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- Best Time To Buy Largecaps?
Best Time To Buy Largecaps?
Yash Upadhyaya
August 20, 2024
Tale of the Tape
Howdy folks! Markets closed up for a third straight day.
Nifty and Sensex gained +0.5% each. Midcaps (+0.8%) and Smallcaps (+0.5%) also followed suit. The advance-decline ratio was in favour of the bulls (3:2).
Most sectors ended in the green. PSU Banks (+1.7%), NBFCs (+1.1%) and Banks (+0.9%) were the top winners.
Retail ownership of blue chip stocks is at a record low. Read our top story below to find out more.
Q1 earnings season is officially over. What does it tell us about what FY25 will look like? More details below.
Shipbuilding stocks got beaten up today, with Mazagon Dock Shipbuilders ending as the top NSE 500 loser. Check out their charts below to find out why.
Ola Electric was volatile AF! The stock fell over 12% from its intraday high after doubling IPO investors’ money earlier today.
Zomato was in focus after 21 cr shares (2.4% equity) changed hands in a big block deal; reports say Antfin Singapore was the likely seller.
KEI Industries gained +8% after UBS initiated coverage on the stock; the brokerage sees a +31% upside from current levels.
Allcargo Logistics jumped +9% after reporting a solid July business update.
Optiemus Infracom soared +12% after announcing a foray into telecom equipment manufacturing as a partner with Tejas Networks.
Nucleus Software Exports was locked in a +20% upper circuit after saying it will consider a share buyback proposal on August 22.
Here are the closing prints:
Nifty | 24,699 | +0.5% |
Sensex | 80,803 | +0.5% |
Bank Nifty | 50,803 | +0.9% |
Market
De-risk Your Portfolio Before Its Too Late
India’s bull market has been CRAZY. But even amid all the massive gains, the two clear winners have been smallcap and midcap (SMID) stocks. In fact, these two segments have become SO attractive that retail investor shareholding in blue chip stocks has fallen to a 22-year-low of 36.8%! Ditto for institutional holding in Nifty 50 firms, which has now fallen to its lowest level since 2001.
It’s a no-brainer why this is happening. Both the Midcap 100 and Smallcap 100 indices have beaten the Nifty over the last year. A large part of this is because many heavyweight stocks missed out on the rally like HDFC Bank. But sadly, the good times can’t continue forever for SMIDs. There’s plenty of reasons to be cautious.
For starters, valuations are near all-time highs. The Midcap 100 index is now trading at its highest relative level to the Sensex, while the Smallcap index is close to its 2005 record. We’ve already seen some favourite retail stocks take a hit. Mazagon Dock Shipbuilders has corrected -26% from its July highs, RVNL has dropped -13% while IREDA has fallen -23%.
Secondly, we’ll need to wait and see how earnings growth pans out. Nuvama notes that in its SMID universe, Q1FY25 finally saw an earnings downgrade for this fiscal after three straight quarters of upgrades. There’s a lot of different reasons for this but it’s a sign to take a step back and reassess your portfolio.
Finally, this doesn’t mean you should abandon SMIDs. Only that it also makes sense to load up some large caps as well. FWIW - most experts agree that FY25 will be the year of IT, chemicals and private banks. These sectors are set to bounce back after a rough 2024 and provide enough of a largecap defence to help you weather any future small and midcap corrections!
Stocktwits Specials
IREDA: 5-Min Review
IREDA is down -22% from it's all-time highs. Is it the right time to buy the dip?
Check out our recent stock analysis video where we cover all the major updates around IREDA. Along with this, we also breakdown the fundamentals of the company & discuss SEBI RAs’ views on the stock.
Earnings
Q1 Earnings Report Card
The Q1FY25 earnings season has wrapped up! As we move ahead, what does India Inc’s report card look like? And what does it say about the rest of the fiscal? We got you covered.
1) Top and bottom converge: For most of FY24, PAT growth for a majority of the BSE 500 companies beat revenue growth. This is primarily because the bottomline was lifted by key tailwinds like lower input prices & bank credit costs. This has started to converge now with the topline and bottomline of BSE 500 firms (ex-OMC) growing on average 8%-10% each.
2) Sectoral winners and losers: Earnings stabilised for dark horses like IT and FMCG, while big FY24 winners like auto & industrials lagged. There were also surprise outperformers like pharma. But within consumption stocks, there’s been an uneven gap with things like hotels and jewellery slowing down, while durables did well due to industry-specific factors.
3) Earnings downgrade: For the Nifty, Q1 PAT growth was sub-5%, which is its LOWEST since 2020. As a result, most experts have cut FY25 earnings by 1.5%-2%. For specific stocks, Motilal Oswal says Coal India (+10.8%), Dr. Reddy’s Labs (+6.7%) and Apollo Hospital (+4.4%) saw the biggest earnings upgrades for FY25. At the other end, BPCL (-16.3%), Bharti Airtel (-11% and Hero MotoCorp (-9.4%) saw the biggest downgrades.
Big Picture: Overall, the picture is subdued but not too bad just yet. So what’s going wrong? The answer is demand. Consumption growth never recovered fully after Covid. Bottomline could come under pressure as earlier tailwinds moderate. Hope for the best but prepare for the worst!
Charts
Movers and Shakers
Shipping stocks got KO-ed today, falling up to -9% intraday in an otherwise strong market. The immediate trigger was ICICI Securities projecting a -73% downside for Mazagon Dock Shipbuilders. But ICICI has been a long-term bear, so this is mostly just nervousness over valuations and panic corrections. PS - the selloff spread to most other ship stocks including Cochin Shipyard and Garden Reach Shipbuilders. Check out their charts below!
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