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- Budget Week Is Here!
Budget Week Is Here!
Yash Upadhyaya
July 22, 2024
Tale of the Tape
Howdy folks. Welcome back to the Daily Rip!
Nifty and Sensex ended barely in the red, down -0.1% each as investors await the Union Budget. Midcaps (+1.3%) and Smallcaps (+1%) knocked it out of the park though. The advance-decline ratio was in favour of the bulls (3:2).
It was a mixed-bag kinda day for sectors. Auto (+1.1%), Metals (+1%) and Pharma (+1%) saw the most buying. Oil & Gas (-0.6%) and Real Estate (-0.5%) witnessed profit booking.
The Union Budget will be announced tomorrow! Read our top story on why markets are jittery ahead of the announcement and what to watch out for.
RIL fell -3% after its oil biz dragged down its overall Q1 earnings. Meanwhile, HDFC Bank was up +2% after its okay-ish results! More details below.
Wipro, RCF and Kotak Mahindra Bank saw BIG movements today. Check out their charts below to find out why.
Defence stocks were buzzing a day before the Union Budget. HAL, Mazagon Dock and Garden Reach Shipbuilders were up +4% to +5%.
ITC was in focus after Macquarie initiated coverage on the stock; the brokerage sees a +15% upside from current levels.
Results reaction. Indian Hotels gained +7%. Meanwhile, Tejas Networks fell -6% despite steady Q1 results.
Jubilant Pharmova (-4%) fell after the USFDA red-flagged its Montreal facility.
Here are the closing prints:
Nifty | 24,509 | -0.1% |
Sensex | 80,502 | -0.1% |
Bank Nifty | 52,280 | FLAT |
Spotlight
SEBI RA Spotlight
IT stocks are on a roll after reporting strong earnings. One such stock which looks bullish on the charts is Accelya Solutions, according to Sneha Vasudeo. After a long consolidation, the stock has given a breakout from its double bottom pattern, which is a positive sign. 1930 is a key pivot level and as long as it trades above it we can expect it to hit 2300 in the next month, she added.
FYI - Sneha is a SEBI Registered Advisor. By qualification, she is a Certified Financial Planner from FPSB Ltd, USA. Sneha mostly shares ideas around cash stocks with a decent to good risk-reward ratio on Stocktwits. Follow her for more amazing insights and add $ACCELYA.NSE to your watchlist and track the latest from the community.
Budget
Budget Kya Lagta Hai?
The Union Budget will be unveiled tomorrow and EVERYONE is nervous AF. Some of it is because people are worried about what FM Nirmala Sitharaman has up her sleeve. But the real issue is that Indian markets are very carefully poised right now.
Markets have been on a way-way trajectory over the last year. A never-ending bull rally, with Nifty and Sensex regularly hitting new highs. Any corrections, like the one on election day on June 4, were quickly brushed aside with markets recouping all losses. Yes, many sectors have justified the rally with earnings growth but there are a LOT of pockets with overstretched valuations.
In other words: if the GOI even breathes a little too hard, markets could get BLOWN AWAY. Which is why this is probably the most closely watched Budget in easily a decade.
Here’s what you should be watching out for, in terms of positive AND negative triggers:
1) Taxes: There have been rumours for months about a potential hike in capital gains tax. While that has kinda gone away recently, any increase will be devastating and be the trigger for a MAJOR sell-off.
2) Policy Changes: Everyone wants to see the GOI re-commit to the broad agenda it’s followed for the last 10 years. This includes a focus on defence, renewable energy, railways, infrastructure and PSUs. Don’t get too upset if overall capex spending comes down, all experts say it will. What matters is that the overall trend remains intact.
3) Careful populism: Most experts say a consumption boost is coming. Media reports are filled with how the GOI is planning sops for the rural economy. If it ALL happens, the GOI’s finances will go for a toss. A calibrated boost is the ideal middle path. This is why you should be ready to play this narrative too. FYI - some of JM Financial’s top picks here include Mahindra & Mahindra, Hero Motocorp, Dabur, HUL and ITC.
Specials
Budget 2024 Stock Picks - By SEBI RA
The Final Budget is around the corner! What to expect from the budget announcement and how should you position yourself to make the most of it? In our latest video, we cover 5 stocks ideas by SEBI RAs which can deliver healthy upside from current levels.
Earnings
Earnings Roundup
Reliance Industries fell -3% after its Q1 results. FYI - it has three main verticals: O2C (oil-to-chemicals), retail and Jio. O2C is the core cash cow and has been struggling for a while. This time around, oil biz’s EBITDA crashed -14% YoY due to lower refining margins, weak global demand and a ramp-up of new refineries. To make matters worse, Reliance Retail reported flat profit too due to higher depreciation + tax costs. Both these things brought down RIL’s overall bottomline, making it miss Street estimates big time!
On the bright side, the topline was decent across all divisions. Jio added 8 million net subscribers in Q1 and posted a healthy 12% YoY profit bump despite structural market issues. Retail’s revenue growth missed some analyst estimates but was still up +7% YoY despite a crippling heatwave which hurt consumer spending.
Here is RIL’s Q1 report card:
Revenue: Rs 2.36 lakh cr; +12% YoY (vs Est: Rs 2.34 lakh crore)
Profit: Rs 15,138 cr; -5% YoY (vs Est: Rs 16,287 cr)
Big Picture: It’s become a waiting game for RIL investors. For some positive triggers, there’s clarity. Yes, Jio’s ARPU was flat QoQ, but tariff hikes have kicked in and will start delivering soon. For retail, the GOI is expected to boost consumption. But for O2C, we’ll have to see. How much of the global oil demand recovery depends on China? When will margins improve? Nobody really knows.
RIL is +17% YTD
HDFC Bank’s Q1 were meh. Deposit growth was flat QoQ, while advances fell -1% QoQ. On the positive side, net interest margins were slightly up, which shows that the lender’s strategy of chasing profitable growth is starting to pay off. That said, asset quality took a hit in Q1, mostly due to stress in its agricultural portfolio.
If the results were all over the place, why did the stock end +2% higher? It’s partly because the results slightly beat Street estimates. But, mainly because a LOT of the negatives are priced in. ICYMI - we knew about weak loan disbursals in early July during the Q1 biz update. Here are its key stats. PS - YoY figures aren’t comparable because the merger took place in July 2023.
Net Interest Income: Rs 29,837 cr; +3% QoQ (vs Est: Rs 29,583 cr)
Net Profit: Rs 16,175 cr; -2% QoQ (vs Est:
Gross NPA: 1.33% vs 1.24% QoQ
Net NPA: 0.40% vs 0.30% QoQ
FYI - analysts are quite divided over HDFC’s future. Goldman Sachs has hiked its target price to Rs 1,927 p/sh, citing brighter growth prospects. Meanwhile, JP Morgan has cut its target price to Rs 1,700 p/sh (vs Rs 1,800 p/sh earlier) saying weak loan growth will continue!
HDFC Bank is -3% YTD.
What’s your view on the stock? |
Charts
Chartbusters
Here are three companies that saw big movements today!
1) Wipro tanked -9% intraday after its disappointing Q1 results. FYI - this was its biggest one-day fall in over 4 years. Yikes. Tbh, the results were not SOOOOO bad but the guidance cut was a bummer. Is it an overreaction? Perhaps, but when the rest of the IT pack is popping off, you can’t afford to be the ugly duckling.
2) RCF soared as investors anticipated a sectoral boost in the upcoming Union Budget. ICYMI - most experts believe that the GOI plans to increase rural economy spending and come out with some sops for farmers. All of that translates to good news for fertilisers, which is why most of those stocks were up today.
3) Kotak Mahindra Bank cracked -4% after an okay-ish Q1. Its bottomline jumped +81% YoY, but that was due to a one-off. What’s got investors spooked is its net interest margins, which were flat QoQ. Sluggish deposit & loan growth didn’t help either. That said, most analysts still remain upbeat on the stock!
Check out their charts below:
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