Let The Earnings Season Begin

Author

Yash Upadhyaya
July 11, 2024

Tale of the Tape 

Hiya everyone.

Nifty and Sensex pulled back from the lows to end flat. Midcaps (+0.4%) and Smallcaps (+0.7%) had a much better day. The advance-decline ratio was evenly split!

It was a mixed-bag kinda day for sectors. Oil & Gas (+1.1%) was the top winner, while FMCG (+0.3%) and Banks (+0.2%) saw minor gains. On the other hand, Real Estate (-1.5%) got beat up the most. 

Most banks continue to struggle in their war for deposits. Read our top story below to find out why, courtesy of inputs from DSP Netra.

Is India’s footwear sector finally at an inflection point? More details below on Yes Securities’ top picks.

Shipping Corporation, HPL Electric and Sun TV all saw BIG movements today. Check out their charts below to find out why.

TCS will report its Q1 earnings later today. Here are the key things to watch out 

Yes Bank was up +4% after global credit rating agency Moody’s upgraded its long-term outlook.

PS - there’s also been a LOT of stake sale buzz recently, with alleged interest from investors in Japan and UAE.

Glenmark Pharma (+1%) was in focus after it said it would divest its entire stake in Glenmark Life Sciences.

Raymond (-36%) turned ex-date following the demerger of its lifestyle biz. This is just the first part of the demerger, with the lifestyle business now set to be listed separately on stock exchanges by the end of August or early September. ICYMI - the share swap ratio was 4:5.

Ahluwalia Contracts (+3%) hit an all-time high after bagging an Rs 893 cr order win from the Airports Authority of India for a new terminal building.

Here are the closing prints:

Nifty

24,316

FLAT

Sensex

79,897

FLAT

Bank Nifty

52,271

+0.2%

Spotlight
SEBI RA Spotlight

Oil & Gas stocks are breaking out once again. Global brokerage firm Macquarie upgraded a clutch of them including ONGC today. Shubham has been bullish on ONGC for a long time and recommended buying it earlier this week for a potential upside of ~30%.

For the unaware, Shubham Jain has been an active SEBI registered advisor for 9 months now. He specializes in giving recommendations on equities from a short-term swing trade perspective.

Sponsored
“REAL” Reason For Fall In Bank Deposit

Q1 biz updates are out for most banks now. The common red flag? Weak deposit growth! For a majority of lenders, both private sector and public, deposit growth is lagging behind loan growth. Put simply: people want to borrow more money, but banks don’t have enough deposit cushion to keep giving it to them. This is bad for bank investors because lower earnings = lower stock price. This issue is kinda complex, but luckily for us, the folks at DSP Netra have broken down what’s happening at the household level:

1) Net financial savings: Banks fight for deposits from a common pool of household savings. What we save from our salaries, that’s what banks are working with. Now, the thing is in India, this savings pool has reduced. DSP estimates household net financial savings collapsed to a 47-YEAR-LOW in FY23. This is because consumption growth has SMOKED income growth. FYI - this is due to two factors. Firstly, if you aren’t in IT or finance, your salary growth isn’t beating inflation. And secondly, people like to buy a lot of stuff using debt. 

2) Real estate and stocks: The other rival for banks is real estate and mutual funds + stocks. Every rupee you spend on buying a plot or a flat is one less rupee available for a bank deposit. Ditto with MFs and stocks. Fun fact: Household ‘physical’ savings aka real estate accounted for 70% of total savings in 2023. We all also know the mountain of SIPs hitting markets every month.

Look. We know what you’re thinking. You want the best possible return on your savings, whether it’s land or stocks. That’s fair enough. But banks are a key driver of the economy and they need deposit growth too. FYI - one solution proposed by SBI economists recently is to tweak the tax on deposit interest and give equal treatment at maturity. This could help shift the balance back to bank deposits!

​​For more details, check out the full report here: https://dspim.co/SwNetJul24 

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Specials

5 Stocks To Buy In July - By SEBI RA

Markets are at their all-time highs but is it a good time to invest now? In this video, we cover 5 investment ideas by SEBI RAs which can deliver healthy returns even from current levels.

Stock

Spring In Its Step

Is it time to start betting BIG on India’s footwear sector? Granted, the sector has seen some rough times (cough, Relaxo) mostly due to Covid-19. But it looks set to bounce back and maybe near an inflection point. Here’s what you need to know.

Let’s take a look at the challenge first. Yes, organised footwear players increased their market share from 25% in FY15 to 30% in FY20. But, the problem is that the organised segment still contributes only 13% of total pairs sold (volume) in India. FYI - that represents the MASSIVE opportunity here. India’s per capita consumption is 1.9 pairs vs the global average of 3.2 pairs.

The trick here is in identifying where growth is going to come from. Fun fact: the ‘mass’ and ‘economy’ segments grew at a CAGR of only 8% from FY15-FY20, lower than the industry average of 9%. This trend has broadly continued in the last few years. This is partly why players like Relaxo or Bata haven’t been doing that well. What HAS been growing then? It’s primarily the mid & premium segments. With rising disposable incomes, greater economic growth + lower inflation, experts say this segment is likely to explode. 

Beyond this, there are two other key positive triggers. Firstly, the prices of key raw materials have been coming down after peaking in 2022. So, expect profitability to finally improve. Secondly, the industry’s export prospects are expected to SOAR when the new BIS norms kick in from August 2025. The new quality standards are not just for footwear parts (soles heels etc), but also raw materials. Analysts say this should reduce the need to import footwear and also boost exports.

FYI - Yes Securities’s two key picks here are Metro Brands and Campus Activewear. Campus for its huge presence in the sports & athleisure segment and Metro for its asset-light biz model. The brokerage sees a +17% upside for Campus Activewear in the next 12 months!

Charts

Chartbusters

Here are three companies that saw big movements today!

1) Shipping Corporation of India hit a +20% upper circuit on a bunch of positive news developments. ICYMI - different reports say the PSU’s privatisation is back on track, that the GOI is considering a new JV between it and Indian Oil for making tankers and that the Budget will have some goodies for shipping firms! No wonder the stock rocketed today.

2) Sun TV hit a 52-week high after a big block deal. Reports say 36 lakh shares (or 1% equity) changed hands in a large transaction. The buyers and sellers were not immediately known.

3) HPL Electric & Power was locked in a +20% upper circuit after it won a massive Rs 2,000 cr order for smart meters. FYI - this is an insane win because it exceeds the company’s total order book for FY24! It also represents about 64% of the company’s market cap!

Check out their charts below:

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