A Song Of Ice (Markets) and Fire (Elections)

Author

Yash Upadhyaya
March 19, 2024

Tale of the Tape 

Good evening everyone! Markets were back in the red. 😢 

Nifty and Sensex dropped over a percent each. Weakness in heavyweight IT stocks, muted global cues and 1-month low on rupee dented sentiment. Midcaps (-1.2%) and Smallcaps (-1.2%) also moved in sync. The market breadth was extremely negative with over 3 stocks falling for every gainer.

It was a sea of red across the board. Not a single sector closed higher. IT (-2.9%) got smoked. Pharma and FMCG fell over 2% each.

How will the Lok Sabha elections affect your portfolio? Read our top story to find out. 📈

We may be headed for a scorching-hot summer. More details below on what stocks to load up on to beat the heat. 😎

TCS was the top Nifty loser today after Tata Sons sold a stake. Meanwhile, Indigo hit a record high after a Kotak target upgrade. Read more below. ✅

Aditya Birla Sun Life AMC slipped -3%. Promoters will sell up to 11.5% stake in the company via Offer For Sale. 🤝

Poonawala Fincorp jumped 3% intraday after appointing HDFC Bank veteran Arvind Kapil as MD & CEO. 🧑‍💼

Tata Investment Corp was locked in a -5% lower circuit for a 7th consecutive day! PS - the stock is down over -30% from its highs! 📉

Piramal Pharma rose +3% bucking the overall market weakness. Global brokerage firm Jefferies sees a +40% upside from current levels. 💎

Paint stocks were under pressure on fears of pricing disruption by Birla Opus. Grasim’s paints business set their retail prices 5% lower than the industry average, as they aim to capture market share. ⚔️ 

JBM Auto rallied +10% intraday after winning a mega Rs 7,500 cr order to supply electric buses. HG Infra won new orders worth Rs 1,026 cr for its solar business. ⚡

Listing pain. Popular Vehicles and Services closed at Rs 276 p/sh; -6% from its issue price. 🙈

Here are the closing prints: 

Nifty

21,817

-1.1%

Sensex

72,012

-1.0%

Bank Nifty

46,385

-0.4%

Market
Markets And Elections

The general elections are right around the corner! ICYMI - voting begins April 19 and the results are out on June 4. Yes, it looks like a slam dunk for the Bharatiya Janata Party (BJP) at this point. But nobody can ever predict how the markets will react. Electoral victories can be priced in and that’s when other factors start to affect the market mood. Here’s a look at how markets played out over the last four elections: 🤓

1) The run-up: This time around, markets have seen their BIGGEST rise in a pre-election year in two decades. FYI - the Nifty was up +30% in the year leading to the poll announcement. The last time this happened was back in FY04. For context: the average gains in a pre-election year are ~10%. What’s the deal? Some of this is faith in the BJP, but a good chunk of it is also because of global factors (China doing awful, oil prices coming down, inflation cooling etc). 📈

2) The aftermath: Markets are ALWAYS positive for the rest of the calendar year after results are announced. The strongest performance was in 2009 when Nifty was up +40% from May 2009 - Dec 2009. This was because the UPA was able to form a majority + a lot of foreign money came in after ‘quantitative easing’ kicked in the US. On the flipside, the weakest was in 2019 when indices were up just 4%-5% after the elections. Despite a big BJP victory, global factors (US-China trade war, rates being hiked) took a toll. 👍

3)  Sectors to watch out for: Experts say consumer durables, IT and banking stocks ALWAYS perform post-election results. Fun fact: banks have been among the top 5 best sectors in three out of the last four elections. FYI - don't blame you for being a little cautious here, considering the bearish mood around those sectors. 😋

Specials

Defence Stocks To Buy - By SEBI RAs

Defense stocks are never out of action. With the government increasing spending in the Defence sector, several stocks are poised to benefit. 🚀

Wondering which stocks to buy? Check out our latest video where we discuss 5 trade ideas on Defence stocks by SEBI RAs. 👇🏻

Stocks

Summer Stocks

Sometimes the best investment bets are the most simple ones. Scorching hot summer? Bet on stocks that benefit from soaring temperatures. For 2024, the weather department is already prepping for a “higher than normal” number of heatwave days! Here are some themes that can help you beat the heat: 🌤️

1) ACs and fans: Cooling products in general see a big uptick in sales, usually starting from March. For fans, Crompton Greaves & Bajaj Electricals usually project a nice bump as the summer season starts. For air conditioners, Blue Star has guided for an industry-beating 25% YoY sales jump for Q1 FY25. 🪭

2) Travel and fun: As schools let out for holidays, flight and hotel bookings usually jump through the roof. Firms like Easy Trip see a bump in ticket sales. Also, hotel chains across the spectrum, from Lemon Tree to Indian Hotels, see higher occupancy rates & revenue during the holiday season. 🎒

3) FMCG: Soft drinks, ice creams and sodas are ALWAYS in demand in summer. Fun fact: for most FMCG firms, the summer months usually see 10%-25% YoY sales growth. For some, the two hottest months sometimes make up to 25% of total annual sales as well. Experts say this time, Varun Beverages, United Breweries, and Dabur are top picks here. 🍺

Finally, a word of caution: While summer stocks may seem like an easy bet, there are a bunch of potential downsides. Unseasonal rains can always spoil the party as they have in the past. Also, always do your research! Not all AC companies are the same. Voltas, for example, fell -17% during the 2023 summer months over company-specific problems! 👀

Bullets For The Day

🚨 Tata Consultancy Services fell -3% after 2.02 cr shares, or 0.6% equity, changed hands in a big block deal. Reports say that promoter Tata Sons was the likely seller. FYI - anytime a promoter reduces their stake, it’s a little sus for investors.  

So why is Tata Sons tapping into the TCS vault? There are two likely reasons. The first is that the Tata Group needs money to expand into new areas. The conglomerate is entering new-age businesses like smartphone manufacturing, semiconductors and e-commerce. All of these are capex-heavy areas that require a bunch of investment up front. TCS has always been a Tata cash cow; the promoter gets its money through dividends or buybacks usually. But this time it's possible the group needed money quicker.

The second reason is a little less clear. RBI rules dictate that Tata Sons needs to list by Sept 2025 because it is classified as an ‘upper-layer NBFC’. Reports say Tata doesnt want an IPO. So it's been hunting for ways to get out of it. The best way is to reduce some debt and restructure its business, which could also explain the TCS stake sale! 

✈️ Interglobe Aviation rallied +3% intraday in a weak AF market after Kotak Securities said it sees a further 30% upside.

What’s the deal bro? The brokerage says it's a simple issue of demand & supply. Indigo currently accounts for 60% of India’s airplane delivery backlog. This implies there’s nobody adding more capacity than Indigo at this point. Demand is expected to kick into high gear over the next five years. Booming economic growth, corporate travel and opening of many new airports are the key positive triggers here.

Finally, pricing is unlikely to be a major issue. This is because newer rivals like Akasa Air have kinda flopped. Traditional rivals like SpiceJet are still floundering. This leaves just Indigo and the Tatas in a comfortable duopoly.

Get In Touch

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