1% and 6.3% over the past quarter. It is important to note that US indices fell significantly in 2022. The tech-heavy Nasdaq 100 fell 32.7% while the S&P 500 lost 18.1%.

With inflation remaining sticky, US indices are facing worries of a recession, even as the US economy delivered a strong quarterly performance. The banking crisis and the worsening situation in the Middle East have added to its woes. US Tech 100 suffered its worst month of 2023 in September as it fell 5.1% due to fears of the interest rates rising or staying higher for a longer period of time.

Japan's Nikkie 225 index has the second highest rise of 21.6% in 2023. This rise helped the index to touch its all-time high of 33,772.9 on June 20. However, it has fallen 3.8% in the last three months. This fall can be attributed to the sticky inflation in the country and the Bank of Japan’s refusal to raise interest rates, citing domestic and global uncertainties.

England’s FTSE 100 is down 1.8% and 2.1% in 2023 and the recent quarter, respectively. The country is facing a persistent rise in inflation and weakening consumer sentiment. Its retail sales have fallen in September after a marginal rise in August.

China’s Shanghai Composite index has fallen 4.3% over the last year and 5.9% in the past quarter. The country is facing a property crisis as its largest private sector developer, Country Garden, faces a default on payment of a foreign bond. The realtor has international debts aggregating at $11 billion while it has liabilities worth Rs 200 billion.

The Hang Seng from Hong Kong has fallen the most (both YTD and quarter) among the major global indices. It has fallen by 14.8% in 2023 while it declined by 9.3% over the past quarter. The index is facing a sell-off after foreign investors divest their stakes in the Chinese market.

Other notable indices are the DAX (Germany), Taiwan Weighted (Taiwan) and S&P ASX 200 (Australia). The DAX and Taiwan Weighted rose by 5.3% and 15% respectively in 2023. However, they declined by 7.8% and 4.2% respectively over the last three months.

The Baseline

27 Oct 2023

Five Interesting Stocks Today

1. Amber Enterprises India:

This consumer electronics company closed 6.5% higher in intraday trade on Wednesday. This uptrend was led by its revenue increasing by 23.5% YoY and EBITDA margin expanding by 154 bps YoY due to lower input costs. This rise comes despite its net loss widening by 130% YoY to Rs 6.9 crore in Q2FY24. It also missed Trendlyne Forecaster’s net loss estimates of Rs 3.2 crore. The firm’s bottom line was impacted by higher finance costs and depreciation expenses, which rose by 49.3% and 42.2% YoY, respectively. The stock shows up in a screener for companies with cash flows from operations improving over the past two years.

Also, the street’s expectation of healthy growth from H2FY24 onwards pushed up the stock’s prices. According to reports, several analysts retained their ratings, while some raised the target price of the consumer electronics manufacturer. For instance, Jefferies India kept its ‘Buy’ rating on the company and raised its target price to Rs 3,990, implying an upside of 37.2% from the closing price on Friday. The brokerage expects the firm’s sales in the electronics and mobility divisions to double over the next two years.

The management’s focus is on increasing revenue contribution from the non-room air conditioners (non-RAC) segments, such as the electronics and mobility segments. Jasbir Singh, the CEO of Amber Enterprises said, “We've guided that the electronics division and the mobility division, which is the railway subsystem division, are likely to double their revenues in the next two years”. He expects this growth to be driven by new client additions, new product launches and rising order books.

The firm expects its overall margins to improve as commodity costs have started to normalize. It plans to reduce its net debt to Rs 650-680 crore by the end of FY24, from its current levels of Rs 960 crore in Q2FY24.

2. CreditAccess Grameen:

This financial services stock has outperformed the Nifty Financial Services index by 21.5% in the past month. The stock rose 18.1% in the past month according to Trendlyne’s Technical. The stock is trading at a 52-week high.

In Q2FY24, the firm's AUM grew by 36% YoY to 22,438 crores. The disbursements in the quarter grew by 13.5% YoY to Rs 4,966 crore. The growth in AUM was led by the new customer addition and higher ticket size. The NIM of the bank is one of the highest among its peers at 13.1%. However, the margins are expected to compress owing to an increased cost of funds and limited scope to raise interest rates. The bottom line was also aided by lower provisioning. The gross NPA remains at 0.8% backed by high-rated customers.

The bank is also rapidly expanding and investing in newer product lines like loan against property (LAP), two-wheeler loans, and housing loans. This stock shows up in a screener for companies with consistently high return stocks for five years in the Nifty 500.

In its future outlook, CreditAccess Grameen Managing Director, Udaya Kumar Hebbar has indicated that “CreditAccess Grameen will focus on geographical expansion along with building a non-micro finance (MFI) loan book. The AUM growth is expected to be at 24-25% and NIMs at 12.7% for FY24. Most of the growth would be from newly launched non-MFI verticals and geographical expansion”.

According to Axis Securities, healthy NIMs and a strong rural presence will help in maintaining the MFI loan book, while expansion into the retail side will be an added advantage. Also, the lower NPAs will result in lower credit costs. The brokerage has maintained a ‘Buy’ rating on the stock.

3. BSE:

This stock exchange company hit an all-time high of Rs 1,912.8 on Friday and grew 20.8% in the past week. The rise comes after the company announced a hike in transaction costs for equity derivatives, effective November 1. Under the new transaction fee structure Rs 500 per crore will be charged for transactions with a turnover of less than Rs 3 crore. Whereas Rs 3,750 per crore will be charged for transactions with a turnover between Rs 3-100 crore. Rs 3,500 per crore for transactions with a turnover between Rs 100-750 crore, going up to Rs 2,000 per crore for transactions above Rs 2,000 crore.

BSE’s derivatives market share has also grown to 7.4% by September 2023 from 0% in April 2023. Its average daily trading volume in options, which were non-existent between January-May 2023, has risen above Rs 26 lakh crore in September 2023. The Sensex contract is currently catering to 40% of the NSE’s derivatives volume but with the launch of the Bankex contract, BSE will address 95% of NSE’s derivative volume. The launch of Bankex (Monday expiry) will cater to a larger addressable volume and there is a possibility of further gain in market share. The company’s premium market share is 3.3%, which is also expected to rise further with the launch of new contracts and trading on non-expiry days.

In Q1FY24, the company reported a 10x YoY growth in the net profit to Rs 442.7 crore (beating Trendlyne Forecaster's estimate by 94%) while its revenue grew by 37.2% YoY. The company also features in screener for stocks with increasing profits every quarter for the past three quarters. BSE will tentatively announce its Q2FY24 results on November 10.

ICICI Securities downgraded from 'Buy' to 'Add’ on BSE due to higher current valuation but maintains a positive outlook on the back of stellar growth in Q2FY24 and improved pricing. The brokerage expects the company to witness traction in new products like Bankex and expects large brokerages to add BSE product offerings in H2FY24.

4. Tanla Platforms:

This internet & software services stock rose 4% on October 20 as its net profit grew by 5.3% QoQ to Rs 142.5 crore in Q2FY24. Due to this, the company appears in a screener of stocks with increasing profit for the past four quarters.

The company provides services like application-to-person messaging (A2P), WhatsApp, email and chatbots for broadcasting. In Q2FY24, Tanla Platform’s revenue increased by 10.7% QoQ to Rs 1,008.6 crore. This helped the company to beat Trendlyne’s Forecaster estimates for net profit and revenue by 17.9% and 3.3% respectively. However, its EBITDA margin declined by 40 bps QoQ due to increase in cost of services, employee benefits and finance costs.

Revenue rose on the back of improvement in revenue from the digital platforms and enterprise communications segments and also the acquisition of ValueFirst India. The enterprise communications segment (SMS and WhatsApp broadcasts), which contributes to 90% of total revenue, rose by 8.4% QoQ owing to an improvement in revenue from WhatsApp, UPI, OTP SMS broadcast and a hike in National Long Distance Connection (NLD) rates.

Uday Kumar Reddy, Founder and CEO of the company commented, “We expect to complete the ValueFirst overseas acquisition in Q3 subject to regulatory approvals in local geographies which would add around Rs 60-70 crore to the revenue on a quarterly basis.”

Post results, HDFC Securities maintained its ‘Buy’ rating on the stock with a target price of Rs 1,440 per share. This implies a potential upside of 47%. The brokerage expects its volumes to improve, driven by growth in transactional SMS traffic, NLD price hikes and market share gains with ValueFirst acquisition. It expects the company’s revenue to grow at a CAGR of 16.1% over FY23-26.

5. Jubilant Foodworks

This restaurant major has fallen over 4.5% in the past two consecutive sessions, from Thursday. This comes after it reported a fall in its Q2FY24 net profit, down 26.1% YoY to Rs 97.2 crore. This was due to factors including higher finance costs and employee benefit expenses, as well as muted demand and heightened competition. However, its revenue rose by 4.9% YoY to Rs 1,368.6 crore, in line with Trendlyne’s Forecaster estimates, led by Domino’s delivery channel sales. As a result of the revenue rise, it features in a screener of companies with increasing revenue every quarter for the past two quarters.

During the quarter, Domino’s Pizza’s like-for-like or LFL sales growth (which is the YoY growth in sales for non-split restaurants opened before the previous financial year) contracted by 1.3% YoY, therefore, remaining in the negative territory for three consecutive quarters. However, the LFL ADS (average daily sales per store) for matured stores grew 1.4% QoQ. Domino’s Pizza's ‘Cheesy Rewards’ continue to gain traction, with its membership base reaching around 2 crore (up 16% QoQ). Initiatives like 20-minute delivery and discounts on combo offers by the company are expected to aid in improving its sales.

Further, the company continued to expand its store network in Q2FY24, and opened 60 new outlets across various brands, taking the total to 1,949 stores in India. Sameer Khetarpal, the CEO and MD said, “We are on track to meet our guidance of opening 200- 225 Domino’s stores and 30-35 Popeyes stores for FY24”.

Post results, Prabhudas Lilladher maintains its ‘Hold’ rating on the restaurant major, with a target price of Rs 505. The brokerage expects an increase in demand led by the festival season and World Cup. It also has a positive outlook on the company considering its focus on long-term growth.

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

The Baseline

25 Oct 2023

Five analyst picks from the banking and finance sector

By Suhas Reddy

This week, we take a look at five stocks that analysts have picked from the banking and finance sector.

1. IndusInd Bank:

BoB Capital Markets maintains its ‘Buy’ rating on this private bank with a target price of Rs 1,755. This implies an upside of 21.6%. In Q2FY24, the bank’s net profit grew 22.8% YoY to Rs 2,181.5 crore, and its revenue rose by 29.2% YoY.

Analyst Ajit Agrawal attributes the bank’s growth to its robust credit growth trajectory, where vehicle finance, non-vehicle finance and microfinance (MFI) segments have outperformed. He notes that the company’s net interest margin (NIM) was stable due to the recovery of its high-yielding consumer finance division (CFD).

Agrawal adds, “Strong growth momentum in retail and recovery in the MFI book led to stable margins, despite higher costs.” The analyst remains optimistic about the bank’s prospects due to its favourable loan mix and stable asset quality. He expects the company’s net profit to grow at a CAGR of 21.3% over FY23-25.

2. ICICI Bank:

Edelweiss keeps its ‘Buy’ rating on this bank with a target price of Rs 1,195, implying an upside of 30.1%. In Q2FY24, its net profit grew by 35.8% YoY to Rs 10,261 crore, and its net interest income (NII) rose by 23.8% YoY. It beat Trendlyne Forecaster’s net profit estimates by 6.6%.

Analysts Raj Jha and Umang Patil attribute the bank’s growth in Q2 to a healthy rise in domestic loans. In terms of business segments, retail and business banking drove growth. The analysts also highlight improving asset quality, with declining slippages in the retail, rural and business banking segments.

Jha and Patil believe the firm will continue to see healthy growth on the back of asset quality improvement and growing loans. They add, “A strong digital push, focus on risk-calibrated operating returns, and a strong balance sheet will result in a re-rating of the stock.” They expect the private bank’s net profit to grow at a CAGR of 17.9% over FY23-25.

3. Can Fin Homes:

HDFC Securities reiterates its ‘Buy’ call on this housing finance company with a target price of Rs 920. This indicates an upside of 26.6%. In Q2FY24, the company’s profit increased by 11.6% YoY to Rs 158.1 crore, while its revenue grew by 32.5% YoY to Rs 871 crore. It beat Trendlyne Forecaster’s profit estimate by 2.3%. Analysts Krishnan ASV, Deepak Shinde and Neelam Bhatia say, "Delayed asset repricing and a mild softening in the funding environment have contributed to an improvement in NIMs, which now stand at 3.8%."

According to the analysts, asset quality remains stable, with slippages from the restructured portfolio at 14%, which is marginally higher than the guided range. The management has reiterated its loan growth guidance of 18%, coupled with an acceleration in return disbursement. On account of a one-time provision, the analysts have slightly reduced their FY24 earnings estimates for the company by 4%.

4. ICICI Prudential Life Insurance:

KRChoksey reiterates its ‘Buy’ call on this life insurance company with a target price of Rs 625, indicating an upside of 20.2%. In Q2FY24, the company’s profit grew 21.9% YoY to Rs 243.9 crore, despite its revenue falling 22.3% YoY. It missed Trendlyne Forecaster’s profit estimate by 0.4% but beat the revenue estimate by 2.8%.

Analyst Unnati Jadhav believes that the company’s VNB margin declined by 308 bps YoY primarily because of the shift in the underlying product mix towards unit-linked insurance and a decline in non-participating business.

The analyst remains optimistic about the insurance services provider as it has focused on expanding its non-ICICI Bank channels and expects it to reap results from H2FY24 onwards. Jadhav believes that a balanced product mix and improved productivity of the agency channel will drive premium growth in the coming quarters. She says, “We will closely monitor the trends in product mix and their impact on margins going ahead.”

5. IIFL Finance:

ICICI Securities maintains a ‘Buy’ call on this financial services provider with a target price of Rs 760. This indicates an upside of 22.7%. The company’s net profit grew by 25% YoY to Rs 474.3 crore in Q2FY24, while its revenue grew by 23.5% YoY. According to Trendlyne Forecaster, it missed the profit estimate by 2.1% YoY. Analyst Renish Bhuva says, “IIFL Finance’s healthy Q2FY24 financial performance reflects the successful execution of its retail-focused strategy.”

Bhuva notes that controlled asset quality, sustained traction in assigned and co-lending volumes, and strong growth in higher-yielding products like MFI and digital loans led to growth in net profit. He remains optimistic about IIFL, as it has increased its physical presence by adding 184 branches in Q2FY23, taking its total branches to 4,596 in H1FY24. He believes that diversified AUM, investment in franchise development, and access to funds at competitive rates will help sustain its growth momentum.

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

(You can find all analyst picks here)

The Baseline

20 Oct 2023

Five Interesting Stocks Today

1. Angel One:

This capital markets stock has soared by 11.2% over the past week, hitting its all-time high of Rs 2,369.7 per share. The surge comes as its net profit grew by 43.9% YoY to Rs 305.3 crore in Q2FY24, outperforming Trendlyne Forecaster’s estimates by 6.1%. As a result, Angel One appears in a screener of stocks with improving quarterly net profit and profit margin.

The company’s revenue improved by 40.6% YoY on the back of a higher number of active clients, growth in average daily turnover (ADTO) and increased number of orders. Its ADTO surged by 143.4% YoY during Q2FY24. The active client base also increased by 16% YoY to 4.9 million, helping Angel One maintain its position among the top three brokers. Its market share increased by 336 bps YoY to 14.6%.

Dinesh Thakkar, the MD and CEO of the company, said, “Our orders, a key revenue driver for our business, grew by 36% sequentially to over 338 million, marking a lifetime best, while the ADTO generated on our platform remains on an uptrend.”

Over the past year, Angel One (14.6%) has overtaken Upstox (6.6%) in terms of market share concerning the active client base. On the other hand, Groww took the top spot from Zerodha as of September 2023.

Post results, Motilal Oswal Financial Services maintains its ‘Buy’ rating on the stock with an upgraded target price of Rs 2,550 per share. This indicates a potential upside of 8.6%. The brokerage remains confident in the stock, given its strong growth in Q2FY24 and continued technology investments to strengthen its position. It expects the company’s revenue to grow at a CAGR of 16.5% over FY23-25.

2. Polycab India:

This consumer durables company – a historically strong performer currently trading at an eye-watering PE of 78 – has dropped by 2.4% since the announcement of its results on Wednesday. The decline is on account of a slowdown in its fast-moving electrical goods (FMEG) segment and demand tailwinds in the B2B business. However, the firm reported 28.9% growth in its cables and wires business. The firm's Q2FY24 profits beat Forecaster estimates by 10.4%.

During the quarter, Polycab’s revenue increased by 26.6% YoY to Rs 4,253 crore, led by the wires & cables and international businesses. The company’s net profit grew by 58.9% YoY to Rs 429.7 crore and EBITDA margins also improved by 160 bps YoY due to falling commodity prices and the sale of high-margin products. The firm appears in a screener of stocks with good quarterly growth in recent results.

Polycab has almost emptied its non-rated fan inventory in Q2FY24 and expects a revival in its lighting business. The company’s newly launched economy brand ‘Etira’ and premium brand ‘Hohm’ are seeing traction. Further growth is expected to be led by institutional demand, especially by growth in the real estate sector and affordable housing.

Commenting on the company’s performance, Inder T Jaisinghani, the Chairman and MD, said, “The company registered its best-ever first-half yearly revenues and profitability. A favourable demand environment, with multiple growth avenues, and the Centre’s focus on infrastructure development and structural reforms, as well as continued momentum in real estate has given us a good set of results.”

ICICI Securities maintains a ‘Hold’ rating on the firm but raises the target price to Rs 5,600 from Rs 4,100. The brokerage believes that strong institutional demand and a revival in its FMEG segment will help Polycab’s top-line growth.

3. Dalmia Bharat:

This cement company has fallen by 7.1% since announcing its result on Saturday. The decline came after QoQ decreases in the company’s net profit and revenue by 9.2% and 12.1%, respectively, in Q2FY24.

Despite the lackluster sequential performance, its profit rose by 156.1% YoY to Rs 118 crore, beating Trendlyne Forecaster’s estimate by 10.1%. Its revenue is also up by 7.5% YoY, at Rs 3,234 crore. Its EBITDA margins expanded by 5.8 percentage points YoY to 18.7% due to lower power & fuel and freight costs. The company features in a screener for stocks showing growth in operating profit and operating margins.

During the quarter, Dalmia Bharat lost market share in West Bengal and Bihar due to price hikes. In response, the management has implemented corrective measures and anticipates a positive swing starting from Q4.

According to the management, Dalmia Bharat has benefited from rising cement prices, particularly in the East, where costs surged by Rs 40-50/bag. Taking note of improved demand, it has also upped the price by Rs 30/bag in the southern market.

For FY24, the company is planning a capex of Rs 6,500 crore, including Rs 3,700 crore for the acquisition of Jaiprakash Associates’ (JPA) cement assets. Meanwhile, the company's net debt increased by Rs 290 crore to Rs 1,500 crore this quarter and is expected to swell further to around 3,000-4,000 crore with the conclusion of the JPA deal.

Motilal Oswal reiterates a ‘Buy’ call on Dalmia Bharat and expects its volume to clock a CAGR of 11% over FY24-26. It estimates an EBITDA/tonne of Rs 1,045 in FY24, as against Rs 901 in FY23, driven by lower opex.

4. Bajaj Auto:

This two-wheeler manufacturer rose by 7.5% over the past week till Friday, and also touched its 52-week high of Rs 5,510. This surge follows a 17.8% YoY increase in stock price comes on the back of its Q2FY24 net profit rising by 17.8% YoY to Rs 2,020 crore. It beat Trendlyne Forecaster’s net profit estimates by 15.1%. The management attributes this improvement in profitability to normalising commodity costs and a better product mix. The stock also shows up in a screener for companies with increasing cash flows from operations over the past two years.

However, this growth comes despite a 0.2% YoY dip in its Q2 sales volume. The slump in exports offset strong growth in the domestic market. falling by 0.2% YoY as growth in the domestic market was offset by a decline in exports. In contrast, Bajaj Auto's domestic On the domestic front, the company's retail sales increased by 22% YoY, outperforming the industry’s domestic retail sales growth of 10% YoY for the same period in Q2FY24.

The firm gained from the healthy demand for 125cc+ bikes in the domestic industry, which made up 51% of all two-wheeler sales in the 2-wheeler domestic market during Q2. Specifically, Bajaj Auto’s retail sales in this 125cc + segment grew by 36% YoY, outpacing the rest of the industry. Currently, Bajaj Auto The company has a 30% market share in the 125cc + segment, which and this segment accounts for 65% of its domestic volumes.

The management expects to drive growth in the near-to-medium term by increasing its market share in the 125cc+ segment through new launches. It also aims to sustain its 80% market share in the internal combustion engine (ICE) three-wheeler segment, and boost increase its presence in the electric three-wheeler market. Although the company’s exports have been sluggish are currently subdued, wholesales and retail sales in the key markets like of Africa, Latin America and Asia have started to improve on a QoQ basis. The firm expects exports to start recovering gradually as the inflation subsides in these key markets reduces.

5. Karur Vysya Bank:

This banking and finance company has risen over 6% since Monday and is currently trading near its 52-week high, after reporting healthy Q2 numbers. The bank reported its highest-ever quarterly net profit of Rs 378.5 crore (up 51.2% YoY), beating Trendlyne’s Forecaster estimates by 5.7%, owing to a sharp decline in provisions. As a result, it features in a screener of companies with increasing profits every quarter for the past four quarters. The bank’s net interest income grew 11.5% YoY to Rs 915 crore, helped by improved revenue from the treasury, corporate banking, and retail banking segments.

During the quarter, Karur Vysya’s deposits grew by 13.2% YoY, while its loan book was up by 15.3% YoY, driven by the MSME and housing segments. Its asset quality has also improved, as NPAs decreased by 91 bps YoY to 0.5%. According to Managing Director and CEO Ramesh Babu, "Our slippages are under control, and our gross slippages for the quarter is less than 1%, which is as per our guidance." He also highlighted the bank’s focus on retail deposit mobilisation, while maintaining a steady growth strategy.

Post Karur Vysya’s results, Emkay Global maintains its ‘Buy’ rating with an upgraded target price of Rs 185, implying an upside potential of 28.6%. The brokerage has a positive outlook on the bank, given its superior return ratios. It anticipates the bank to register its decadal best RoA and RoE at 1.5% and 16%, respectively, over FY24-26E.

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

The Baseline

18 Oct 2023, 04:40PM

Chart of the Week: Foreign and domestic investors pick finance, auto stocks

By Akshat Singh

Retail investors often seek cues from market heavyweights—foreign portfolio investors (FPIs) or domestic institutional investors (DIIs)—to identify strong-performing sectors. As the final quarter of 2023 kicks off, we take a look at the sectors these institutional investors are betting on.

The heatmap identifies sectors with high FPI activity in 2023. The financial services sector was a favourite among FPIs,with a net investment of Rs 1,20,525 crore. In fact, from April to July 2023, FPIs put money into this sector for four consecutive months.

Oil & gas, on the other hand, had the highest FPI outflow of Rs 19,585 crore from January to September 2023. The FMCG sector saw cyclical FPI investments: an inflow of Rs 12,386 crore from March to July 2023, followed by an outflow of Rs 4,403 crore in August and September 2023, influenced by El Niño conditions and worries about rural consumption.

In the capital goods sector, FPIs were net buyers from February to September 2023, with an investment of Rs 34,184 crore. However, they shifted gears in September 2023, turning net sellers with a total outflow of Rs 14,764 crore.

FPIs invest the most in financial services and auto

Looking at these trends a little more closely, we start with the financial services sector, which kicked off the year on a low note. FPIs withdrew Rs 15,204 crore from the sector in January 2023 due to concerns over its exposure to Adani Group companies.

However, this soon reversed, with FPIs investing Rs 36,292 crore in the sector in 2023. Despite global challenges since March 2023, India's financial sector has remained stable with continuous growth in bank credit, falling non-performing assets, and high capital and liquidity reserves.

The capital goods sector ranks among the highest in FPI inflows for the year, drawing an investment of Rs 34,098 crore. This increase can be attributed to a 12% YoY growth in the order books for the top 30 engineering and construction (E&C) firms, reaching $161 billion in Q1FY24. This expansion was largely driven by substantial orders from the railway and road construction sectors due to an infra capex boost of 33% in the FY24 government budget.

Next is automobiles, attracting Rs 25,941 crore of net FPI investment from January to September 2023. According to Geojit, the Indian automobile industry is rebounding after a five-year slump, observing an uptick in passenger vehicle volumes and a recovery in commercial vehicle sales.

The consumer services sector isn't far behind, registering an inflow of Rs 9,837 crore till September 2023 since the start of 2023. The sector has risen 24.2% in the past six months.

The once-upbeat IT sector has struggled, with a net FPI outflow of Rs 9,805 crore this year due to recession fears in its key markets, North America and Europe. However, there was a small revival with an investment of Rs 1,886 crore in September 2023.

The power sector saw a net FPI outflow of Rs 9,731 crore in September 2023 due to profit-booking, as stocks like Power Grid Corp and Bharat Heavy Electricals hit record highs. The rise was due to a report by the Power Ministry stating that India’s power demand touched an all-time high of 234 GW on August 17 2023. Additionally, the centre plans to expand its thermal energy capacity by 25 GW to 30 GW.

FPIs are currently positive on the healthcare sector with a net investment of Rs 8,712 crore from April to September 2023. On the other hand, the FMCG sector had a net buying of Rs 6,832 crore YTD. According to Nuvama, this is due to falling input prices that led to rising margins from March to July 2023.

Lastly, the oil and gas sector saw a net selling of Rs 19,585 crore this year. Market volatility due to OPEC sanctions and geopolitical factors, such as supply chain disruptions due to the Israel-Hamas conflict, played a significant role in this trend. Brent Crude futures have risen by 9.2% YTD.

Mutual funds mirror FPI focus on banking & finance

J B Chemicals leads in MF investment, while Camlin tops in outflow

Domestic investors have also shown clear preferences over the past month, as Indian markets turned volatile. According to a Trendlyne screener, MFs invested the most in banking & finance (26 companies) followed by the auto sector (10 companies). Within banking & finance, Power Finance Corp saw the most significant spike in MF investment, surging by 350 basis points MoM. The stock recently made headlines for issuing a loan of Rs 1,229 crore to Assam Petrochemicals and rose 10% in the past month.

On the other hand, another screener tracking the highest outflows by DIIs highlights a steep decline in MF holdings for Camlin Fine Sciences, dropping 190 basis points in the past month.

While FPIs pulled out of power stocks, MFs strengthened their positions in companies like Power Grid Corp. It saw a 360 basis points rise in MF holdings in the past month. Meanwhile, DIIs scaled down investments in consumer services stocks such as Krsnaa Diagnostics by 70 basis points in the past month.

J B Chemicals and Pharmaceuticals’ MF holdings increased by 15.4 percentage points over the same period. This increase is due to the pharma company receiving US FDA approval for manufacturing and marketing the generic Doxepin Hydrochloride capsules on August 23, 2023. Mutual funds like Axis Growth Opportunities Fund, NJ Flexi Cap Fund, Invesco India and HSBC Small Cap were the leading investors in the stock.

Defence player Hindustan Aeronautics also saw a 6.8 percentage point MoM rise in MF holdings. The company’s order book, at Rs 81,784 crore as of July 2023, was aided by the centre's private indigenisation list. Restaurant Brands Asia, a restaurant player, also had a 5.3 percentage point surge in MF investments over the past month.

Despite FPIs funnelling Rs 763 crore into real estate companies, MFs reduced exposure to Phoenix Mills by 90 basis points. Similarly, banking & finance stocks like MCX and IDFC also saw declines in MF holdings, falling by 120 basis points and 140 basis points respectively in the past month

The Baseline

16 Oct 2023

Five analyst picks this week

By Satyam Kumar

1. Bharat Forge:

SBI Securities maintains its ‘Buy’ rating on this manufacturer of forged components with a target price of Rs 1,338.9, implying an upside of 19.3%. Analysts at the brokerage believe that the stock is well-positioned to benefit from the growing demand for forged steel and aluminium, given its market leadership. They are also positive about the firm’s plans to diversify away from commercial vehicles and enter into the defence & aerospace industry.

Analysts at SBI Securities expect Bharat Forge to gain significantly from the ongoing shift of manufacturing bases from China and Europe to India. Overall, they believe the firm’s healthy growth trajectory will be sustained by a “steady expansion in its order book and effective execution, which can drive revenue growth over the next few years”. The analysts expect the company’s revenue to grow at a CAGR of 15% over FY23-25.

2. HCL Technologies:

Motilal Oswal maintains a 'Buy' rating on this IT consulting and software company with a target price of Rs 1,410, reflecting an upside of 11%. Analysts Mukul Garg, Pritesh Thakkar, and Raj Prakash Bhanushali have a positive outlook, given the company's healthy deal pipeline. This includes a record net-new deal total current value of $3.79 billion, including the Verizon deal. In Q2FY24, HCL Technologies reported a revenue of Rs 26,672 crore, marking an 8% YoY increase, while its net profits rose by 9.8% YoY.

Garg, Thakkar, and Bhanushali highlight the company’s focus on reducing operational expenses as a key positive. They point out that EBIT margins have improved by 150 basis points QoQ to 18.5%, thanks to cost-control measures implemented in H1FY24 and the rationalisation of the employee pyramid. The analysts express confidence in the company achieving margins of 18-19%. They note this is likely because the company has cut over 2,000 jobs for the second consecutive quarter and has also skipped management-level increments, which is a major component of the wage bill.

3. Equitas Small Finance Bank:

Hem Securities recommends a ‘Buy’ call on this bank with a target price of Rs 112, indicating an upside of 14.3%. Analyst Madhur Mandhana says, “Equitas Small Finance Bank provides a suite of products and services tailored to the needs of its customers, including individuals with limited access to formal financing channels, affluent and mass affluent individuals, MSMEs, and corporates.”

According to the analyst, in Q2FY24, the bank’s asset quality was stable and its MFI, new CV, and house financing segments were important growth drivers, with well-distributed disbursements. Mandhana believes new products like credit cards, new vehicle loans, and personal loans will maintain credit growth healthy in the medium term. He also believes that the cost-to-income ratio will likely remain elevated through FY24. He remains optimistic about the bank as its asset quality has improved over the previous year, and the trend of good recoveries and upgrades is projected to continue. He expects the bank to achieve 25-30% loan growth in FY24.

4. State Bank of India (SBI):

HDFC Securities maintains a ‘Buy’ call on this bank with a target price of Rs 790. This indicates an upside of 36.9%. Analysts Krishnan ASV, Neelam Bhatia and Akshay Badlani say, “While SBI has always enjoyed brand recognition and scale, the bank has gradually added other competitive moats in the form of a ‘prolific’ sourcing edge, a YONO-powered digital stack, an unparalleled lean distribution model, and a potent combination of cross-sell focus and competencies.”

The analysts believe that this combination of traditional strengths and newly-added moats has led to higher throughput, sustained efficiency gains, and high-quality new loan origination. This results in structurally lower credit costs and better return ratios. The analysts expect repricing of existing deposits to pick up pace and exert pressure on near-term NIMs, while the loan deposit ratio (at 73%) will support SBI’s growth appetite.

5. JTL Industries:

Axis Direct maintains a ‘Buy’ rating on this iron & steel products manufacturer with a target price of Rs 265, implying an upside of 8.9%. In Q2FY24, the company’s net profit rose by 37.7% YoY and revenue increased by 67.4% YoY. Although the firm’s net profit growth missed the brokerage’s estimates by 4%, analyst Aditya Welekar keeps an optimistic outlook for the stock’s growth prospects.

He remains positive about the firm due to its sales volume growth guidance of 40% YoY in FY24. Welekar adds, “The company aims to exceed the 30% growth target and has guided for 0.33 MT in FY24 compared to 0.24 MT in FY23. This translates to a 40% YoY growth.” He expects healthy growth on the back of higher sales volumes and an increase in the share of value-added products in the coming quarters. The analyst predicts that the net profit for this steel product maker will grow at a CAGR of 51% over FY23-25.

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

(You can find all analyst picks here)

The Baseline

13 Oct 2023

Five Interesting Stocks Today

1. Titan Company

This gems and jewellery major has seen a 2.1% increase in its share price over the past week, trading near its 52-week high of Rs 3,352 with significant volumes. The rise is driven by its recent Q2FY24 business update, where it reported a 20% YoY increase in revenue. As a result, Titan appears in a screener of companies with prices above short, medium and long-term moving averages.

The jewellery segment (which contributes 85% of the total revenue) reported a 19% YoY growth in revenue. Titan says this uptick is from new collection launches, strong gold sales during the harvest season, and a spike in high-value studded purchases during the quarter. According to Trendlyne’s Forecaster, Titan’s revenue is expected to grow by 15.2% YoY in Q2FY24.

The company also expanded its retail presence by opening 81 new stores this quarter, taking its total store count to 2,859. Currently holding a 7% market share in the Indian jewellery market, Titan is focused on expanding its retail footprint.

With the festival and wedding seasons ahead, as well as easing gold prices, analysts predict a surge in Titan's Q3 sales. According to Motilal Oswal, earnings growth visibility for the company remains strong. The brokerage has a ‘Buy’ rating, with a target price of Rs 3,570.

2. Prestige Estates Projects:

This realty company hit its all-time high of Rs 796.4 on Tuesday. The stock rose by 6.7% over the past week. The price rise follows the company’s announcement of record sales of Rs 11,007.3 crore (up by 69% YoY) during H1FY24, aided by a 30% YoY increase in volume to 10.7 million square feet and a 13% YoY rise in collections to Rs 5,380.6 crore.

In Q2FY24 alone, Prestige Estates Projects’ sales rose by 102% YoY to Rs 7,092.6 crore, and collections increased by 1% YoY to Rs 2,639.8 crore. Speaking about future prospects, Chairman and Managing Director Irfan Razack said, “With a promising pipeline of projects, we are poised for growth for the rest of the year.” In FY24, the company expects to achieve annual presales of Rs 18,000 crore, led by high-value launches in Mumbai. It will also launch residential/commercial units worth Rs 27,500 crore and spend Rs 4,000 crore annually on land/stake buyout.

In Q1FY24, Prestige Estates Projects’ profit increased by 30.3% YoY to Rs 266.9 crore, beating Trendlyne Forecaster’s estimate by 115%. It also appears in a screener for stocks with improving book value per share for the past two years.

HDFC Securities maintains a ‘Buy’ call on the firm on the back of its robust supply pipeline, a positive outlook due to decreasing recession probabilities and sustained housing demand. According to Trendlyne Forecaster, 16 analysts have a consensus ‘Buy’ recommendation, with 12 of them indicating a ‘Strong Buy’.

3. PCBL:

This carbon black manufacturer has risen 10.4% over the past week till Friday. This uptrend comes after the firm bagged two patents from the Indian Patent Office on Wednesday, one for specialty-grade and another for surface-modified carbon black. The first patent is for an innovative process of modifying specialty-grade carbon blacks for use in inks and coatings. The second patent focuses on a composition developed by PCBL to improve fuel efficiency and tyre life.

The management has guided its carbon black sales volume to grow by 10-12% YoY in FY24, driven by rising demand for tires. Rising auto sales, the easing of supply chain issues, and an improvement in the tyre replacement market is driving growth. The company estimates tyre demand to grow by 8-9% YoY in FY24. According to Trendlyne’s Forecaster, the firm’s annual net profit is expected to climb by 30.3% YoY in FY24. The company also shows up in a screener of stocks with good valuation, high RoE, and strong momentum scores.

Although the firm did not see a slowdown in global demand in Q1FY24, it remains cautious about the export market. SBI Securities believes that PCBL is well-placed to benefit from American and European companies diversifying their supply chain away from Russia.

4. Zomato:

This food delivery services provider touched its 52-week high of Rs 113.2 per share on Thursday after brokerages increased its target price. Kotak Institutional Equities has revised its target price to Rs 125 from Rs 110, citing growing profitability from higher order intensity, improved demand trends in non-metro cities, and better volumes.

However, SoftBank Vision Growth Fund sold a 1.2% stake in the company for Rs 947 crore on August 30, while Tiger Global divested its remaining stake for Rs 1,124 crore on August 28. But the company still appears in a screener of stocks with high FII holdings.

Zomato turned a profit for the first time in Q1FY24 on the back of a 64.2% YoY revenue growth. Although it posted a pre-tax loss, a deferred tax credit of Rs 17 crore resulted in a net profit of Rs 2 crore. For Q2FY24, Forecaster estimates its revenue and net profit to improve by 8.4% and 990% QoQ respectively. In the Q1FY24 earnings call, Chief Financial Officer, Akshant Goyal said, “We expect our business to remain profitable and continue to deliver over 40% YoY top-line growth for at least the next couple of years.”

ICICI Securities maintains its ‘Buy’ rating on the stock with an upgraded target price of Rs 160 per share. This indicates a potential upside of 43.6%. The brokerage expects its profitability to improve over the next four quarters on the back of increased revenue from advertising, Zomato Gold and the introduction of platform fees. It also projects the company’s revenue to grow at a CAGR of 39.9% over FY22-25.

5. NCC:

This construction & engineering company’s stock price rose 3.6% on October 3 after winning three orders amounting to Rs 4,200 crore. It includes a major transport order from the Mumbai Municipal Corporation. Additionally, Larsen & Toubro and NCC are competing for the Hyderabad Airport Metro Rail project, having submitted bids for the Rs 5,688 crore tender. According to Trendlyne’s Technicals, the stock has climbed 3.3% in the past week, earning its spot in a screener for affordable stocks with good momentum and RoE.

The company’s Q1FY24 net profit increased by 33.9% YoY to Rs 653.1 crore. Order inflows have also improved by 83% YoY, taking the total order book to an all-time high of Rs 54,110 crore. The management foresees a 20% YoY revenue growth for FY24, driven by strong execution. Also, EBITDA margin is expected to expand by 20 bps in FY24, aided by lower input costs.

The arbitration with Sembcorp over the construction of a thermal power plant in Telangana has concluded, and NCC foresees a payout of Rs 606.2 crore in Q3FY24. The company’s gross standalone debt rose by 33.7% QoQ in Q1FY24, aided by higher working capital requirements for faster executions.

Geojit has raised its FY24 and FY25 EPS estimates by 5% and 10%, respectively, due to robust order execution, a record-high order book, and improved margins. The broker maintains a ‘Buy’ rating on the stock.

The Baseline

12 Oct 2023

The big winners: Five stocks expected to stand out in the Q2FY24 results season

By Tejas MD

People woke up to shocking headlines on Saturday - an attack by Hamas within Israel that left more than a thousand people dead and several thousand wounded. It has led Israel to declare war on Gaza and cut off food, electricity and water supplies to the Palestinian region. The spiralling tensions have pushed oil prices higher, reminding us how interconnected global markets are.

The conflict has also raised fresh concerns about US and Iran being pulled into a Middle East fight, especially when the world is already struggling with rising interest rates and sticky inflation. Brent crude oil futures soared by over 4.5% on Monday on the news, with fears about potential disruptions to Iran's oil supply.

The surge in crude oil prices comes even as inflation has been more stubborn than expected globally. This has revived worries of a recession in the US, and Bloomberg Economics has predicted a 100% chance of an American recession in the next twelve months.

And when the US sneezes, the world catches a cold.

Neelkanth Mishra, Axis Bank’s chief economist, highlighted this link in an October 7 interview,saying, “If the US sees a recession, India’s IT services industry and business services exports could be hit. Services make up 10% of India's exports. If they fall by a lot, we could lose 1% in GDP growth."

But in the near term, analysts are positive about India’s growth story as we head into the Q2FY24 results. According to a report by Motilal Oswal, Nifty 50 companies’ net profit is set to rise 21% YoY on average in Q2FY24.

In this week’s Analyticks,

Q2FY24 pre-results special: Five companies set to zoom with high revenue growth
Screener: Companies expected to post the highest revenue and net profit growth for Q2FY24

The big winners: Five stocks expected to stand out in the Q2FY24 results season

Heading into the Q2FY24 results, we shortlisted five stocks from the Nifty 500 that are predicted to post the highest revenue and net profit growth YoY in Q2FY24, according to Trendlyne’s Forecaster. What’s more? These companies already set the bar high with strong results in Q1FY24.

Growth stocks in focus are from five different industries

All five stocks in focus, Godrej Properties, KPIT Technologies, Craftsman Automation, Angel One and CCL Products India, are from different industries. They have not only risen sharply over the past year but have also outperformed the Nifty 50.

Godrej Properties, KPIT Tech and Angel One trade near their 52-week highs

Trendlyne’s Momentum scores for these companies range from neutral to high, indicating buying interest in the market. However, low Valuation scores for Godrej Properties, KPIT Technologies and CCL Products India are a signal that they may be expensively priced.

Angel One leads with ‘Good’ Durability and Momentum scores

These companies have high durability scores, thanks to strong financials and management stability.

Godrej Properties surges amid a revival in residential real estate

The realty industry has had a pretty good year. Nifty Realty went up by 34.9% in 2023, driven by companies posting record pre-sales and rising realisations, mainly in the residential segment.

Indians are snapping up homes at an impressive rate - consulting firm CBRE says that residential sales grew 4% YoY (6% HoH) to over 150,000 units in H1CY23. By the end of 2023, they expect this number to cross 300,000, which would be the highest sales in 10 years.

Godrej Properties is riding this wave, and its Q2FY24 revenue is expected to jump 141.5% YoY, and net profit by 163.8%.

Godrej Properties’ Q2FY24 revenue expected to jump 141.5% YoY

In the Q1FY24 earnings call, Gaurav Pandey, MD and CEO of Godrej Properties, had said that they plan to achieve pre-sales of Rs 15,000 crore in FY24E.

Godrej Properties’ pre-sales to grow at a CAGR of 23% over FY23-25E

Motilal Oswal expects the company’s pre-sales to rise by 18,900 by FY25. After the acquisition of multiple projects over the last few quarters, the management’s focus will now shift towards execution.

Outperformer in a weak sector: KPIT Tech to shine despite muted outlook for tech

This IT consulting and software company has risen by around 66.3% in the past year, outperforming the Nifty IT by 47 percentage points. KPIT Technologies provides engineering solutions for firms in the CASE (Connected Autonomous Shared and Electric) auto segment. KPIT Tech’s revenue and net profit are expected to rise both YoY and QoQ in Q2FY24.

KPIT Tech to post QoQ revenue growth for the 11th consecutive quarter

A report by HDFC Securities suggests diverging revenue trends among IT companies for Q2FY24. While tier-1 IT firms might see sequential growth ranging from -1.4% to +2.2%, mid-tier companies like KPIT are likely to register a more positive 0.9% to 3.8% growth.

Notably, KPIT Tech’s top line has been rising QoQ for the past 10 quarters, and is expected to rise 5.5% in Q2FY24 despite the tech slowdown. This is because of a 20% surge in engineering spending by auto OEMs over the past year. KPIT’s heavy investments in autonomous and electric technologies have cemented its leadership position in this segment.

Craftsman Automation’s aluminum push to boost Q2 results

Thisauto parts and equipment manufacturer’s revenue and net profit is projected to rise an impressive 44.3% and 58.9% YoY, respectively, in Q2FY24.

Revenue from auto-aluminum products to drive Craftsman’s top line in Q2

Sometimes, a new product segment significantly alters a company’s fortunes. Over the past two years, Craftsman has strategically diversified its revenue sources - while it previously manufactured ferrous casting products like cylinder blocks and cylinder heads for commercial vehicle powertrains, the company has been expanding aggressively into the more profitable passenger vehicle and two-wheeler industry since FY22. The entry point was through the aluminum products segment.

ICICI Securities expects revenue contribution from aluminum products to rise from 25% in FY22 to 48% by FY26, while powertrain revenue share should fall from 52% to 35%.

Craftsman Automation to significantly expand aluminium products revenue share by FY26E

The brokerage has a positive outlook on Craftsman on the back of continued growth in the passenger vehicles (PV) market, especially utility vehicles (UVs), a revival in two-wheeler production, and an improved focus on the industrial and farm equipment segments.

Angel One’s market share in NSE active clients continues to rise

With the Nifty 50’s bullish trend in 2023, the number of demat accounts added has increased for the fourth consecutive month in August.

Number of demat accounts added rises for four months straight

Angel One enjoys the third-highest market share among brokerages, with 4.7 million active clients, after Zerodha and Groww. Angel One’s broker market share rose by 3.3 percentage points YoY to 14.2% in August.

The company is expected to post strong results in Q2FY24, aided by healthy growth in net broking revenues and net interest income. Trendyne’s Forecaster estimates the broker’s revenue to rise 43.7% YoY, while its net profit is projected to grow by 32.6% YoY in Q2.

However, HDFC Securities expects staff costs to stay elevated due to the company's effort to invest in more tech talent, leading to margin pressure. Notably, the stock hit a new 52-week high last week, ahead of its results announcement on October 12.

Growth is brewing for CCL Products, as it boosts capacity

CCL Products India is engaged in the production, trading and distribution of coffee, mainly in India, Vietnam and Switzerland. Its Q2FY24 revenue and net profit are expected to rise by 34% YoY and 42.2%, respectively.

CCL Products India’s net profit to rise by 42.2% YoY in Q2

The company posted strong revenue growth in Q1FY24 as well, on the back of 18-20% volume growth, driven by an additional 16,000 metric tonnes capacity expansion in its Vietnam plant end-FY23. The management expects the volume growth trend to continue for the next 3-4 years. However, high coffee bean prices are a major risk to the company’s profitability.

The management has also increased its debt guidance to Rs 2,000 crore for FY25, due to rising capex, with plans to expand the production capacity to approx 77,000 metric tonnes (MT) by FY25 in Vietnam and India.

Screener: Companies expected to post the highest YoY revenue and net profit growth for Q2FY24

Jindal Stainless, MTAR Tech among the highest revenue growth estimates in Q2FY24

In the earlier section, we covered five of the stocks which are likely to outperform in Q2FY24. The relevant screener tracking these companies has a full list of 99 stocks from the Nifty 500. These stocks are expected to have the highest YoY revenue growth and QoQ net profit growth % in Q2FY24. These stocks have already delivered YoY growth in both revenue and net profit in Q1FY24.

The list is diverse, featuring stocks from several sectors, including auto parts & equipment, IT consulting & software, pharmaceuticals and packaged goods sectors. Major stocks in the screener are Jindal Stainless, MTAR Technologies, Central Depository Services India, Tata Motors and CE Infosystems.

Jindal Stainless’ revenue grew by 86% YoY to Rs 10,227.2 crore in Q1FY24, aided by improved sales volumes of stainless and carbon steel. Trendlyne’s Forecaster estimates its revenue to rise by 83.4% YoY in Q2FY24. ICICI Securities believes that the acquisition of Jindal United Steel will aid the iron & steel producer’s revenue and profitability.

MTAR Technologies’ Q2FY24 revenue is expected to improve by 49.7% YoY, according to Trendlyne’s Forecaster. Its revenue grew by 67.6% YoY to Rs 156.7 crore in Q1FY24. According to Edelweiss, the defence company’s revenue is expected to grow in line with the management’s guidance of 45-50% in FY24 on the back of a strong order book and client additions in the global aerospace and clean energy segments.

Trendlyne’s Forecaster estimates Central Depository Services of India’s revenue to grow by 38.2% YoY in Q2FY24. This is an improvement from the 6.8% YoY increase in revenue in Q1FY24. HDFC Securities expects a recovery in the investment company’s revenue growth, aided by recovery in the beneficiary owner (BO) account addition, higher revenue from the transactions segment and growth in revenue from the annuity segment.

You can find more screeners here.

The Baseline

11 Oct 2023

Chart of the Week: Banking, IT and general industrials stocks are the highest contributors to Nifty 500’s gain over past year

By Akshat Singh

In this edition of Chart of the Week, we look at the top 15 stocks that drove the Nifty 500’s rise in the past year. These stocks were responsible for 25.3% of the Nifty 500’s 14% gain. This translated to an overall 3.6 percentage point contribution.

Over the past year, the Nifty 500 has risen 14%. To understand which were the top stocks that drove this surge, we analysed the change in market capitalisation for stocks in the index, and divided it by the total change in market cap across all index members.

NBFCs and public sector banks lead gains in banking & finance

Six of the 15 stocks in our list are from the banking & finance sector. Within the sector, the non-banking financial company (NBFC) industry is represented by Indian Railways Finance Corp, Power Finance Corp, and REC. These three stocks drove 3.5%, 2.2%, and 2.2% of the Nifty 500’s gains, registering impressive one year returns of 250%, 191%, and 199%, respectively.

The top public sector banks in the list include Indian Overseas Bank, UCO Bank and Union Bank of India, contributing Nifty500 gains of 2%, 2%, and 0.2% respectively. They delivered multibagger returns of 161%, 262%, and 135% in the past year.

The public banking sector’s PE TTM ratio stands at 8, compared to the overall banking industry's 19.2, indicating potential for further growth in PSU bank stocks. Several growth drivers like the RBI's decision to remove the incremental CRR (Cash Reserve Ratio) mandate of 10% for scheduled banks and the inclusion of Indian sovereign bonds in the JP Morgan Government Bond Index are at play.

Engineering stocks surge on budget boost and lower input costs

Larsen & Toubro and Rail Vikas Nigam from the cement & construction sector have contributed 3.9% and 1.9% respectively to Nifty 500’s yearly gain. Their performance got a lift from the government’s 33% capex hike to Rs 10 trillion in the FY24 budget. The sector's growth can also be attributed to the declining prices of input materials like steel, which have fallen by 22% since their peak in Q4FY22. These prices are further expected to drop by 9-11% in FY24. This decline is expected to have a positive impact on operating profitability, especially for companies with fixed-price contracts, which typically constitute 25-30% of their total revenue.

Larsen & Toubro’s stock price rose by 62% in the past year. According to the company's Chief Financial Officer, R Shankar Raman, its order book increased by 57% YoY to Rs 65,000 crore in Q1FY24. The management expects it to surge to Rs 2 lakh crore by Q4FY24.

Rail Vikas Nigam, with a 368% rise in the past year, has reaped the benefits of the government’s Rs 2.4 lakh crore allocation to the railways in the FY24 budget. As of Q1FY24, the company's order book is at Rs 65,000 crore, including Rs 30,000 crore from the railways. The management aims to grow it to Rs 75,000-1 lakh crore by the end of the fiscal year.

Meanwhile, IT major Tata Consultancy Services contributed 3.3% to Nifty 500’s gains, thanks to a 17% annual share price growth. The company has multiple transformational deals in its pipeline, including projects with NEST for digital scheme administration services. According to Sharekhan, TCS sustains strong deal momentum, averaging $8.9 billion from Q1FY23 to Q1FY24. Notably, contracts with JLR (Jaguar-Land Rover)/NEST and BSNL, valued at $1 billion, $1.1 billion, and $1.8 billion, are expected to boost revenue growth estimates.

Strong order books and inflows drive general industrials and shipping stocks

Suzlon Energy, a heavy electrical equipment company, added 1.5% to the gains of Nifty 500, thanks to a 280% rise in its stock price in the past year. The company currently holds a 33% market share in the wind energy space, with an order book of 1.5 GW in the domestic market. According to ICICI Securities, its revenues are expected to achieve a CAGR of 37% during FY23-25.

Mazagon Dock Shipbuilders, a shipping company, contributed 1.6% to Nifty 500’s gains. With multibagger returns of 261% in the past year, the company’s order book consists of defence orders amounting to Rs 50,000 crore as of August 2023. The firm is also competing with a joint venture of Larsen & Toubro and Thyssenkrupp, Germany, in the bidding of P75 submarines.

Other significant contributors to Nifty 500’s gains are ITC, NTPC and The Fertilisers and Chemicals Travancore. ITC, with a 31% annual growth, contributed 2.5%, while NTPC’s 45% annual stock price increase added another 1.5%. The Fertilisers and Chemicals Travancore contributed 1.8%, with a remarkable 366% rise in its share price over the same period

The Baseline

10 Oct 2023

Five analyst picks this week

By Abhiraj Panchal

1. Birla Corp:

ICICI Direct maintains a 'Buy' rating on this cement manufacturing company with a target price of Rs 1,540, indicating an upside of 23.2%. Analyst Vijay Goel is optimistic about the company's efforts to enhance capacity utilisation and operational efficiency, which are expected to boost margins and profitability.

Goel is upbeat about the recently commissioned 3.9 million-tonne cement facility in Muktaban, Maharashtra. He foresees robust sales volume growth as Birla Corp expands in the west while maintaining a strong footprint in the northern, central, and eastern parts of India. He projects a strong CAGR of 8.2% in sales volume over FY23-25.

The analyst notes the company's efforts to improve operational efficiency through streamlined raw material sourcing, increased utilisation of coal from its captive mines, and a shift towards captive power, including solar and waste heat recovery. Goel also highlights government incentives for the Muktaban facility, lower fuel costs, and a strategic focus on premium product sales as key contributors to potential margin and profit growth in FY24-25.

2. Federal Bank:

Sharekhan maintains its ‘Buy’ rating on this private bank with a target price of Rs 170, implying an upside of 14.8%. Analysts at the brokerage expect the bank to sustain its healthy operational performance, with strong loan growth, healthy fee income, and lower credit costs, despite net interest margin (NIM) pressure in the near term. They add, “The bank saw an impressive loan growth of 20% YoY and 5% QoQ in Q2FY24. This growth was broad-based across retail (22% YoY) and wholesale (17% YoY) segments.”

The analysts highlight the management’s optimistic outlook on credit growth, which is guided to be 18-20% in FY24, with broad-based traction across asset classes. Federal Bank plans to scale up the share of high-yielding assets in its loan book. The analysts also expect NIMs to bottom out in H1FY24 and gradually pick up in H2FY24. They forecast the bank’s standalone net profit to grow at a CAGR of 17.5% over FY23-25.

3. APL Apollo Tubes:

Motilal Oswal maintains a 'Buy' rating on this iron and steel products company with a target price of Rs 1,930, indicating an upside of 22.6%. Analysts Sumant Kumar, Meet Jain, and Omkar Shintre hold a positive outlook due to the company's well-distributed manufacturing plants, giving it a robust geographic presence and keeping it close to customers.

Analysts at Motilal Oswal see the company's focus on value-added products as a big plus, especially with the addition of the Raipur plant, which has a capacity of 1.2 million tonnes per annum (MTPA). They expect the Raipur unit to produce innovative roofing products designed for better corrosion protection and durability. They believe that these value-added products will boost margins.

Kumar, Jain and Shintre expect that increased capacity, debottlenecking, and the addition of high-margin products from the Raipur unit, will drive volume growth and margin expansion in the future.

4. Navin Fluorine International:

HDFC Securities maintains its ‘Buy’ rating on this commodity chemicals manufacturer with a target price of Rs 5,368, implying an upside of 44.6%. Analysts Nilesh Ghuge, Harshad Katkar and Akshay Mane are optimistic about the firm’s growth prospects despite the resignation of its Managing Director, Radhesh Welling. Their positive outlook is on the back of the firm’s strong earnings visibility, given its long-term contracts, increasing share of high-margin segments in total sales, and rising production capacity. They also add, “The company’s operating model, with individual CEOs leading each business vertical, supported by senior management teams from various departments, will help it maintain its growth strategy.”

Ghuge, Katkar and Mane are positive about the management’s focus on maintaining capex spending, and research & development investments. They believe the company’s focus on expanding its existing capacity will enable it to win bigger projects in the future, thus maintaining the growth momentum. The analysts expect the firm’s revenue to grow at a CAGR of 27.7% over FY23-26.

5. Ujjivan Small Finance Bank:

Axis Direct reiterates its ‘Buy’ call on this bank with a target price of Rs 64, indicating an upside of 9.9%. Analysts Dnyanada Vaidya, Prathamesh Sawant and Bhavya Shah say, “FY23 was characterised by a sharp rebound in the MFI business and a gradual pick up in the non-microfinance book.” The bank’s disbursements have grown by 42% YoY. As the challenges posed by the pandemic fade, the analysts highlight improvements in both asset quality and profitability metrics.

Vaidya, Sawant and Shah expect Ujjivan Small Finance Bank to grow rapidly with these building blocks in place. They are optimistic that the bank will now focus on sustaining growth momentum and improving efficiency. They believe that the bank is well-poised to deliver robust RoA and RoE of 3-3.1% and 25-27%, respectively, supported by improving cost ratios and consistent credit costs.

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

(You can find all analyst picks here)