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Terrible Tuesday
Yash Upadhyaya
August 13, 2024
Tale of the Tape
Good evening everyone. Markets were down big!
Nifty and Sensex fell -0.9% each, weighed down by heavyweight stock selling. Midcaps (-0.8%) and Smallcaps (-1.3%) followed suit. 382 stocks in the NSE 500 ended in the red!
It was a sea of red across the board. NBFCs (-1.9%), Metals (-1.6%) and PSU Banks (-1.6%) were the top losers.
Vodafone Idea slipped -3% after a disappointing Q1. Meanwhile, Samvardhana Motherson also fell after a gloomy outlook. More details below.
When markets start correcting, what safe pockets should you be looking at? Read our story below, with some advice from DSP Netra.
The MSCI quarterly rejig is here, with a bunch of winners and losers. Check out their charts below.
Honasa Consumer (+3%) was in focus after Goldman Sachs initiated coverage on the stock; the brokerage sees +23% upside from current levels.
Results reaction. Olectra Greentech jumped +7% after a solid Q1 show. Hindalco (-1%) was down after its Q1 numbers missed Street estimates.
Listing delight! Firstcry rose +45% from its IPO price. Unicommerce E-Solutions nearly +2x investor wealth!
Sugar stocks were buzzing after reports said GOI would hike ethanol prices for the FY25 season. Balrampur Chini, Shree Renuka Sugar and Triveni Engineering rose between 2%-6%.
Sundram Fasteners was up +3% intraday after 33 lakh shares (1.57% equity) changed hands in a block deal; the buyer and seller were not immediately known.
Here are the closing prints:
Nifty | 24,139 | -0.9% |
Sensex | 78,956 | -0.9% |
Bank Nifty | 49,831 | -1.5% |
Earnings
Earnings Roundup
Vodafone Idea (-3%) posted weak Q1 results. The company’s total subscriber base dropped by over 2 million users QoQ, resulting in a hit to the topline. FYI - VI’s revenue has now dropped for the third straight quarter in a row! Its ‘average revenue per user (ARPU) was also flat QoQ at Rs 146.
The only positive note is that VI was able to reduce losses YoY. FYI - its net loss was the lowest it has been in 14 quarters. This comes mostly from a big drop in interest costs after its recent fundraising. Its bank-related debt is at Rs 4,650 cr vs Rs 9,500 cr in Q1FY24!
Here are its Q1 stats:
Revenue: Rs 10,508 cr; -1% YoY
Net Loss: Rs 6,432 cr vs Rs 7,840 cr last year
Big Picture: Those hoping that Vodafone Idea’s fundraising success would be backed by a solid biz performance were left disappointed. The company still continues to bleed subscribers. They hope that with the new cash infusion, it can boost 4G capacity and rollout 5G services to a greater audience. Let’s see how this one pans out.
Vodafone Idea is -8% YTD.
What’s your view on the stock? |
Samvardhana Motherson (-3%) Q1 results met Street estimates. Despite global light vehicle volumes being flat YoY, the company’s topline saw a jump. FYI - growth in China & and India specifically offset a decline in Europe. Improved scale also gave a small bump to margins and helped boost the bottomline.
If the results were solid, why did the stock end down -3%? Partly because its margins missed estimates and the global outlook doesn’t look that great now. FYI - the company noted that key challenges ahead include a sharp jump in container costs due to the Red Sea crisis, which in turn have led to an inventory build-up! Muted EV sales and launch delays in EU markets could also be a big issue.
Here is its Q1 report card:
Revenue: Rs 28,868 cr; +29% YoY (vs Est: Rs 28,460 cr)
EBITDA: Rs 2,775 cr; +44% YoY (vs Est: Rs 2,830 cr)
EBITDA Margin: 9.6% vs 8.6% YoY (vs Est: 10%)
PAT: Rs 994 cr; +65% YoY (vs Est: Rs 985 cr)
Samvardhana Motherson is up +73% YTD!
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Sponsored
Shift To Large Caps? Ft. DSP Netra
The global economy is uncertain AF, the Nifty is refusing to breach 25k again and valuations are at a crazy high. Is it time to take a breather and re-assess how best to play the market? Here’s the case for taking things a little slower, courtesy inputs from the folks at DSP Netra.
1) Valuations: Within the NSE 500, the percentage of stocks trading below 3x their book value has dropped from 70% during Covid to just 23%. FYI - the historical average is 44%, which shows how heated our market is right now. This is partly because our bull market has seen very little volatility. Fun fact: 2023 and 2024 YTD have seen the fewest number of days where benchmark indices experienced a decline of 1% or more. This comparison goes back over two decades, which shows how INSANE the current bull cycle really is.
2) Pockets of safety: When so many companies trade above 3x book value, it becomes harder to find good investment opportunities. But DSP Netra points out that it's much harder to do this in midcaps and smallcaps. The Midcap 100 index is now trading at its HIGHEST relative level to the Sensex, while the Smallcap index is pretty close to its 2005 record. The 12-month rate of change is also showing signs of reversion, which means….
3) Look at largecaps: Over the last five-years, largecaps have delivered the lowest CAGR (19%), even lower than sectoral thematic schemes. This could mean they are a safer space to hide when markets start consolidating or correcting. As DSP notes: “Valuations for large caps are relatively favourable at this point. But remember that broadly valuations are above average or expensive.”
For more details, check out the full report here: https://dspim.co/NetAugSt
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
Charts
Chartbusters
The MSCI quarterly rejig is here. 7 stocks have now been added to the MSCI India index. These include Dixon Tech, Oil India, RVNL, Vodafone-Idea, Zydus Life, Oracle Financial Services and Prestige Estates. Only 1 stock - Bandhan Bank was excluded. PS - the Adani Group also had something to cheer after the MSCI lifted the freeze on coverage of its stocks.
However, the biggest loser was HDFC Bank which despite the weightage increase was the top loser on Nifty. This was because the full expected weightage hike will now be broken into two separate increases. FYI - the second hike will happen ONLY if HDFC is able to maintain a specific level of FII ownership, which is a bit of a bummer.
Check out their charts below:
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