How To Make Money In THIS Market

Markets pullback after yesterday’s ugly cut, investment strategy post-election, why you need to focus on auto stocks, and plenty more

Author

Yash Upadhyaya
June 05, 2024

Tale of the Tape 

Howdy folks. Markets were back in the green! 🎢

Nifty (+3.3%) and Sensex (+3.2%) staged a smart recovery after the election disaster. Midcaps (+4.3%) and Smallcaps (+3.8%) knocked it out of the park as well. Only 62 stocks in the NSE 500 ended in the red! 🚀

It was a green wave across sectors. Metals (+5.8%), Auto (+4.7%) and FMCG (+4.3%) were the top winners. 📈

With the election earthquake over, how should you start tweaking your portfolio? Read our top story below to find out what experts are saying. 💯

Looking for new opportunities and stocks in a stable sector? More details below on how to play India’s auto story in FY25. 🚗

FMCG stocks continued their rally for a second day in a row. HUL, ITC, Dabur and Marico were up +4%-+6%. 🔥

Zee Entertainment (+7%) will consider raising funds at its June 6 board meeting. 💸

Bharat Dynamics (-10%) was the top NSE 500 loser after being hit by profit-booking over post-election worries. 📉

Hindalco (+6%) was in focus after its US subsidiary Novellis shelved its IPO plans. ⛔

KEC International rallied +7% intraday after bagging a Rs 1,002 cr civil construction order. 🏗️

Angel One gained +5% after a strong May business update. 📊

Here are the closing prints: 

Nifty

22,620

+3.4%

Sensex

74,382

+3.2%

Bank Nifty

49,055

+4.5%

Market
Investment Strategy Post-Election

The dust is starting to settle after the election earthquake, and markets are picking up the pieces. But the question on every investor’s mind right now: where do we go from here? Experts are divided mostly because future visibility is still low. But there is broad consensus on what to watch out for. Here’s a quick guide on what’s hot and what’s not before placing your bets over the next month: 🤓

1) Infra, Defence & PSU: Every analyst right now is saying take a deep breath. The more bullish ones note that ‘re-rating will take a back seat’ aka don’t expect major gains. Pessimists like CLSA have straight up dropped overvalued capex stocks; the brokerage has swapped L&T from its India focus portfolio with HCL Tech instead. The reasoning here is that their expensive valuations can longer be justified with reduced GOI support. Beyond that though, there’s common sense calculations to be made. It’s clear that no future GOI can take defence or road infra lightly, but the same may not be true for utilities or railway financing firms. 💰

2) Consumption: The popular thesis being put forward is that rural consumption will be on the rise. ICYMI - the new Govt will have a huge pot of money from the RBI to spend on populist schemes; a windfall that it can use without running up the fiscal deficit! Yes, FMCG is now the new golden goose. But don’t forget about auto (Hero MotoCorp; +8% intraday), consumer durables (Voltas; +7% intraday) and even sugar stocks (Balrampur Chini up +7% intraday). Keep in mind, a lot of this is speculative because we don’t really know the new policies. 🚀

3) Election-adjacent: Finally, there’s many categories that don’t fit into those two baskets. Some of these are completely separate like telecom, where the bull case depends on upcoming tariff hikes. And then there are some that are kinda related but not really. For example: if the GOI’s focus on PSU banks wavers, it offers a chance for lagging private lenders to pick up the slack. FYI - Prabhudas Lilladher says HDFC, Kotak and Axis could all bounce back! 📈

Specials

Election Special: 5 Stocks To Buy - By SEBI RAs 🚀 

Post-election results, markets have shown tremendous volatility. But there's still room to buy stocks at the current dips. Check out our latest video where we share 5 election special picks by SEBI RAs!

Stocks

Opportunity In Adversity

India’s political scene is chaotic AF. But amidst all the uncertainty there are both new opportunities and stable sectors! Today, we’re taking a look at the old classic: the auto industry. 🚗

In FY25, we have multiple positive triggers. The new GOI may be forced to loosen its fiscal purse and boost rural consumption through populist schemes, which is a HUGE positive. We should also fingers crossed see rate cuts later this year. Apart from that, demand is still strong and a better-than-expected monsoon should aid recovery. On the flip side, higher commodity prices (metals and rubber) may restrict earnings growth. 📊 

Here’s how best to play India’s auto story:

1) Two-wheelers: The sector suffered from a slump in rural demand and because of how badly lower-income consumers were hurt during Covid. Overall sales grew +13% YoY in FY24 but annual volumes are still short of the peaks seen way back in FY19. This will hands down be the BIGGEST winner if consumers in semi-urban and rural areas start spending more. Fun fact: that’s why Hero MotoCorp and TVS Motor, both of whom have a strong presence in the entry-level segment, were up +4%-8% intraday! 🏍️

2) Commercial vehicles: Like two-wheelers, CVs also had a rough FY24 after a weak rural economy plus delays in some key infrastructure projects hurt most players. But a lot of that seems to be turning around right now and there’s no better sign than Ashok Leyland’s May sales, which show a cool 12% YoY jump across verticals. 🚚

3) Passenger vehicles: May sales data throws up a mixed trend for top dogs Maruti (-2% YoY) and Tata Motors (+2% YoY). After a great FY24, it’s tough to maintain scorching growth. It's still early days yet, but we’ll have to see whether demand will help bolster the industry leaders. There are still a few bright spots though, with a strong performance by Mahindra & Mahindra. PS - M&M’s tractor biz could also shine if the rural recovery plays out. 🚜

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Community Star Of The Month

Winner Winner Chicken Dinner

Congratulations Shashi Pundit for winning the Community Star of the Month! ⭐️ 

Here are a few investment & trading ideas shared by him on Stocktwits that you must check out: 😎 

Shashi is a full-time trader and has been in the markets for nearly 20 years. He specializes in swing trades and options. Follow him for more awesome trading insights like these.

Disclaimer: Shashi Pundit is not a SEBI registered advisor and you should not construe any information discussed herein to constitute investment advice. Consult your financial advisor prior to making any actual investment or trading decisions.

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