Banks Are Hot Again!

Author

Yash Upadhyaya
June 20, 2024

Tale of the Tape 

Good evening everyone.

Nifty and Sensex pulled back sharply from the day’s low to end with minor gains. Midcaps (+1%) and Smallcaps (+0.6%) had a much better day. The advance-decline ratio was in favour of the bulls (3:2).

Most sectors ended in the green. Real Estate (+2%) and Metals (+1.8%) saw the most buying. Pharma (-0.5%) and Auto (-0.5%) were under pressure.

Is the sun starting to shine on private-sector bank stocks? Read our top story below to find out.

MakeMyTrip was the top NSE 500 gainer after Goldman Sachs’s stamp of approval. More details below.

Fertilisers And Chemicals Travancore, PNB Housing Finance and Vedanta saw big movements today. Check out their charts below to find out why.

Religare Enterprises was up +4% after SEBI said it could proceed with its open offer.

AU Small Finance Bank (+2%) was in focus after WestBridge Capital sold a 1.7% stake.

Brokerage reactions. Muthoot Microfinance (+4%) gained after Investec slapped a buy rating on the stock; the brokerage sees a +39% upside from current levels. Uno Minda (+2%) hit a record high after Goldman Sachs initiated coverage and said it sees a +28% upside.

Sapphire Foods rallied +6% intraday after approving a 1:5 stock split.

Gokuldas Exports gained +5% after it said it would invest Rs 350 cr in a fabrics manufacturer.

Here are the closing prints:

Nifty

23,567

+0.2%

Sensex

77,479

+0.2%

Bank Nifty

51,783

+0.8%

Market
Banks Are Back!

Private sector banks look cool again. ICYMI - Bank Nifty was one of the worst-performing sectors in 2023. Yes, PSU banks did well and there were a few decent performers like ICICI. But private lenders have mostly underperformed in an otherwise raging bull market. That said, the tides may have started to turn. Here’s why. 🤔 

1) Strong economy: Banks generally do well when the economy does well. And vice versa. Luckily for us, India is kicking ass on all key macros; GDP, inflation, forex reserves. With the global rate cut cycle starting (India and US hopefully later this year), things look better overall for international trade too. FYI - mutual funds have started buying HDFC Bank like there’s no tomorrow! They purchased shares worth Rs 7,600 cr in May. Retail investor’s favourite golden boy Quant Mutual Fund led the pack. 💸 

2) Sturdy house: Private lenders have also cleaned up their act in the last two years. Balance sheets are the strongest they’ve been in a decade, while profits have quadrupled during the same period. The war for deposits is starting to ease and they also tackled the whole unsecured personal loan problem pretty well. FYI -Indusind Bank is one of CLSA’s top picks here! Many lenders have also solved their internal problems. ICYMI - Kotak took an RBI blow over its digital biz, but it has been working to win back customer trust. It also finally solved its leadership issues with the exit of KVS Manian. FYI - Macquarie upgraded Kotak’s target price today and says it sees a potential +15% upside. 💪 

3) Cheap valuations: There comes a point when ‘underperformance’ translates to a stock being dirt cheap. And we’re there; for example, HDFC Bank is available at just 3.2x price-to-book! 😍 

Specials

Turning Point For Tata Motors?

2024 is still going strong for Tata Motors. But is it a good buy at current levels? Check out our recent video covering technicals, fundamentals, brokerage rating & SEBI RAs' views on this Tata group stock.

Stock

Mapping New Highs 🚀 

MapMyIndia was the top NSE 500 gainer today, locked in a +20% upper circuit. Goldman Sachs slapped a ‘buy’ rating on the stock and sees an additional +16% upside from current levels! FYI - with today’s insane rally, the stock has more than DOUBLED in the last year. So why are experts so bullish? Here’s what you need to know. 🔍️ 

For the unaware: CE Info Systems aka MapMyIndia is a leading homegrown digital mapping company. FYI - the company has an 80%+ market share in the auto OEM navigation software sector. 🗺️ 

What’s popping? For starters, the company recently won back Hyundai and Kia in a mega deal that’s roughly 1.25x its current annual sales. This will bolster revenue visibility in the short term. Fun fact: MapMyIndia’s order book already stood at a healthy Rs 1,400 cr as of FY24, which is a big positive. ✅ 

In the long-term though, analysts see a HUGE opportunity in the ‘emerging mobility biz’. This includes things like mapping ‘software as a service’, fleet management solutions and newer revenue segments like GPS trackers, dash cameras and ‘assisted’ helmets. This market could hit a whopping $461 million in the next four years. PS - MapMyIndia currently has a 16% market share, so even small gains could result in millions of dollars added to the topline by FY30. 📊 

Finally, MapMyIndia is also betting big on government contracts, all of which are trying to digitize land records and new infra projects, all of which will require mapping data. FYI - If the number of government customers grows from 500 as of FY23 to 1,250 as of FY30, that's another +$50 million in revenue over the next six years. 💰️ 

Big Picture: New verticals like IoT or EVs with high margins are on the horizon, providing a huge growth runway. Because MapMyIndia’s capex is extremely low, this could boost margins & profitability over the next few years. 🔥 

Charts

Chartbusters

Here are three companies that saw BIG movements today:

1) Fertilisers And Chemicals Travancore was locked in a +20% upper circuit as the fertiliser stock rally continued for the second day in a row! FYI - today’s trigger was the GOI increasing MSP rates for many Kharif crops. Higher MSPs = more money for farmers to spend on fertilisers! 🚀 

2) Vedanta rallied +7% intraday after the company approved raising Rs 1,000 cr. This is good news because it still has a lot of debt to clear. ICYMI - the company has been cutting costs, working on its demerger plan and getting its act together. Along with the metal rally, the stock is up +82% YTD! 🤑 

3) PNB Housing Finance took a hit after 1.36 cr shares (5.2% equity) changed hands in multiple block deals. Reports say PE firms General Atlantic and the Opportunities Fund were the likely sellers. With markets at all time-high, you can’t blame FIIs for hitting the door. 👀 

Check out their charts below:

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