Sea of Red

Author

Yash Upadhyaya
May 09, 2024

Tale of the Tape 

Hiya everyone. Markets recorded their WORST fall in over 3 months!

Nifty (-1.5%) and Sensex (-1.4%) crashed after a broad-based selloff. Midcaps (-1.8%) and Smallcaps (-2.8%) saw even more selling pressure. Fun fact: only 53 stocks in the NSE 500 closed in the green!

Except for Auto (+0.8%) every other sector ended in the red. Oil & Gas (-3.1%), Metals (-2.9%) and FMCG (-2.5%) got beat up the most.

Paytm (+5%) has been volatile AF lately. Read our story below on why it's struggling to recover from the RBI blow.

Larsen & Toubro was the top Nifty loser after reporting a weak FY25 guidance. Meanwhile, Asian Paints (-4%) Q4 results show it is starting to feel the heat from competition.

Manappuram Finance, Sula Vineyards and SKF India all saw big movements today! Check out their charts below to find out why.

Bank of Baroda was in focus after the RBI lifted the ban on onboarding customers through its mobile app

Results reaction. SBI (+1%) hit a record high after its Q4 numbers beat Street estimates! Jupiter Wagons (+4%) also hit an all-time high after its Q4 net profit more than doubled. 

WPIL (+5%) will consider a dividend and stock split at its board meeting on May 25. Bajaj Consumer will buy back 57.41 lakh shares at Rs 290 p/sh; a +20% premium to Thursday’s close.

TBO Tek IPO was subscribed nearly 3x on Day 2 of bidding.

Here are the closing prints: 

Nifty

21,958

-1.6%

Sensex

72,404

-1.5%

Bank Nifty

47,488

-1.1%

Stock
The Fault In Paytm’s Stars

Paytm and volatility - name a better duo! After being locked in a -5% lower circuit for the last three days, the stock hit a +5% upper circuit today! We don’t blame you for asking WTF is going on. ICYMI, Paytm is down a whopping -48% YTD and hit an ALL-TIME-LOW this week. 📉

The stock’s collapse since its 2021 IPO has been extraordinary. Of course, everyone knows about the RBI nuke earlier this year. But in the last two months, questions have been raised about how quickly Paytm can bounce back. 🤔

Let’s start with the resignations. Paytm COO Bhavesh Gupta quit last weekend. Gupta was the man responsible for growing Paytm’s all-important lending biz. It is literally the ONLY bright spot for the company. So what’s cooking? If you go by some media reports, Gupta and founder Vijay Shekhar Sharma had an alleged power struggle over the future of the company. In March, VSS said at a Tokyo conference: “...many times your teammate and adviser may not be getting it correct." If that was aimed at Gupta, that was some major SHOTS FIRED. 💣

Naturally, VSS prevailed. But that has prompted another round of exits: two chief business officers in charge of key verticals have also reportedly quit. This is NOT what you want during a time of crisis. It’s unclear whether Paytm can even attract top-notch new talent when its reputation has taken such a big hit. 👎

The other key negative trigger is Aditya Birla Finance reportedly invoking Paytm's loan guarantees over customer defaults. FYI - this ties back into the RBI being unhappy over Paytm’s KYC processes. The guarantees allegedly run into hundreds of crores, which could end up being a big hit. Also, Paytm desperately needs new NBFC partners for its lending vertical. 👀

Specials

5 Stocks To Buy In May - By SEBI RAs

Markets are near 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.

Earnings

Earnings Roundup

L&T’s (-6%) Q4 results were mostly in line with Street estimates. Sharp execution in its project & manufacturing biz helped boost the topline. That said, overall order inflow for Q4 fell 5% QoQ to Rs 72,150 cr, which is a negative. Operating margins also took a small hit. FYI - this has been a lingering problem for L&T as cost pressures in old legacy projects catch up near completion. 📊

Here are its stats:

  • Revenue: Rs 67,079 cr; +15% YoY (vs Est: Rs 66, 280 cr)

  • EBITDA: Rs 7,234 cr; +6% YoY (vs Est: Rs 7,250 cr)

  • EBITDA Margin: 10.8% vs 11.7% YoY (vs Est:12%)

  • PAT: Rs 4,396 cr; +10% YoY (vs Rs 4,267 cr)

Big Picture: If the results were decent enough, why did the stock end up as the top Nifty loser? This is mainly due to the management’s weak FY25 guidance. On revenue, L&T has guided for 15% topline growth, which Jefferies says is LOW considering its order wins. On margins, the company has projected 8.25%, lower than analyst estimates of 9% to 9.5%. Overall, a slightly rough outlook ahead for one of India’s biggest infra companies. 😣

Larsen & Toubro is -7% YTD.

Asian Paints (-4%) Q4 results missed Street estimates! Volumes in its decorative biz grew +10% YoY. But despite this, the overall topline DECLINED YoY due to weak demand and ‘downtrading’ in its premium segment. FYI - downtrading is just a fancy way of saying customers are switching to cheaper alternatives. The quarter in fact saw price cuts across product categories, which took a toll on margins. The company declared a final dividend of Rs 28.15 p/sh, but that didn’t do much to perk up market sentiment. ❌

Here is its Q4 report card:

  • Revenue: Rs 8,371 cr; -1% YoY (vs Est: Rs 9,050 cr)

  • EBITDA: Rs 1,6882 cr; -9% YoY (vs Est: Rs 1,950 cr)

  • EBITDA Margin: 19.4% vs 21.1% YoY (vs Est: 23.7%)

  • PAT: Rs 1,275 cr; +1% YoY (vs Est: Rs 1,370 cr)

Big Picture: Pricing pressures are largely due to the discount war triggered by the Birla Group’s entry into the paint business. FYI - this is just a teaser of things to come over the next few quarters. In an earnings release, CEO Amit Syngle admitted that “price cuts implemented in the last few months affected Q4 value” but expressed confidence about future demand. 🙏

Asian Paints is down -10% over the last year.

Charts

Chartbusters

Life comes fast both for humans and stocks! Here are three companies that saw big movements today:

1) Manappuram Finance fell -8% intraday after the RBI reportedly warned them not to disburse loans over Rs 20,000 in cash. Ambit Capital says this could be a big negative because rural customers often ask for cash loans.  FYI - Muthoot, which also got the RBI warning, recovered after it said the move won't have a big impact on its operations. ⛔

2) Sula Vineyard cracked -7.5% on weak Q4 results. Its bottomline fell -4% YoY, hurt by higher expenses. ICYMI - prices of key raw materials, including grapes, sugar & yeast, surged by almost 9% over the last year. Experts say it may take a couple more quarters for the storm to blow over. 🍷

3) SKF India was the top NSE 500 gainer after posting solid Q4 results. Growth in key machinery verticals helped create double-digit topline growth. Meanwhile, key operational efficiency boosted net profit by +43% YoY. Not too bad on a day when broader markets collapsed! 💪

Check out their charts below:

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