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- Smallcaps Hit New All-Time High!
Smallcaps Hit New All-Time High!
Yash Upadhyaya
April 23, 2024
Tale of the Tape
Hola Amigos! Markets closed up for a third straight day. 🔥
Nifty and Sensex closed barely in the green. A decent start to the Q4 earnings and positive global cues boosted investors’ sentiment. Midcaps rose +1% and Smallcaps (+1.2%) hit a new ALL-TIME HIGH! The market breadth was also positive with over 3 stocks advancing for 2 losers. 💪
Check out the Stocktwits Momentum Meter:
It was a mixed-bag kinda day for sectors. Real Estate (+2.6%), FMCG (+0.8%) and IT (+0.5%) saw healthy buying. Pharma (-1%) and Oil & Gas (-0.7%) witnessed some selling pressure. 📉
Will FY25 see markets take a breather after the 2023 bull run? Take a look at DSP Netra’s projection for how things will play out. 😎
Reliance Industries was down -1% on meh Q4 results. Read our top story below on why investors are jittery. 📊
JNK India’s Rs 640 cr IPO opened for subscription today! M&M Financial cracked -5% after reporting a Rs 150-cr fraud. More details below. 🔍
Vodafone-Idea jumped +12% a day after its FPO received a strong response. 🚀
Sudarshan Chemical Industries surged +13% after one of its biggest global rivals filed for bankruptcy. ✅
Results reaction. Tejas Networks has jumped 40% over the last two days on a strong Q4 show. Hatsun Agro gained +8% after its Q4 profit doubled. 💰
Inox Wind (+1%) will consider issuing bonus shares on April 25. 🤑
Here are the closing prints:
Nifty | 22,368 | +0.1% |
Sensex | 73,738 | +0.1% |
Bank Nifty | 47,970 | +0.1% |
Markets
Where Do We Go From Here? Ft. DSP Netra
The biggest fear in any bull market is figuring out when it will end. We’ve had a great last few years, but are the good times coming to an end? Here’s a look at DSP Netra’s projection for how the cookie may end up crumbling: 👀
1) Overstretched?: One factor in a market going belly-up is figuring out if its rally was justified or not. Lucky for us, there’s a bunch of data to show that it was. For starters, in three out of the last four financial years, BSE 500 Index PAT growth has been HIGHER than nominal GDP growth. Since March 2020, nearly 1 in 5 Nifty 500 firms have also delivered multibagger earnings growth. Additionally, nearly one in three Nifty 500 stocks have outperformed Nifty earnings growth of 16%. Broadly speaking, this means the rally has been supported by broad-based corporate growth. 🔥
2) Overheating?: That said, there are a couple of mild warning signs. DSP’s volatility indices indicate markets are reaching a stage where it's prudent to be a little cautious. Equally important, most small and midcap firm valuations look unsustainable. FYI - the trailing PE of the median small & midcap company is 37x, this is 30% higher than the peaks seen in the 2021 boom! These stocks have also rallied to a level where they are 52% of India’s nominal quarterly GDP, which is INSANE. As DSP notes: “Only large liquidity injections or profit surprises can sustain these valuations.” 😟
3) Future outlook: India’s nominal GDP is slowing. This is happening in conjunction with sales growth for the BSE 500 also slowing. ICYMI - aggregate revenue growth for BSE 500 firms came in at only ~6% YoY in Q3. Margins are also slowly starting to contract. All of this means stock prices will likely be under pressure in FY25, so act accordingly! 📉
For more details, check out the full report here: https://dspim.co/NetSWNL
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
Specials
Yes Bank: 5-Minute Review!
Want to know the latest updates on Yes Bank share? Check out our latest video where we break down all the key updates on Yes Bank, covering both fundamental and technical analysis. Also, find out SEBI RAs’ views on the stock. 👇🏻
Earnings
Reliance Industries Q4 Earnings Review
Reliance Industries (-1%) put out an okay-ish set of Q4 results. This is partly because its core cash cow, the ‘oil-to-chemical’ (O2C) biz has struggled in 2023. Volatility in oil prices hurt the refining margins. That said, O2C revenues are back to double-digit growth (+11% YoY). Meanwhile, the conglomerate’s consumer businesses are still doing pretty well. 👍
Reliance Retail’s topline was up 10% YoY in Q4, while bottomline was up 12% YoY. Jio added nearly 11 million net subscribers in Q4 and posted a healthy 12% profit bump despite structural market issues. RIL did end up reporting a small profit decline, but that was mostly due to higher expenses + taxes. 📊
Here are its stats:
Revenue: Rs 2.4 lakh cr; +11% YoY (vs Est: Rs 2.34 lakh cr)
PAT: Rs 18,951 cr; -1.8% YoY (vs Est: Rs 18,227
Big Picture: If things are somewhat OK, why are investors feeling jittery? Some of it is because they’re waiting for positive triggers. Experts are trying to get more clarity as to where RIL’s oil biz goes from here as the Middle East tensions threaten to send oil past $100 a barrel again. Additionally, Jio’s ARPU of Rs 181.7 was FLAT QoQ. It desperately needs a tariff hike. FYI - Goldman Sachs is the big bull here, seeing a +16% upside. It believes that with RIL’s capex over, profits will start to flow. Macquarie on the other hand sees a -11% downside! 🤼
Reliance Industries is +25% over the last year.
What’s your view on the stock? |
Bullets From The Day
🚨 M&M Financial Services fell -8% intraday after reporting a fraud in its Northeast operations!!! Consequently, the company had to delay its Q4 results which were due today
M&M says the fraud involved its retail vehicle loans business and forgery of KYC documents. Overall, this led to an embezzlement of company funds and the company expects a financial hit of ~Rs 150 cr. To put things in context, this isn’t really a small amount. The firm’s Q3 profit was around Rs 553 cr. We don’t know if the company will be able to recover the lost money just yet. All M&M has said is that it has initiated “corrective measures” and that some of the people involved (including an area business manager and other employees) have been arrested.
There’s nothing markets hate more than fraud and it seems to be a recurring occurrence at M&M Financial. Hope they fix things soon!
🆕 JNK India IPO opens for subscription today! The price band is fixed at Rs 395-415 p/sh. The company aims to raise Rs 649 cr from the IPO.
JNK makes heaters, reformers and cracking furnaces used in oil refineries & fertiliser industries. Its key customers include Indian Oil Corporation, Rashtriya Chemical & Fertilizer and Tata Projects. As of Dec 2023, its order book stood at a healthy Rs 845 cr. FYI - the IPO will see a Rs 300 cr fresh issue of shares, most of which will go for working capital purposes.
Big Picture: JNK had a solid last 12 months, a robust order pipeline and is poised to benefit from two key triggers. Firstly, as countries worry over emissions, demand for their incinerator systems (which closely control this) will go up. It’s also building capacity in the green hydrogen sector with a new subsidiary. A lot will depend on how it executes though. FWIW - the IPO is slightly on the expensive side, so most experts say this is a long-term bet!
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