Nifty Jhukega Nahi!

Author

Yash Upadhyaya
July 25, 2024

Tale of the Tape 

Hiya everyone. Markets were volatile AF today!

Nifty and Sensex pulled back sharply from the day’s low to end flat. Midcaps (-0.2%) and Smallcaps (-0.3%) weren’t that lucky. The advance-decline ratio was in favour of the bears (3:2).

It was a mixed-bag kinda day for sectors. Oil & Gas (+2.2%), Auto (+1.3%) and Pharma (+0.9%) were the top winners. Metals (-1.3%), Banks (-0.8%) and Real Estate (-0.8%) saw some selling pressure.

Markets seem to be in no mood to fall despite all the hate around the Budget! Read our top story on the positives that can continue to drive this bull-run.

Axis Bank (-5%) was the top Nifty loser after its Q1 slippages jumped up! Nestle India also fell -3% after its Q1 numbers missed estimates. More details below.

Tata Motors, HG Infra Engineering and RBL Bank saw big movements today. Check out their charts below to find out why.

Results reaction. JK Paper plunged -8% after its Q1 profit HALVED YoY. Meanwhile, Larsen & Toubro ended +3% up after a strong Q1 show.

Brokerage updates. Petronet LNG was up +5% after Nomura upgraded the stock. Suzlon Energy (+2%) was in focus after JM Financial hiked its target price to Rs 71 p/sh; +15% from current levels.

Rail stocks continued their losing streak after the Budget ignored them. IRFC (-4%) led the pack while RVNL (-3%), IRCON (-3%) and Titagarh Rail (-3%) saw some losses.

CG Power gained +5% after acquiring a Bangalore-based railways signaling firm for Rs 320 cr.

Here are the closing prints:

Nifty

24,406

FLAT

Sensex

80,040

FLAT

Bank Nifty

51,889

-0.8%

Market
India Par Laga Do 🇮🇳🇮🇳🇮🇳

Ever since the elections, India’s bulls and bears have been fighting over the ‘Big Correction’. The idea is that after the never-ending bull rally, a major sell-off is just around the corner. The Budget was viewed as a key trigger here. And while the tax hikes have left a bad taste in our mouths, there are a bunch of reasons to stay POSITIVE too:

1) Growth story: Everything about India’s potential remains intact. We’re the fastest-growing major economy. Inflation has been (mostly) tamed and rate cuts are due in H2-2024. The lack of a direct rural stimulus in the Budget sucks, but rural housing & infra saw a decent bump. Finally, with the fiscal deficit coming down, the GOI’s quest for a sovereign rating upgrade will likely be rewarded in 2025-26, which will be HUGE when it happens.

2) Retail + FII: It’s tough to have a panic sell-off when there’s SO MUCH money flow. Gross monthly SIP inflows are at an insane 20k crore. On top of that, mutual fund houses are holding Rs 1.25 lakh crore in cash, ready to deploy at attractive dips. Then there’s FIIs who are starting to nibble at India after staying away for most of 2024. ICYMI - FII purchases hit a 4-month-high in July.

Big Picture: How far will the GOI go in curbing speculative trading aka market excess? The problem here is not what the GOI does per se, but how it’s looked at in the worst way. So when the finance secretary says that there’s no plans to raise LTCG taxes beyond 12.5%, market rumors say it will go to 20%. 

The best way to look at this is an important speed bump that protects lives. As Prabhudas Lilladher chairperson Amisha Vora noted: “Their idea is not to allow any bubble anywhere to happen and then correct it, but rather to make the pace of things a bit more sober…So, these are some of the road blockers for a speeding car. I would rather take it like this. And I would also say that this will not disturb the long-term outlook of the market at all”

Spotlight

SEBI RA Spotlight

3,2,1… Lift off! MCX has been rising steadily since August last year. Momentum indicators like RSI and MACD are also in the bullish zone, indicating possible upward momentum. Volumes are also healthy which further solidifies the bull case, according to SEBI RA Dhwani Patel. 

About Dhwani: She is the head of research at Fiversify, which is a SEBI registered RA. She has +14 years of market experience and specializes in short to medium term recommendations in equities and derivatives. Follow her for more amazing insights and add $MCX.NSE to your watchlist and track the latest from the community.

Earnings

Earnings Roundup

Axis Bank cracked -7% intraday after posting disappointing Q1 numbers! While the headline numbers were a beat, there’s a LOT that isn’t so hot under the hood. Deposit growth (+13% YoY) continued to lag behind loan growth YoY (+14% YoY), which sucks. Provisions jumped +97% YoY to hit Rs 2,039 cr mainly due to stress in its agri biz. Finally, credit costs jumped +97 bps QoQ putting pressure on margins. 

Here are its key stats:

  • Net Interest Income: Rs 13,448 cr; +12% YoY 

  • PAT: Rs 6,035 cr; +4% YoY 

  • GNPA: 1.54% vs 1.43% QoQ

  • Net NPA: 0.34% vs 0.31% QoQ

Big Picture: At one level, Axis is facing the SAME issues that its peers are. But that doesn’t make it better. Key positive triggers to watch out for include RBI rate cuts. And who knows, maybe higher LTCG taxes will make people want to save their money in fixed deposits again. FYI - Citi has downgraded Axis, with a target price of Rs 1,320 p/sh, citing weak recoveries and elevated credit costs!

Axis Bank is +6% YTD.

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Nestle India (-3%) Q1 results missed Street estimates! Domestic volumes grew only +1% YoY vs estimates of 4-8%. This led to the topline missing analyst expectations. Finally, higher commodity prices, specifically coffee, cocoa and grains, hurt its operational performance.

In a statement, Chairman Suresh Narayanan acknowledged that there were “external challenges such as lower consumption growth, concerns on continued food inflation and volatile commodity prices”.

Here are its Q1 stats:

  • Revenue: Rs 4,814 cr; +3% YoY (vs Est: Rs 5,075 cr)

  • EBITDA: Rs 1,103 cr; +4% YoY (vs Est: Rs 1,205 cr)

  • EBITDA Margin: 22.9% vs 22.7% last year (vs Est: 23.7%)

  • PAT: Rs 747 cr; +7% YoY (vs Est Rs 815 cr)

Big Picture: The headline numbers by themselves aren’t too bad. But you gotta remember, Nestle India does not have a high rural presence compared to other FMCG peers. 75% of its sales are from Urban India, which is supposed to be doing better! So expectations are higher. 

Nestle India is -10% YTD.

Charts

Chartbusters

Here are three companies that saw big movements today!

1) Tata Motors was the top Nifty gainer after Nomura upgraded the stock. FYI - it believes that key triggers include stronger Jaguar Land Rover’s execution and the upcoming CV demerger. Also, while PV + EV sales have cooled off, new launches should kick growth into a new gear. The brokerage has a new target price of Rs 1,294 p/sh; +19% from current levels!

2) HG Infra Engineering rallied +5% intraday after bagging Rs 763 cr project. The order is for a national highway project and provides near-term revenue visibility for FY25. ICYMI - HG recently entered the solar power sector as well. Little wonder the stock is up +2x YTD

3) RBL Bank cracked -4% after a whopping 4.8 cr shares or 7.95% equity changed hands in a big block deal. FYI - reports say that PE firm EQT (formerly Baring PE Asia) was the likely seller. Can’t blame people for hitting the exit door on a high, but it makes sense why it sparked some jitters in an already-worried banking sector.

Check out their charts below:

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