Tale of the Tape 

Hiya everyone. Welcome back to the Daily Rip!

Nifty (-0.2%) and Sensex (-0.3%) ended with minor cuts after a boring range-bound session. Midcaps (+0.5%) and Smallcaps (+0.2%) fared slightly better. The advance-decline ratio was evenly split.

FMCG (-2.2%) was the top loser -- check out their charts below -- followed by Auto (-0.8%) and Oil & Gas (-0.6%). Metals (+0.6%) and IT (+0.3%) saw some buying.

Godrej Consumer (-9%) nosedived after a weak AF Q3 biz update. Read our top story more for the deets.

CEAT (+8%) hit a record high after its $225 million Camso off highway tyre acquisition. More details below on the company’s premium play.

MapMyIndia (+16%) was the top NSE 500 gainer after reversing its decision to invest in the former CEO’s new B2C firm.

Star Health cracked -4% after getting a show-cause notice from IRDAI over violation of unidentified norms.

Lloyd Metals (+4%) gained after it entered the mines development & operations biz. PS - InCred also initiated coverage on the stock and sees a +35% upside from current levels.

Zaggle Prepaid Ocean Services was up +5% after inking a credit card partnership with HDFC Bank.

Textile stocks zoomed after Bangladeshi media reported that the Beximco Group would sell its loss-making garment firms. Trident (+10%; firm is also investing to expand ops in MP), Gokaldas Exports (+7%) and Welspun Living (+6%) saw solid gains.

Mishtann Foods was locked in a -20% lower circuit for a second day in a row after SEBI’s regulatory action.

Here are the closing prints:

Stock
Godrej Warning Sends FMCG Stocks Crashing

Godrej Consumer crashed -10% intraday after releasing its Q3 biz update. FYI - this is the first time they’ve shared their business update even before the quarter has ended! That’s how you know this is bad!

Firstly, the company expects “flattish" volume growth in Q3. ICYMI - Godrej posted average organic volume growth of ~7% in the last six quarters, so this is a big dip. Also, its margins come between 24%-27%, but it now expects a “temporary downward breach” aka a profit hit.

The pain comes from the firm’s soap & insecticide verticals, which account for ~60% of the topline. In soaps, input costs (mainly palm oil & derivatives) have risen 20%-30% YoY. The company has hiked prices & reduced grammage which would lower inventory, thus hurting sales. For insecticides, crazy weather (South Indian cyclones + delayed winters in north India) has hurt demand.

The stock’s selloff spread to other FMCG firms. Hindustan Unilever (-3% intraday) competes with Godrej in soaps, so a palm oil hit should hurt HUL. PS - this is why HUL has been trying to reduce palm oil content in its products! But many experts thought H2 would be a LOT better for FMCG firms on the back of a rebound in rural demand and easing cost pressure 

However, in reality there are serious inflation challenges led by adverse weather events. Combined with the recent hit to urban consumption, it’s clear the market is jittery about FMCG’s outlook for FY25 and beyond.

Big Picture: Zooming out, Godrej says these challenges are “transitionary” aka it should pass in a quarter or two. This could be true, but it would still mean FY25 is a washout. FYI - CLSA  has cut its target price to Rs 1,000 p/sh; implying a further -11% downside from current levels!

Stocktwits Specials
What Next For Adani Stocks?

Adani Group stocks have been super volatile recently following the bribery allegations. But, the storm seems to have passed after a series of statements and clarifications by the Group. Does that make it an opportunity to buy Adani stocks or should you avoid catching a falling knife? Check out our latest video to know more.