• Tata Steel: This steel company’s stock yielded negative returns in the past three months, along with most other steel stocks This correction in steel stocks comes after a 11% fall in domestic hard-rolled coil prices ever since November, 2021. Although ICICI Securities maintains a ‘Buy’ rating on Tata Steel, it reduced its target price by 15% in December 2021.

On Tuesday, Jefferies India downgraded the steel sector, and hence Tata Steel, to ‘Sell’. Jefferies believes muted real estate demand from the Chinese market and softening steel prices will likely impact Tata Steel’s margins from H2FY22 onwards. It expects EBITDA margins to contract in FY23 as spot steel prices may fall further by 9-10%. This may lead to a 44% fall in earnings. Interestingly, Indian brokerages like Axis Direct and Prabhudas Lilladher still hold a positive view on the steel sector. They anticipate that steel prices will not fall materially in FY23 as lower demand in China might be balanced out by lower production. Only time will tell whether the commodity cycle actually turns for the worse in FY23.

• Hinduja Global Solutions: The journey of this stock in 2022 is nothing short of a theatrical drama. It hit a 52-week high on January 4, 2022 in anticipation of a dividend declaration and bonus issue. However, on January 7, the stock plunged nearly 20% after the company announced a special dividend of Rs 150 per share and a bonus issue of 1:1. An anticlimax you would think? Well, not exactly.

The company had earlier faced investors’ ire when it extended short-term loans of Rs 340 crore to its group entities in Q4FY20. HGS’ management informed them of this development only in August 2020 when the loan was already paid off. The company got embroiled in yet another corporate governance issue as it concluded the sale of its flagship healthcare services division. The cash inflow for the company in this deal is around Rs 8,082 crore while dividend outgo is a meagre Rs 315 crore. However, investors have a much bigger concern here. They suspect that a major part of this inflow will go to the related parties. This belief is backed by the company's history and the fact that the board raised the limit for corporate loans to Rs 3,500 crore from just Rs 500 crore. Also, as the company hives off the healthcare division, its earnings could fall by nearly 30-40% taking down the stock price as well. This story is far from over as the company recently announced that it will consider a buyback proposal on January 14. Only time will tell whether this move is a pure gimmick to support stock prices or real value lies on the table for the investors.

• Avenue Supermarts (DMart): This stock slumped during intraday trade on Wednesday because of the company’s Q3FY22 earnings being a mixed bag. The company’s consolidated net profit rose 23.4% YoY to Rs 5,526 on a  22.2% YoY rise  in revenues to Rs 9,220 crore. However, gross margins remained flat at 15.4% YoY because of lower sales of general merchandise and apparel. Brokerage Prabhudas Lilladher suggests that a deterioration in sales mix and an expected rise in expenses by 15.2% YoY might hamper margins going forward. The brokerage has a  ‘Hold’ rating on the stock as it expects store expansions and increasing share of essentials in the sales mix to drive profit growth at a 31% CAGR from  FY20-24.

On the other hand, ICICI Securities downgraded its target price for Avenue Supermarts expecting footfalls to decrease and demand for general merchandise and apparel to stall in H2FY22. ICICI Securities feels  the trend of tepid demand is likely to continue due high inflation and reduced mobility because of restrictions on movement of people due to the pandemic’s third wave in many cities the company operates in.

• Abbott India: This stock rallied for five continuous sessions in the last week of December 2021 and ended up 5.8%, but since January 1, the stock is on a downward trajectory losing nearly 8.5% . A recent report from Axis Securities says that the company’s Q2FY22 performance has been robust and its average growth rate of 11% in October 2021 and November 2021 outpaces the Indian Pharma Market’s growth of 5.8% by 520 bps. Axis    reduced its target price by 2.7% to Rs 20,000 as it believes that the stock has limited upside. However, the brokerage maintains a positive outlook on the company and has a ‘Buy’ rating on the stock. According to Axis Securities’ report, the company retains its leading position in segments like women’s health, gastroenterology, metabolic, pain management, CNS, and vaccines. Axis Securities believes that its branded business will improve the company’s profitability in H2FY22. The distinct factor for this company’s growth prospects is its strategy of going digital and providing services beyond just medicinal pills and venturing into diagnostics, medical devices, and nutrition.

• Affle India: This advertising technology company’s stock is on fire. Till date in 2022, it is up nearly 27% and has been touching new highs regularly. It’s the most overbought stock among the Nifty 500 companies, according to technical indicators like RSI and MFI. During this upward movement of the company’s stock, existing investor Malabar India Fund sold 1,05,739 shares in a bulk deal to Value Partners High-Dividend Stocks Fund. The stock is currently trading above all its simple moving averages.