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

19 Jan 2024

This construction & engineering stock has risen by 45.8% over the past week after it formed a joint venture (JV) and incorporated a South African subsidiary on Tuesday. The surge helped its stock price to touch its all-time high of Rs 251.4 per share on Thursday. According to Trendlyne’s technicals, the stock has also risen by 59.5% over the past month, helping it to feature in a screener of stocks with expensive valuations according to the Trendlyne valuation score.

RVNL has formed a JV with Jakson Green to strengthen its renewable energy portfolio. As per the agreement, RVNL will hold a 49% stake in the JV, while Jakson Green will hold the remaining 51% stake. Among the renewable energy projects, the JV will focus on exploring opportunities for solar power projects internationally and in India. The company also incorporated a subsidiary in South Africa named RVNL Infra South America. This will enable the company to establish its railway infrastructure business internationally.

The company’s director of operations, Rajesh Prasad said, “With the new JV and subsidiary, we are we–placed to receive orders in international markets. We expect the company to book orders worth Rs 80,000-85,000 crore in FY24.”

Speaking on the stocks’ recent rally, Vishal Perival, infrastructure sector analyst at IDBI Capital, noted, “Railway stocks have experienced significant upswings in anticipation of the upcoming budget. There is an expectation of substantial budgetary allocation for the sector." Trendlyne’s Forecaster sees the company’s revenue growing by 3.2% YoY to Rs 5,463.8 crore in Q3FY24. However, net profit is expected to fall by 4.8% YoY to Rs 364 crore.

2. PCBL:

This carbon black company hit its all-time high of Rs 317.9 on Thursday and has risen by 17% in the past week. The rise came after the company announced its Q3FY24 results. PCBL’s net profit grew by 52.4% YoY to Rs 147.9 crore, beating Trendlyne Forecaster’s estimate by 4.8% while its revenue increased by 21.3% YoY to Rs 1,663.9 crore, marginally below Forecaster’s estimate. The company also appears on a screener for stocks with improving ROCE in the past 2 years

The revenue increase was on account of increased carbon black demand from auto OEMs in the festive season. Increased demand from Europe has also helped boost international sales. Its Q3FY24 consolidated sales volume stood at 1.4 lakh MT and it achieved the highest-ever power generation volume.

The firm also achieved its highest-ever EBITDA of Rs 286 crore, up 66% YoY. Its EBITDA margin was driven by higher price realization for its specialty products. The firm has also patented two high grades of specialty chemicals and expects to reach a volume of 6,000 tonnes annually in the next two years, which will be sold at 4X of current margins. These products are expected to provide roughly 7-8% additional EBITDA to the company.

During the quarter, the company acquired a 100% stake in Aquapharm Chemicals for Rs 3,800 crore. Post-acquisition, Aquapharm is expected to add 40% more EBITDA to Philip Carbon. Aquapharm’s biodegradable chelating agents are rapidly replacing traditional agents and it has been ramping up its sales in Asia and looking forward to expanding in the European market.

JM Financials maintains its ‘Buy’ call on PCBL as it considers it a key player in the carbon black market for lithium-ion batteries. It also suggests that its joint venture with Kinaltek will help it achieve its goal of diversifying its business portfolio.

3. IRB Infrastructure:

This roads and highways company has risen by 11.3% in the past month and reached a new 52-week high of Rs 47.6 in the past week. The firm reported a 26% YoY increase in toll collections in December 2023 of Rs 488 crore. It also emerged as the preferred bidder for NHAI’s Kota bypass on NH-27 in Rajasthan and for the Gwalior-Jhansi bypass section under the Toll Operate Transfer (TOT) model. The two projects have an upfront cost of Rs 1,683 crores and will turn cash-flow positive in the first year of their operations.

Additionally, the firm’s Samakhiyali Santalpur Build Operate Transfer (BOT) project in Gujarat became operational on December 28, 2023. Historically, Q3 and Q4 are high-volume quarters for IRB Infrastructure, and owing to this, management expects the uptick in toll collections to continue in Q4FY24.

The Hybrid Annuity Model (HAM) for road projects is facing obstacles in execution and funding, so to reduce its debt levels, NHAI has shifted from HAM to BOT and TOT models while awarding road contracts. IRB currently has a 38% market share in India’s TOT roads and a 20% share in India’s Golden Quadrilateral project (including BOT and TOT).

Kotak Institutional Equitiesstates, “With a Rs 44,400 crore BOT in the pipeline for FY24 and two more TOT projects expected to be awarded, firms like IRB with strong balance sheets will benefit.” The firm’s private InvIT (IRB Infrastructure Trust) has successfully refinanced five BOT projects at a lower interest rate, which could save Rs 1,000 crore in interest expense over the next five years.

4. ICICI Lombard General Insurance:

This general insurance stock rose 5.8% on January 17 after announcing its Q3FY24 results, as its net profit grew by 22.4% YoY to Rs 431.5 crore and revenue rose by 14.7% YoY. The company appears in a screener of stocks with increasing quarterly net profit and margins. According to Trendlyne’s Technicals, the stock rose 6.7% in the past week.

In Q3FY24, gross direct premium income (GDPI) reached Rs. 6,400 crore, growing 15% and outperforming the industry. In the motor segment, the company saw 5.6% YoY growth, with strong contributions from the new private car segment at 30% YoY. The health segment grew at 29.1% YoY. The company’s provision increased to Rs 37 crore in Q3FY24 as compared to Rs 1 crore in Q3FY23.

The management says the company maintains its premium growth guidance in the 15-19% range till FY25. They tend to remain careful in the motor segment, noting that although claim ratios have decreased since Q3FY23, they are still quite high. Also, they expect the combined ratio to fall by another 160 bps in FY25 due to the lower claims ratio, which indicates that the company aims to reduce its losses.

Sharekhan highlights the firm’s competitive advantage in business reach through a multi-channel distribution network and conservative underwriting. As a result, the brokerage expects the RoE to come back to the 18% levels of Q3FY23 in the next one year from the current levels of 17.1% in Q3FY24. The brokerage maintains a 'Buy' rating on the stock.

5. Newgen Software Technologies:

This IT consulting & software company rose 5% on January 16 and reached its 52-week high of Rs 901.1, after announcing its Q3FY24 results. Its net profit jumped by 43% QoQ to Rs 68.3 crore in Q3FY24 on account of a deferred tax credit of 5.8 crore. Revenue was up 10.4% QoQ, due to gains in India, EMEA (Europe, Middle East, and Africa), APAC (Asia–Pacific, excluding India), and USA markets. The company’s net profit beat Trendlyne’s Forecaster estimates by 3.7%, while revenue missed estimates by 2.3%.

As a result of the share price rise, Newgen features in a screener of stocks with prices above short, medium, and long-term moving averages. During the quarter, the company’s India market (which constitutes 34% of the revenue pie) saw revenue increase by 19.8% QoQ, and that of the EMEA market (contributing 31% to total revenue) rose by 0.6% QoQ, driven by strong growth in banking and financial services.

The software firm is witnessing strong traction from its existing and new clients. Newgen has added 11 new clients during the quarter and 38 clients during 9MFY24 across various geographies. Its order book is also seeing healthy traction. Diwakar Nigam, the Chairman & Managing Director said, ”The company’s order book has grown around 20% in 9MFY24, of which there's a significant part to be executed over the next 2-3 quarters. This is expected to drive revenue growth for the company, by more than 25% over the coming quarters”.

Post Newgen Software’s Q3 performance, Nuvama Wealth maintains its ‘Buy’ rating with an upgraded target price of Rs 1,000, implying an upside potential of 20%. The brokerage believes the company’s growth momentum will continue, driven by strong deal bookings and pipeline, product launches, and its investments in sales and marketing.

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

The Baseline

17 Jan 2024

Chart of the Week: DVM screener outperforms the Nifty 500 over the last decade

By Bhavani Eswar

As the Indian equity markets hit record highs in December, over 42 lakh demat accounts were opened in that month alone, marking a 50% increase from November 2023. Markets also started the new year on a positive note, with the Nifty 50 hitting the 22,000 mark on January 15.

In any market, investors seek alpha, aiming to outperform benchmark indices.

One way to achieve this is by using screeners that filter stocks based on multiple performance metrics. TheDVM score, for example, looks at management quality, financial health, stock valuation, and several technical indicators to identify high-scoring stocks. Using these scores, investors can shortlist higher-quality stocks for investment.

In this edition of Chart of the Week, we analyse the ‘DVM - High Performing, Highly Durable Companies’ subscriberscreener. This screener selects Nifty 500 stocks with strong financial durability, reasonable valuation, and positive momentum scores. It is optimised to select the top five stocks with the highest durability scores, and cycles the stocks quarterly

The screener backtest ran from March 2013 to December 2023, and evaluates the screener’s quarterly performance against the Nifty 500 benchmark. It delivered a cumulative return of 2,300.1%. In comparison, the Nifty 500 was up by 327.8% over the same period, helping the screener outperform the benchmark by 1,972.3 percentage points.

Despite market volatility, the Nifty 500 has grown at a CAGR of 15.7% over the decade. However, Trendlyne’s DVM screener delivered returns at a CAGR of 34%, outperforming the benchmark by 18.3 percentage points during the same timeframe. The screener’s average quarterly return was just over 9.1%.

The heat map compares the performance of the DVM screener stocks with the Nifty 500 over the last decade. A closer look at the period analysis reveals that the screener has outperformed the benchmark in 30 out of 43 quarters.

This strategy saw its maximum drawdown of 30.5% in Q1FY23. Maximum drawdown indicates the biggest observed loss from a portfolio’s peak to its lowest point before reaching a new peak. This automated strategy does not have a stop loss set, so the drawdowns show the maximum loss potential of this approach. Introducing a stop loss could reduce periods of negative returns and lower maximum drawdowns.

Jyothi Labs and Godfrey Phillips achieve the highest returns over the past two years

Jyothy Labs emerges as the best performer in the DVM screener over the past two years

Personal products major Jyothy Labs entered the screener in June 2023 and delivered 67% returns in three months before its exit. Godfrey Phillips remained in the screener for six months, delivering 58.5% returns.

Jewellery maker Kalyan Jewellers and Apar Industries, despite being in the screener for just three months, achieved significant gains. Both stocks had high durability scores (above 75) during the period, with Kalyan gaining 54.7% and Apar Industries 40.1%. Zydus Lifesciences also gained 50.7% returns during its nine-month stay in the screener.

Apar Industries and EIH see the highest one-year rise among the active stocks in the screener

Apar Industries leads in one-year gain among active stocks

Let us now look at the individual performance of active stocks in the screener as of December 2023. Apar Industries entered the screener in March 2023 with a strong durability score of 95. This electrical equipment manufacturer has risen by 197.6% in the last year, making it the top-performer. EIH from the hotels sector follows with a 65.6% rise in the same period, as increased travel post-COVID raised occupancy rates to 74% in 2023 from 65.6% in 2020.

Other active stocks like Great Eastern Shipping and Amara Raja Energy and Mobility have gained 48.4% and 38% respectively in the past year. Paper and paper products company JK Paper has high durability and valuation scores but posted muted price performance over the past year and quarter.

Although the screener strategy has significantly outperformed the benchmark in the past decade, it underperformed in the latest quarter by 540 bps, partly because of the high rise of the Nifty 500 index in Q3FY24. However, the returns were still positive (+6.9%). It is important to note that this comes after the strategy outperformed the Nifty 500 by 27.4 percentage points in Q2FY24.

Investors should regularly review their portfolios and adjust them according to the screener’s stock entries and exits. It is also important to note that past returns don't guarantee future results.

The Baseline

16 Jan 2024

5 stocks to buy from analysts this week

By Satyam Kumar

1. Ashoka Buildcon:

IDBI Capital maintains a 'Buy' rating on this roads and highways company with a target price of Rs 206, indicating an upside of 30.8%. Analysts Vishal Periwal and Shubham Shelar made a visit to the MOPA Airport (Goa) and reported on the progress of the Rs 670 crore project. This initiative, which includes three flyovers, roadwork, and interchange segments, is expected to be completed ahead of its scheduled date in August 2024.

Ashoka Buildcon is close to finalizing the asset monetization for nine hybrid-annuity model (HAM) projects, with the share purchase agreement expected to be signed by FY24. The analysts believe this monetization, which includes HAM along with BOT (build-operate-transfer) assets, will help reduce the company's consolidated debt of Rs 7,200 crore. However, the monetization of BOT assets is delayed to FY25 as it awaits NOC approval.

Analysts Periwal and Shelar predict a rise in revenue from international projects. They also forecast EBITDA margins will improve from 8% in FY24 to 11% in FY25, with a stable order book of over Rs 14,800 crore.

2. Arvind Fashions:

Nuvama Wealth initiates coverage on this textile company with a ‘Buy’ rating and a target price of Rs 660, implying an upside of 36.1%. Analyst Palash Kawale notes that the firm has exited multiple loss-making brands in recent years, which has resulted in falling debt and a 500 bps increase in operating margins over the past five years. He expects a 12% CAGR growth in revenue over FY24-26, driven by product and store expansion plans.

The firm’s working capital cycle has improved over FY20-23, dropping from 72 days to 43 days. Along with that, a superior retail channel mix and better collections resulted in a fall in debtor days from 74 to 46. Palash Kawale believes that the firm has posted an ROCE of 13% in FY23, owing to the improved working capital cycle. Arvind is aiming for an ROCE of over 20% in the medium term by improving its margins and working capital cycle.

With a focus on its core brands, the firm is expected to benefit from the ongoing trend of premiumization in India. Kawale predicts significant revenue growth from the firm’s USPA, Arrow, Calvin Klein, and Tommy Hilfiger brands. It is projected to generate Rs 2,000 crore in revenue from USPA sales alone in FY24. Currently, sales from USPA form just over 40% of the firm’s total revenue. The analysts say, it aims to scale up these brands further, thanks to their healthy operating cash flows and double-digit margins.

3. Metro Brands:

Motilal Oswal maintains its ‘Buy’ rating on this footwear retailer with a target price of Rs 1,530, implying an upside of 22%. Despite the current muted demand for discretionary products in the country, analysts Aliasgar Shakir, Tanmay Gupta, and Harsh Gokalgandhi remain optimistic and say that “the company has continued to post industry-leading growth, led by steady footprint expansion.”

The analysts note Metro Brands’ robust store economics with 2x revenue productivity compared to its peer, Bata India. They believe that the company’s right store size, diverse product portfolio, and focus on premiumization will contribute to its healthy store economics. They add that with the addition of brands like Fila and Foot Locker, Metro Brands has an opportunity to generate Rs 1,500-2,000 crore in sales in India in the next three to five.

The analysts expect a 21% and 26% growth in the company’s revenue and EBITDA, respectively, for FY24-26 (except Fila and Foot Locker’s earnings). They also foresee Metro Brands generating operating cash flows of Rs 6,000 crore over the same period to fund its plan to open 250 new stores per year.

4. JTL Industries:

Axis Direct maintains its ‘Buy’ call on this iron and steel products manufacturer with a target price of Rs 300. This indicates an upside of 22.8%. In Q3FY24, the company’s net profit grew by 48.8% YoY to Rs 30.2 crore, slightly missing the brokerage’s estimates by 6%. However, its revenue increased by 101.9% YoY to Rs 568.3 crore, exceeding the brokerage’s estimate by 5%.

Analyst Aditya Welekar says JTL Industries’ capacity expansion plan is underway, following its announcement to raise Rs 1,310 crore. This funding will enhance its capacity to 2 million tonnes per annum (MTPA) by the end of FY27. He believes that the fundraising plan, involving Rs 540 crore from the promoters, Rs 270 crore from non-promoters, and Rs 500 crore through a QIP, will spur growth. The capacity is expected to reach 2 MTPA by the end of FY27, with high utilization (around 65%, the industry standard) expected in FY28. The analyst says, “With phase-wise volume expansion in progress, we model revenue and profit CAGR of 42% and 45%, respectively over FY24-26.”

5. Tata Consultancy Services (TCS):

Sharekhan maintains its ‘Buy’ call on this IT consulting and software company with a target price of Rs 4,200, indicating an upside of 8.8%. In Q3FY24, the company’s net profit rose marginally by 2% YoY to Rs 11,058 crore, while revenue grew by 4.6% YoY to Rs 61,445 crore. Sharekhan's analysts say, “Q3 earnings were better than our estimates in a seasonally soft quarter, driven by growth in the energy resources and utilities, manufacturing, and life sciences & healthcare verticals.”

The analysts believe that despite a QoQ decline in order wins, the order pipeline remains robust. The management is hopeful of a recovery in FY25, owing to the easing of sector headwinds and expected growth in the BFSI sector in the next quarter. The analysts expect 9% sales and 11.7% profit CAGR over FY24-26. They conclude, “We believe TCS is well-positioned to capitalize on cost optimization and transformational opportunities as sector headwinds recede and witness a strong pick-up in growth momentum given its strong domain capabilities, contextual knowledge and strong execution.” However, revenues from the US have declined for top Indian IT players this quarter including TCS, causing analysts to worry that this could be a longer term trend.

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

(You can find all analyst picks here)

The Baseline

13 Jan 2024

9 trends of 2023 that will persist in 2024 | Screener: High and consistent dividend stocks

2023 was a complicated, surprising year - one that saw big shifts both for India, and globally. Some of these changes are likely to continue in 2024, in what promises to be a roller-coaster ride. We take a look at nine major trends that took off last year, and which are likely to define this year as well.

In this week's Analyticks:

The nine trends of 2023 that will persist in 2024
Screener: Top dividend stocks - and a high performing dividend basket

Let's take a look at the big nine:

1) India caught the world's attention in 2023, and will continue to be in the spotlight: Every country believes, secretly or not, that their nation should be at the center of things, dictating terms to the world. US Presidents frequently refer to the United States as the "greatest country on earth". On the other hand, Chinese Premier Xi Jinping says that it is China that "should be center stage in the world".

But in 2023, it was India that got more than its usual share of attention. Prime Minister Modi used the G20 to elevate India's economic profile. And as investing in China became both risky and unfashionable, India became an alternative. About 90% of the money that came into China in 2023 has already left. In contrast, foreign portfolio investments to India are at a nine-year high.

India's lucky streak is likely to continue in 2024. "A lot of the money supposed to go to China will now come to India," is how investor Mark Mobius puts it. Brokerage Jeffries also predicts higher foreign inflows into India in 2024.

2) Nifty Smallcap stocks keep climbing: Analysts complain that the Nifty Smallcap is overvalued and set for a comedown. And yet it keeps going up, and substantially outperformed the Nifty50 in 2023.

The Nifty Smallcap has already jumped 1.9% in January this year. While foreign investors are preferring larger stocks in the face of the overvaluation in smallcaps, domestic inflows are still going strong. Young retail investors are likely to keep taking bets on high-momentum smallcaps in 2024.

3) Indian regulators will regulate harder in 2024: A fast-growing economy comes with many temptations. The lending sector in particular is susceptible to taking big risks in boom times, and has been growing at breakneck speed in India.

But Indian regulators stepped in, like parents reaching home early to spoil the party, in 2023. Fast-growing lending startups and well-established players got a jolt when the RBI increased the risk weightage for unsecured loans, increasing lending costs. This is impacting companies such as PayTM and CRED - 24% of PayTM's loan value is from personal loans.

On the stock market side of things, SEBI has been busy cracking down on finfluencers, who have over the past few years, grown their followers on platforms like Youtube and Whatsapp through charisma, catchy taglines, and often suspect advice. SEBI went after the finfluencer Baap of Chart who was known for clickbait-y offers ("Bas 5 Minutes Mein Sureshot Profit"), and promises of guaranteed monthly returns. SEBI asked that the Rs 17.2 crores he got from users via 'misleading ads' be refunded. SEBI's latest consultation paper is an aggressive effort to crack down on such 'unregistered entities'. And there is no doubt that more regulation is coming.

4) Post-Jhunjunwala, Vijay Kedia has become the investor to watch: After Jhunjhunwala's passing away, the investing crowd had to find a new superstar. Increasingly, it looks like this is Kedia's title to lose. Kedia's investing style is very different from Jhunjhunwala's - he prefers midcap and smallcap companies to established players. His profile has risen in 2023 thanks to the stellar performance of his public portfolio. Bets like Neuland Labs, Elecon and Patel Engineering have been multibagger winners for Kedia.

5) AI arrived with a bang in 2023, and will surprise us in 2024: A recent test of AI images showed us how difficult it has become to tell real from fake:

The image survey by Bloomberg found that users were increasingly unable to tell the real photograph from the fake. In the above, the fake one made by AI, is B.

AI has shown an ability to do a variety of tasks, and it will reach us in unexpected ways in 2024. New AI products range from robot cleaners to AI-powered shoes that help you walk faster. AI will be there in 2024 in good ways (helpful robots) and bad (AI powered scams).

6) Real-estate and manufacturing-linked sectors are making a comeback: After a long, quiet period in 2021 and 2022, the realty sector came roaring back in 2023. Manufacturing linked sectors like construction, metals and mining and general industrials are also booming, thanks to the government's aggressive capex. 2024 is likely to continue as a boom year for these segments, although construction may soften post-elections.

On the downside, the rural sector is one to watch. The El Nino made the weather hotter and more unpredictable in 2023, and this is set to persist till May 2024. El Nino has already caused bad coffee harvests in Vietnam and a weak soybean crop in Brazil. In India, El Nino especially affects North India, weakening the monsoon in this region and causing droughts.

7) OPEC's dominance in the oil market is under threat (which is good news for India): OPEC’s one-time nemesis — US shale exports — is making a comeback, threatening the cartel’s control over the oil price.

Shale oil drillers in Texas and North Dakota have pumped much more oil than anyone expected in 2023, hurting OPEC+'s efforts to keep prices high by controlling supply. Oil prices have continued to fall as US shale production is expected to go even higher in 2024. Citigroup predicts that the oil market will remain in surplus in 2024, making it difficult for oil producers to maintain prices at current levels.

Falling oil prices are great for importers like India, since it will mean a lower import bill, and less inflationary pressure. Cheaper oil imports may also be a boost to our petrochemical exports.

8) War is back in the headlines (which is bad news for everyone): “It’ll all be over by Christmas” was the prediction that analysts made when the First World War exploded in August 1914. The war eventually lasted four years and killed 20 million people.

War is unpredictable, and bad for everyone (including those fighting). The Armed Conflict Survey says that the world saw 183 conflicts in 2023, the highest in 30 years. We started January 2o24 with more fighting in Israel, and rising attacks on ships in the Red Sea.

9) Pandemic-era startups are now fully out of fashion: Remember when Zoom predicted that the office meeting would move permanently online? Or when Byju's saw education going digital? Zoom Video Communications, whose share price had jumped 400% in 2020, was removed from the Nasdaq100 index in December 2023 after disappointing performance and falling market cap.

Byju has cut so many costs that employees are complaining that the company's toilets "look worse than government bus stops". Investment giant Prosus has written down the valuation of Byju’s to below $3 billion, a steep drop from the $22 billion valuation the Indian startup hit in 2022.

Instead, good-old fashioned public sector companies are making a comeback, Stocks like REC Limited, Indian Railway Finance, Power Finance Corporation, and Rail Vikas Nigam have been among the top gainers in the Nifty500, helped by the government's aggressive spending in infrastructure and construction.

Screener: Starfolio - High and consistent dividend yield stocks

Coal India leads in 1-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 year. These companies have also outperformed the Nifty 50 in the past year.

The screener is optimised to show 10 stocks with high 1-year dividend%. Out of the 10 stocks currently available in the screener, nine are from the public sector. Major stocks that appear in the screener are Coal India, Indian Oil Corp, Bharat Petroleum Corp, Oil India, Oil & Natural Gas Corp and Power Grid Corp of India.

FY24 has seen an increase in government budgets, contributing to growth in stock prices for these public sector companies. These public companies have to give out a certain percentage of dividends every year, which helps them dominate the screener. 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.

This screener also appears in Starfolio’s 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. It was first rebalanced on May 2, 2023, with the next scheduled for May 1, 2024. Each stock in the basket holds an equal weight of 10%, with seven being large-cap and three mid-cap.

Since its creation, the basket has given pretty impressive returns of 118.2% in its portfolio price (not including dividends) over the past 10 months. The basket outperformed the Nifty 50 index by 93.5% in the same period. The basket also has an average net profit of 671.6% for its companies, and an average revenue growth of 20.2%.

You can find more screenershere.

The Baseline

12 Jan 2024

Five Interesting Stocks Today

1. Titan Company:

This gems and jewellery manufacturer rose by 13.6% in the past quarter and 3% on Monday to touch its new 52-week high of Rs 3,776.8. In its Q3 business update, the firm reported a 23% YoY increase in revenue from the domestic jewellery segment, driven by increased volumes and a marginal increase in average selling prices. The jewellery segment accounts for over 85% of the firm’s revenue. Caratlane, a subsidiary of Titan, saw a 31% YoY revenue increase due to high demand in the wedding segment.

The watches and wearables division also reported a 23% YoY increase in revenue, led by the wearables segment, which achieved a 64% YoY growth. However, revenue from its eye care and fragrances and fashion accessories segments declines by 3% and 9% YoY, respectively. Margins are expected to remain flat in Q4FY24 due to lower studded jewellery sales and higher discounts.

Titan opened 90 new stores in Q3, including stores in the US and Singapore by its subsidiary, Tanishq, bringing its total store count to 2,949 in 2023. Despite a 15% increase in gold prices in 2023, demand for gold remained stable, supported by the wedding season and its status as an inflation hedge.

According to Sharekhan, market share gains, high traction on e-commerce platforms, and sustained expansion in its retail space will help the firm post consistent growth in the medium to long term.

2. Angel One:

This capital markets stock has risen by 6.5% over three sessions, hitting its all-time high of Rs 3,896 per share following its Q3FY24 business update on January 4. The update showed a 55.5% YoY increase in the company’s overall client base to 1.5 lakh. The stock has risen by 27.4% over the month, appearing in a screener of stocks with improving return on equity (RoE) over the past two years.

The overall client base increased on the back of a 149.1% YoY improvement in gross client acquisition. The company’s average daily turnover (ADTO) in the overall equity and futures & options (FnO) segments grew by 148.5% YoY and 151.3% YoY, respectively. Owing to this, its market shares in these two segments expanded by 529 bps YoY each to 26.8% and 26.9%, during the quarter. Trendlyne’s Forecaster expects a 10.9% YoY increase in the company’s revenue and a 38.5% YoY growth in net profit in Q3FY24.

Motilal Oswal Financial Services maintains its ‘Buy’ rating on the stock post-update with an upgraded target price of Rs 4,100 per share. This implies a potential upside of 8%. The brokerage remains confident in the stock due to the improvement in the number of orders per day and FnO volumes during the quarter. It also expects the recovery in cash volumes to improve the company’s mutual fund book.

3. FSN E-Commerce Ventures (Nykaa):

This internet and catalogue retail company has risen 10.3% in the past week till Friday following its Q3FY24 business update. It highlighted a 20% YoY growth in net sales value in its beauty and personal care segment during the quarter. As a result, the company features in a screener of companies with prices above their short, medium, and long-term moving averages.

As per the quarterly update, Nykaa’s beauty and personal care (BPC) vertical is expected to report GMV (gross merchandise value) growth of around 24-26% YoY in Q3. In Q2FY24, the beauty segment’s GMV growth was 23% YoY. The company's footprint in the BPC industry is expanding, driven by the growth of its own brands and early success in newer ventures like Superstore By Nykaa.

Meanwhile, the fashion vertical continues the momentum from the previous quarter with around 40% GMV growth. In contrast, according to Nykaa’s management, the broader industry’s growth was muted in Q3 due to lower-than-expected demand during the festive season. Trendlyne’s Forecaster expects the company’s revenue to grow by 21.3% YoY in Q3FY24.

Post Nykaa’s business update, HSBC Global Research has raised the target price to Rs 250 and maintains its ‘Buy’ rating on the stock. The brokerage says Nykaa is well-positioned to capture long-term value in the beauty and personal care sector, citing its pan-India network, growing portfolio of skin and beauty products, and loyal customer base.

The stock ranks medium in Trendlyne’s checklist with a score of 39.1%. According to Trendlyne’s Forecaster, Nykaa has a consensus recommendation of ‘Hold’ from 22 analysts, with an average target price of Rs 178 per share.

4. Lemon Tree Hotels:

This hotel firm rose by 2% on January 9 after signing a franchisee agreement for the Lemon Tree Hotel in Meerut, which is expected to be opened in FY25. According to Trendlyne’s Technicals, the company has risen by 13% in the past month, outperforming the hotels, restaurants, and tourism sector by 7.7%. This rise can be attributed to the management's optimistic outlook, citing growing occupancy and average room rates (ARR) due to the demand-supply gap in the premium segment in major metro cities.

The company is set to benefit from changing market dynamics in key areas like NCR and Mumbai due to the opening of mega convention centres like the Jio Convention Centre and Bharat Mandapam. Due to this increased demand and a limited supply growth of 2-6% CAGR for FY24 - 28, these cities are expected to contribute around 24% and 17%, respectively, to the company’s consolidated revenue by FY24. Aurika Mumbai Skycity, an upper upscale hotel by Lemon Tree, will benefit from the rising demand in the luxury segment and could contribute 21% to the company’s revenue by FY26.

Lemon Tree is shifting towards an asset-light model by increasing its share of managed rooms (franchise model) from the current 39% to 55% by the end of FY27. The firm plans to add 3,354 managed rooms and double its operational rooms to 20,000 by FY27. This expansion in management contracts will likely boost margins and drive growth in the company’s management fees. By FY26, management fees are expected to reach Rs 94.3 crore, showcasing a 38% CAGR.

Motilal Oswal expects the addition of Aurika, room renovations, and expansion through management contracts to further contribute to the company’s growth. The brokerage maintains a ‘Buy’ rating on the stock.

5. Brigade Enterprises:

This realty company has risen by 5.3% in the past week, reaching its all-time high of Rs 1,000 on Tuesday. The surge followed the signing of two memorandums of understanding (MoU) worth over Rs 3,400 crore with the Government of Tamil Nadu to set up two high-rise residential buildings and high-rise commercial and residential developments. The company also signed a lease agreement with Sidvin Core-Tech India to provide 54,300 square feet of office space in Bengaluru.

Trendlyne Forecaster estimates the company to report a net profit of Rs 91.6 crore in Q3FY24, as against the actual profit of Rs 56.9 crore in Q3FY23. It also estimates revenue at Rs 1,039.7 crore.

Brigade Enterprises has 3.1 million square feet (mnsft) of ongoing projects available for sale and a launch pipeline of 11.1 mnsft in residential properties. Of that, 6.5 mnsft is expected to be launched in H2FY24, which will drive sales momentum. The company has a total land bank of 479 acres, with a development potential of 54.5 mnsft. By FY27, the management aims for an annual pre-sales of 10 mnsft. The company is also looking at expansion into other cities.

Despite the positive growth, Geojit BNP Paribas assigns a ‘Sell’ rating on the stock, citing moderate growth outlook and premium valuation. The brokerage notes the company’s expensive valuation compared to its peers and Nifty Realty. Brigade Enterprises appears in a screener for stocks with broker downgrades in price or recommendation in the past month.

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

The Baseline

10 Jan 2024

Chart of The Week: Most emerging markets fairly valued, India and Taiwan are exceptions

By Bhavani Eswar

In 2023, major global equity indices delivered double-digit returns as inflation cooled and central banks signalled likely interest rate cuts in 2024. Developed markets like the US, UK, and Japan, which faced difficult economic conditions in 2022, saw a turnaround.

The US market had fallen by 19% in 2022, underperforming India’s Nifty 50, which rose by 4.3%. However, 2023 saw a reversal, where developed markets outperformed the broader indices of major emerging markets. However JP Morgan believes that in 2024, “Demand for diversification away from developed countries and GDP growth divergence will make emerging markets attractive.”

We explore the valuation perspective of major emerging market indices after their positive run in 2023.

Even after a rally in 2023, major emerging markets are still trading near or below their historical P/E levels. China is the largest economy in Asia accounting for one-fourth of the MSCI EM index, a benchmark for global fund flows into emerging markets. The market was rattled by public property busts in 2023 that led to the defaults of many prominent developers like Country Garden. Stimulus measures by the Chinese central bank have not had a significant effect on economic recovery, leaving the growth outlook grim. As a result, the Chinese benchmark index, Shanghai Composite (SCI), fell 3% in 2023 and is currently valued at 8.4 times its earnings.

Countries like China, South Korea, and Brazil are trading below their historical P/E, making their valuations justifiable. Trading at less than 10 times their earnings, China and Brazil could be undervalued by global fund managers.

Mexico’s MEXBOL, on the other hand, delivered strong returns of 18% with a P/E of 12.1 but still trades below its historical average P/E of 15. Similarly, Brazil’s IBOV has delivered high returns in 2023. South Korea’s KOSPI index recorded a 14% rise. The contagious effect of the showdown in China is visible on Hong Kong’s HSI, which dropped by more than 13% in 2023 but is still valued fairly at a P/E of 15, its 10-year average.

Indian indices valued at a premium, while other major emerging markets fairly valued

India (Sensex) and Taiwan (TWSE) rose 18% and 26%, respectively, in 2023. As a result, India and Taiwan’s benchmark indices are trading above their historical averages. The global chip manufacturing boom has benefitted TWSE, as the index is dominated by tech stocks. It is trading at a premium of over 15%.

The Indian benchmark has a price-to-earnings ratio of 24, which indicates that it is overvalued compared to the 10-year average P/E of 18.9, implying a 26% premium. High tax collections and huge government spending have helped Indian markets grow, especially the small and mid-caps. The BSEMidcap and BSE Smallcap indices shot up by 44% and 47%, respectively in 2023, taking Indian indices’ valuation above the average. However, India’s Nifty 50 is trading at a 12-month forward P/E of 19, which is slightly lower than its 10-year average of 20. In contrast, the MSCI EM index, a benchmark index for emerging markets, is trading at 11.2 P/E.

Emerging markets well positioned to attract global fund flows

Emerging markets come with unique political and economic challenges. As 2024 is expected to bring interest rate cuts around the world, emerging markets are likely to attract huge inflows from developed markets. This year, asset allocators must pay attention not only to economic indicators of countries but also to political stability, especially with many emerging markets like India and Taiwan facing elections in 2024. The result of the US presidential elections in November will also have an impact on global markets. In India, a strong win for the BJP government at the center could be seen positively. The Reserve Bank of India has also kept a steady hand on inflation, another positive sign for global fund managers.

Indian markets are bracing for volatility in this election year, and its premium valuation hinges on strong corporate earnings in Q3FY24. Chris Wood, the global head of equity strategy at Jefferies LLC, says, “If the ruling BJP faces a surprise defeat in the parliament elections, as happened in 2004, then I would expect a 25% correction if not more.”

Currently trading at 24x its earnings, India is one of the highly valued major equity markets. Despite this overvaluation, expansionary monetary policies in developed countries will reap the benefits of falling interest rates, lower borrowing costs, and higher economic growth.

The Baseline

09 Jan 2024

5 stocks to buy from analysts this week

By Bhavani Eswar

1. Bajaj Finance:

HDFC Securities upgrades its rating on this non-banking financial company to a ‘Buy’ with a target price of Rs 8,650, indicating an upside of 11.3%. Analysts Krishnan ASV, Deepak Sinde, and Akshay Badlani note that Bajaj Finance has maintained a robust 26% annual AUM growth from FY22-24E, despite its growing scale and complexity.

Although the RBI's directive on higher risk weights for consumer credit might impact the near-term capital adequacy ratio, the analysts believe that the recent equity raise of Rs 8,800 crore will cushion the impact and support growth. They express confidence in the company’s new products, such as auto loans and tractor financing, and their potential to boost the top line.

A highlight for the analysts is the rapid growth of Bajaj Housing Finance. In a surprisingly short time - since its inception in 2018 - it has become the second-largest housing finance company, reaching an AUM of approximately Rs 81,200 crore as of September 2023. This represents a 28% CAGR over the past three years, from a mix of B2B channels, their captive customer base, and B2C channels involving builders and open market sourcing.

2. Global Health:

Motilal Oswal maintains its 'Buy' rating on this healthcare facilities company, with a target price of Rs 1,170, indicating a 17.2% upside. Analysts Tushar Manudhane, Sumit Gupta and Akash Dobhada are optimistic about the company's financial transformation, where it turned net cash positive in FY23 from a debt of Rs 300 crore in FY19. Anticipating continued growth, they foresee the company expanding its bed capacity to over 3,500 in the next two to three years.

The analysts project capacity increases in North and Central India. They highlight the significance of the upcoming Noida facility, expected to commence operations by the end of FY25, which is predicted to boost the company's footprint in the Delhi NCR region.

Manudhane, Gupta, and Dobhada forecast robust growth driven by the addition of 552 beds to existing facilities and 1,000 beds to upcoming facilities. They expect a 28% CAGR over FY23-26 due to a faster scale-up of existing hospitals, additional business from new hospitals, and better operating leverage.

3. NTPC:

Axis Direct initiates coverage on this electric utilities company with a ‘buy’ call and a target price of Rs 345, implying a potential upside of 8.4%. Analyst Aditya Welekar says, “The firm benefits from thermal capex revival to meet power demands during non-solar hours, and its thermal capacity is entirely backed by long-term PPAs, providing stable long-term cash flows.”

Welekar notes the key role of thermal power in providing grid stability due to the seasonality of renewable energy (RE). NTPC has set a target of producing 34 million tonnes of coal in FY24 and scaling up this capacity to 70 million tonnes over the next five years. With domestic renewable energy capacity expected to increase from 172 GW in FY23 to 596 GW by FY36, the firm is set to raise its RE capacity from 3.3 GW in FY23 to 60 GW by FY32. The company’s lower cost of debt compared to its peers, due to its sovereign debt rating, provides a competitive advantage in fundraising for RE projects.

Welekar believes that the firm can use a mix of conventional and renewable energy sources to meet the round-the-clock power needs of corporates, who usually have better credit profiles compared to state distribution companies. Additionally, NTPC’s 10 GW under-construction thermal capacity is expected to be commissioned by FY26, along with its entry into various green energy initiatives like green hydrogen and nuclear power.

4. Affle (India):

Sharekhan maintains a ‘Buy’ call on this internet software and services company with a target price of Rs 1,535, indicating an upside of 18.2%. Analysts from Sharekhan say, “Affle has registered healthy revenue growth despite a high base and industry headwinds, driven by consistent growth across key global emerging markets, including India.”

The analysts believe that the company is well-positioned to capture a larger market share, benefitting from improving advertising spends in its key markets and also international markets. This growth is aided by the acquisition of Youappi and the firm’s growing investments in AI. They expect sales and profit CAGR of 23% and 22%, respectively, over FY24-26. Affle is also actively expanding its patent portfolio to stay ahead in the data-driven industry. Currently holding 21 patents, the company is pursuing 15 more in advanced AI areas.

The analysts remain optimistic on the back of Affle’s growth in key global emerging markets and improvements in developed markets, aided by turnaround plans and investments.

5. Jio Financial Services:

KRChoksey initiates a ‘Buy’ coverage on this finance company with a target price of Rs 290. This indicates an upside of 19.4%. Analyst Unnati Jadhav says, “Jio Financial Services hopes to democratize financial services across the country by offering innovative products that will be delivered digitally.” She believes that the consumer lending segment in particular will dominate the company’s business profile, driven by robust credit offtake in this segment. Jadhav notes the company’s plans to build an ecosystem to cater to various financial services. It is exploring partnerships to offer co-branded credit cards to its customers.

Jio Financial is still in its infancy with many plans still on paper, but Jadhav believes that Jio Financial Services is well-positioned to gain higher traction across all business segments, given its strong parentage and the existing customer base it can tap into. She adds that the company’s diversified business model is well-suited to meet the financial requirements of its customers. She also expects capital adequacy to remain strong, supporting its growth aspirations.

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

(You can find all analyst picks here)

The Baseline

06 Jan 2024

Analysts pick their top sectors for 2024 | Screener: stocks with high target price upside

By Tejas MD

Every January at the start of the new year, people are reliably infected with a disease we call 'predictionitis', where they fall over each other to predict events for the next year. Sadly, it is an illness with no cure.

This year as well, 2024 has begun with predictions around the Nifty 50, with analysts saying that the index may reach 25,000. India’s strong growth is expected to boost the stock market - the economy is set to outperform other large countries in FY24, with growth estimated at 6.7-7%.

India stood out in 2023, attracting the highest FII inflows among emerging countries. During the latest monetary policy meeting, RBI Governor Shaktikanta Das said, 'Despite challenges in the global economy, India is poised to become the new growth engine of the world.'

However, the landscape isn't all roses and jasmine - some signals are worrying. Foreign direct investment to India has declined, with the usual average of $40 billion in annual FDI sinking to just $13 billion in 2023.

Private capex by Indian companies is still weak, despite pleas from senior ministers like Nirmala Sitharaman to invest: 'Are you like Hanuman,' she asked Indian CEOs, 'that you do not believe in your own strength, and someone has to stand next to you and say, "you can do it"?'.

In this week’s Analyticks, we, with our own case of predictionitis, identify sectors that are likely to excel in 2024, helped by macroeconomic tailwinds. We will also check the roadblocks that could ruin the party.

2024’s star sectors: The top four sector picks by analysts for the new year
Screener: Rising stocks with high average Forecaster target price upside %

Analysts pick their top sectors for 2024

The Nifty 500 closed in the green for the fifth consecutive year in 2023, with a 25.8% gain. Half of these gains were achieved in the last three months of 2023. Realty, hardware technology & equipment, utilities, transportation and fertilizers sectors played an outsize role in driving the Nifty 500 higher.

Top five sectors driving Nifty 500's growth in October-December 2023

The realty sector led the pack with a 36% gain in the last three months. It is also among the top sectoral picks for 2024 by several brokerages, including ICICI Securities, BOB Capital Markets, and Motilal Oswal Financial Services.

Banking and finance, infrastructure and general industrials are other sectors that have been favourites in 2023, which analysts believe will continue to outperform in 2024. Sunil Subramaniam, CEO of Sundaram Mutual Fund, says, 'Banking and financial services will be the focus at the beginning of the year. After that infra and capital goods will take over.'

Why are analysts so bullish on these sectors? They are counting on two major factors: likely interest rate cuts, and the Centre’s push on infrastructure development.

Financial services and realty sectors are counting on rate cuts in 2024

Tomato sellers were hiring bouncers to protect their produce in the first half of 2023, as inflation sent prices up, and the RBI raised interest rates. Now, with inflation cooling and below the RBI’s upper tolerance limit of 6%, analysts are hoping for rate cuts. Deutsche Bank expects the RBI to cut interest rates by 100 bps in FY25, starting in the second half of 2024.

Lower rates will reduce borrowing costs for companies and consumers. Loan demand in India was strong in 2023 despite high rates, driving the growth of the banking and finance sector. Interest rate cuts will give the sector a further boost.

Advances growth on a sharp rise since FY20

Banks and NBFCs plan to disburse more loans, as demand grows in 2024. According to IDBI Capital, Federal Bank, ICICI Bank and Shriram Finance will be growth stocks in the sector.

Another sector that is expected to do well due to rate cuts is realty. Housing demand has jumped sharply in the past year, with decade-high sales in the top seven cities, and unsold inventory at record lows. As the realty sector operates on high debt levels, falling interest rates will help both builders and homebuyers. Analysts expectSunteck Realty, Mahindra Lifespace Developers and Macrotech Developers to benefit from the rate cuts.

Government capex boosts infra and general industrial sectors, but private capex is still missing in action

On my way to work in Bangalore, I often see earthmovers, men in hard-hats, and construction material piled up on the sidewalks. It feels like there is always construction going on - a new road, flyover, metro line. Most of these new projects are part of the Centre’s infra push, as the government increased the capex allocation in its budget.

This has led to a sharp increase in order wins for infrastructure companies. According to analysts, NCC and J Kumar Infraprojects are expected to benefit due to their on-time order execution. In Q2FY24, NCC’s order book hit an all-time high of Rs 61,796 crore (up +54% YoY) while J Kumar Infra’s order book rose to 16,447 crore (up 43.7% YoY).

In the general industrials sector, brokerages are positive about Siemens and ABB India on the back of PLI schemes and high capacity utilization.

But with capex, the active participation of private players is a missing piece.

Alex Travelli of The New York Times says 'Green and red lights are flashing for the Indian economy at the same time. The government will eventually have to reduce its extraordinary spending, which could impact the economy if private sector investment doesn’t pick up.'

The corporate sector is still on the fence. This is likely due to high interest rates, which are expected to fall in 2024. Companies are also looking for political stability, and waiting to see if the ruling party gets re-elected this year.

The 'joker in the pack': wars are a key risk in 2024

The problem with war is that it can be contagious. A small war can quickly spiral into a regional crisis, dragging in neighbouring countries. February will mark two years since the beginning of the Russia-Ukraine war, and tensions are igniting elsewhere. The Israel-Gaza war is now seeing conflict spillover into the Red Sea, where Iran-backed Houthi rebels are targeting container ships and oil tankers. The Israel-Lebanon border has also turned violent.

Ranen Banerjee, Partner at PwC India’s Economic Advisory Services, says 'The joker in the pack is geopolitics and conflict hotspots. The trend in current conflicts will determine whether GDP growth rates will bias to the lower or higher end.'

Screener: Rising stocks with high average Forecaster target price upside %

Godawari Power & Ispat leads in average Forecaster target upside

After a slow start to the year, the Indian market rose sharply in the second half of 2023 with the Nifty 50 index rising by 12.4% over the past six months. This can make it hard for investors to find stocks with more potential to grow. In this screener, we take a look at stocks with high average Forecaster target price upside % despite seeing gains in their prices over the past quarter. The screener is dominated by the software & services, banking & finance and chemicals & petrochemicals sectors.

Major stocks that appear in the screener are Godawari Power & Ispat, RattanIndia Enterprises, EPL, EIH, Adani Energy Solutions, Infibeam Avenues and Tanla Platforms.

Godawari Power & Ispat has the highest average Forecaster target price upside of 28.1%, following a 23.2% rise over the past quarter. This metals & mining stock’s price has increased by 96.9% over the past year. Analysts believe that the company still has room for growth, owing to rising domestic demand for iron ore and increased production of high-grade pellets.

EPL is another player with a 24.5% average Forecaster target price upside. It has also risen 6.1% over the past quarter. ICICI Securities believes that this commercial services & supplies company will see revenue growth as recyclable tubes are expected to account for 60% of its revenue by FY26. The company is also planning to expand its customer base into the Brazil market.

You can find more screenershere.

The Baseline

05 Jan 2024

Five Interesting Stocks Today

1. Torrent Power:

This electric utilities company rose by 7.4% to touch its all-time high of Rs 1,071.9 per share on Thursday after signing four memorandums of understanding (MoUs) worth Rs 47,350 crore with the Gujarat Energy Development Agency (GEDA).

The company is set to receive Rs 47,350 crore under the Gujarat government’s investment promotion initiative. The stock has also risen by 12.9% over the past week, helping it appear in a screener of affordable stocks with high momentum and return on equity (RoE). The largest MoU of the four, worth Rs 30,650 crore, is for setting up 3,450 MW of solar power and 1,045 MW of hybrid power projects in Banaskantha, Jamnagar, Patan and Surendranagar.

Torrent Power also expects to commission a 300 MW solar power project by the end of FY24. Along with this, the acquisition of Air Power Wind Farm will expand its wind power capacity. The management also plans to enter the hybrid energy segment due to the low return profiles from solar and wind power projects. The higher capacity utilization factor (CUF) of hybrid projects is likely to facilitate increased power generation and ensure a consistent supply.

The stock ranks high in Trendlyne’s checklist with a score of 73.9%. It also has good Trendlyne Durability and Momentum scores. According to Trendlyne’s Forecaster, Torrent Power has a consensus recommendation of ‘Sell’ from 10 analysts tracking the stock with an average target price of Rs 776.9 per share. This indicates a potential downside of 25.2%.

2. Sobha:

This realty firm rose 15.7% on Thursday after being chosen as one of the top picks for 2024 by Motilal Oswal, with a target price of Rs 1,400. According to Trendlyne’s Technicals, the stock has risen by 31.1% in the past month, outperforming the Nifty Realty Index by 16.7%. This surge can be attributed to the company maintaining a pre-sales revenue of Rs 2,500 crore for 9MFY24.

Sobha has long been seen as primarily a Bengaluru company, with the tech city accounting for 70% of its sales until FY20. However, with the introduction of projects in Kerala, Delhi NCR, and Hyderabad, Bengaluru's sales share dropped to 54% (from 65%) in H1FY24. Despite Bengaluru remaining a crucial geo, the company aims to expand in NCR, Pune, and Hyderabad. It's working on a 15 million square feet (msf) project pipeline, with 8 msf outside Bengaluru. Higher price realisations across major cities have also helped in margin expansion.

Sobha plans to launch 12 msf of projects in the next 15 months. With over 200 msf of land holdings, there is potential to increase its launches to 9-10 msf by FY26.

The firm, in its Q3FY24 update this week, reported a 37% YoY increase in total sales value to Rs 1,952 crore, with revenue realisation growing by 21.5% YoY. After declining for two consecutive quarters, Trendlyne’s Forecaster projects that the company’s net income will rebound to match Q3FY23 levels. Based on these estimates, Sobha is currently trading at a PE of 43.9 for FY24E and at 24.2 of FY25E.

Motilal Oswal says that initiating projects on significant land parcels in Bengaluru and Tamil Nadu is a key driver for higher land valuations. Sobha's land, valued at Rs 3,800 crore (CMP), is assessed by Motilal Oswal at Rs 6,000 crore. The broker upgrades the firm to a ‘Buy’ rating.

3. NMDC:

This mining company has risen by 7.5% in the past week and touched a 52-week high of Rs 227.3 per share today after announcing price hikes for its products. The company has raised the prices of lump and fine ores by Rs 200 and Rs 250 per tonne, respectively. Since September 2023, the prices of both lump and fine ores have cumulatively increased by Rs 750 per tonne.

Global iron ore prices have been rising recently due to expectations of economic growth in China, the world’s largest iron ore importer. This increase comes after China implemented major economic stimulus measures. Even after the latest price hikes, NMDC’s prices are still 60% lower than international rates, which crossed $135 per tonne in January from $105 per tonne in August last year. This gives the firm room to increase prices further.

Domestic steel demand is expected to increase at a CAGR of 8% till FY25, as both government and private capex in infrastructure is set to rise. Additionally, all domestic tier-1 steel manufacturers are expanding their capacities to meet domestic demand. According to NMDC’s management, capex for FY24 will exceed the initial target of Rs 1,600 crore and reach Rs 2,000 crore.

Motilal Oswal says, “The firm is set to produce 46 million tonnes of iron ore in FY24, and likely to produce more than 50 million tonnes by FY25 on the back of improved capacity and strong domestic demand”. However, only 36 of 110 iron blocks auctioned since FY16 are operational, which could result in intense competition if the remaining mines become operational.

4. Tata Motors:

This automobiles & auto components company touched a new 52-week high of Rs 805.9 today. This comes after it reported that its total domestic wholesales rose by 4% YoY to 76,138 units in December. In Q3FY24, Tata Motors’ passenger vehicle (PV) wholesales grew by 5% YoY, while that of commercial vehicles (CV) improved marginally by 1% YoY. Girish Wagh, the Executive Director, said, “The rise in CV sales is due to demand from government infrastructure initiatives, expansion in core industries, and sustained growth in e-commerce.”

According to N Chandrasekaran, Chairman of Tata Motors, it is focused on increasing the profitability of JLR (Jaguar Land Rover) rather than boosting volumes. The firm is improving earnings per vehicle while reducing its debt levels. Domestic PV sales are seeing traction in its electric vehicle and SUV segments. The company expects improved demand in Q4FY24 across most CV segments, from a pick-up in infrastructure and mining activities, and the harvesting season.

The automobile major has risen by 4.9% over the past week till Thursday. As a result, it features in a screener of companies with strong momentum.

The EV segment is gaining ground in JLR and Tata Motors India. JLR plans to invest £15 billion in electric vehicle development in the next 5 years. Tata Motors India sold 69,173 EVs in 2023, which is a 59% YoY increase. This is expected to further grow by 35% in 2024.

Post Tata Motors’ business update announcement, JP Morgan has upgraded its rating to ‘Overweight’ and revised the target price to Rs 925. This upgrade is driven by better-than-expected margins and cash flow for JLR. The brokerage also highlighted that the company has maintained its market share in the PV space, despite new launches by competitors.

5. Zomato:

This food delivery company’s stock price hit its 52-week high of Rs 134.4 on Friday and rose by 8.2% in the past week after increasing its platform fee from Rs 3 to Rs 4 per order in its key markets. This marks a 33.3% hike, effective from January 1. This is expected to improve the firm’s EBITDA by 5%.

During the month, Zomato received a show cause notice (SCN) from the Directorate General of GST Intelligence for an alleged tax liability of Rs 401.7 crore. This includes interest and a penalty for the period from October 2019 to March 2022. The demand relates to GST not levied on delivery charges collected from customers, on behalf of delivery partners.

The company said it will be filing an appropriate response to the SCN. Zomato has denied the correctness of the tax claim, stating that delivery services were provided by partners directly to customers, not by the company and do not require GST. However, service aggregators like Uber charge 5% GST on driver charges and 18% on comfort charges.

Zomato reported profits for the first time in Q1FY24, followed by a second consecutive time in Q2. However, the tax liability may affect the company’s profitability in Q3FY24. Trendlyne Forecaster estimates Zomato to report a net profit of Rs 97.5 crore in Q3FY24, as against a loss of Rs 346.6 crore in Q3FY23. The company also appears in a screener for stocks with increasing quarterly net profit and profit margin.

CLSA maintains its ‘Buy’ call on Zomato, despite the SCN. The brokerage believes the increase in platform fee could partially offset (about 25%) the impact of GST on its delivery charge, in case the company is liable.

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

The Baseline

04 Jan 2024

Chart of the Week: As the Indian market surged, FIIs and DIIs were net buyers of equities in 2023

By Akshat Singh

In India, the investment landscape has shifted. While FIIs were net sellers in 2022, they were net buyers in Indian equities in 2023, contributing a total inflow of Rs 1.58 lakh crore. MFs were also net buyers, injecting nearly the same amount (Rs 1.57 lakh crore) as FIIs into Indian stocks. MFs were able to catch up to FIIs in terms of equity investments in 2023 as they were more consistent, and divested in only one month compared to a four-month outflow by FIIs.

Sunil Singhania, a superstar investor and founder of Abakkus Asset Manager, says “When it comes to FII flows my views are very positive. In the next two to three years, FII flows into India will be very high.”

In the equity market, FIIs’ cash segment activity was a major factor, influencing index movements. Of the four months that Nifty 50 went lower, three had FIIs withdrawing from the equity market.

When it came to futures and options, FIIs were net sellers with an outflow of Rs 6,319.8 crore and Rs 8.5 lakh crore, respectively.

FIIs divested in three of four months that Nifty 50 declined

In this edition of Chart of the Week, we take a look at the monthly FII/DII data on Trendlyne’s FII/DII dashboard and identify major trends.

Jan and Feb 2023 saw high FII outflows in equities

The equity markets began 2023 on a sour note, with FIIs taking out Rs 25,292 crore in January. This led to a 2.4% fall in the Nifty 50. However, a substantial Rs 1.2 lakh crore inflow into the options segment by FIIs led them to be buyers at Rs 91,618.4 crore. MFs were net buyers of equities with a total inflow of Rs Rs 21,353.2 crore in January 2023.

Equities overall saw major outflows in January, particularly in the financials and IT sectors, with consumer services, oil & gas, telecommunications, and auto sectors also seeing significant declines. Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed to profit booking as the key driver here. “The simple logic behind FII selling in January is that India is the only large market where FIIs are still sitting on good profits after the disastrous 2022 performance in most global markets.”

In February 2023, FIIs divested Rs 636.4 crore from the equities. This month also saw FIIs return to index options, buying Rs 65,336.3 crore expecting market volatility. Sector-wise, FIIs reduced their stakes in metals, power and oil & gas, while investing in the capex-heavy capital goods sector, motivated by the Rs 10 lakh crore capex investment announced in the union budget 2023. This was followed by a 2% fall in the Nifty 50. MFs were net sellers, with an outflow of Rs 515.1 crore in February 2023. This selling was partly induced by the Adani-Hindenburg case.

Adani stocks attract 25% of March 2023’s total FII inflow

In March 2023, FIIs invested Rs 12,578.2 crore in equities and MFs invested Rs 20,764.3 crore surpassing FIIs investment. The major chunk of FII buying, amounting to Rs 15,446 crore, was made by GQG Partners in four Adani Group stocks. This also led to a 31% sequential rise in MF inflows, according to AMFI.

FII investments continued in April 2023, with an inflow of Rs 15,733.4 crore in equities. FIIs turned overweight on the financials and automotive sectors, which constituted 50% and 14% of their total investment, respectively. On the other hand, MFs turned net sellers, with a total outflow of Rs 6,766.7 crore attributable to an outflow of Rs 4532.6 crore from the equity market.

In May, FIIs had an inflow of Rs 37,369.3 crore in equities and an outflow of Rs 40,036.6 crore in index options. MFs invested Rs 2,446.5 crore into the equities market and had an overall outflow of Rs 2,359.6 crore.

Financials sector sees fluctuating investment patterns

In June, FIIs invested Rs 43,310.8 crore in stocks, providing a positive boost to the market. MFs invested Rs 5,664 crore into the equities market. Mutual funds ended their two-month selling streak and re-emerged as overall net buyers with a total investment of Rs 514.6 crore. Most of the FII investment was done in the financial services, capital goods, and automobile sectors. According to Nirav Karkera, Head of Research at Fisdom, “The banking and financial services segment is large and fairly diversified into smaller, specific sectors. It saw FIIs and MFs reallocate funds from heavyweight banks to smaller banks and NBFCs.”

After significant inflows in previous months, FIIs turned sellers in the financial services and FMCG sectors. Their net purchases decreased in sectors like IT and capital goods, potentially influenced by rising bond yields, higher oil prices, and inflation concerns.

FIIs execute major sell-offs in options starting September

FIIs sold off Rs 18,893.8 crore in equities in September, driven by concerns over potential US Federal Reserve interest rate hikes to curb high inflation. The FIIs also began their options selling spree with a divestment of Rs 2.4 lakh crore. This sell-off was offset by MFs buying Rs 18,512.4 crore in equities.

In addition, Chinese stocks showed an uptick due to their previous market decline and government efforts like interest rate cuts. This drew FII focus from India to China.

FIIs continued their selling streak with a Rs 21,679.9 crore of shares divestment in October 2023. This led to a fall of 2.8% in the Nifty 50. But mutual funds invested Rs 16,916 crore in equities. The FII outflow was because of rising US treasury yields due to the Federal Reserve's hawkish interest rate stance, and market volatility from the Israel-Hamas conflict.

Both FIIs and MFs were net buyers of equity in November, with inflows of Rs 9,433.8 crore and Rs 17,654.3 crore, respectively. This led to FII holdings in Indian equities dropping to a 10-year low, due to the mass selling from August to October.

MFs, however, came to the rescue of Indian markets. According to ICICI Securities, MFs have adopted a more careful and focused strategy, favouring stable and promising sectors amid uncertainty. Healthcare, private banks, and auto saw substantial MF inflows, with multi-cap and mid-cap funds attracting the most attention.

In December 2023, FIIs were net equity buyers with an inflow of Rs 56,390.6 crore while MFs invested Rs 23,894.7 crore in equities.

The influx of funds into equities was on the back of record highs in major indices and a pause in Fed rate hikes. However, FIIs were net sellers overall with an outflow of Rs 2.9 lakh crore due to selling in index options. Mutual funds also broke their two-month selling spree and became net buyers, with an inflow of Rs 412.3 crore.