Tale of the Tape 

Howdy folks. 

Nifty and Sensex ended up +0.9% each after a sharp jump in the last hour of trade. Midcaps (+0.9%) and Smallcaps (+0.8%) followed suit. The advance-decline ratio was in favour of the bulls (3:2).

Except for PSU Banks (-0.9%), all sectors ended in the green. IT (+1.7%), Real Estate (+1.6%) and NBFCs (+1.1%) were the top winners today.

Meme stocks are going nuts. Find out what they are and why are they soaring AGAIN in our top story below. 

HAL zoomed to the MOON after blockbuster Q4 numbers. Meanwhile, Titagarh was up +9% after a strong Q4 show too. More details below.

Somany Ceramics, NCC and Mahindra & Mahindra all saw big movements today. Check out their charts below to find out why.

Apollo Tyres rallied +7% intraday after JP Morgan upgraded the stock; it sees a +13% upside from current levels.

Bandhan Bank fell -5% ahead of its Q4 results on Friday. PS- investors are waiting for the results of a forensic audit over some microloan claims.

Quick Heal rallied +4.5% intraday after inking a distribution pact with a large European partner.

Adani Ports was in focus after Norway’s wealth fund blacklisted the firm over ethical concerns.

Go Digit General Insurance IPO was subscribed 50% on Day 2 of bidding.

Here are the closing prints: 

Stocks
Meme Stocks Are Back!

It was another wild day for the “meme stock” crowd, with traders waking up to massive gains in GameStop, AMC, and other names. 😵‍💫 

With it clear that this moment is more than just a flash in the pan, we thought it’d be helpful to provide a quick refresher on what a meme stock is and where traders on Stocktwits are looking for their next big opportunity. 👇

What is a meme stock?

A meme stock can be roughly defined as anything with widespread retail investor attention and participation, where there tends to be a significant disconnect between what’s occurring in the security’s price and the underlying business.

In today’s world, activity on Stocktwits, Reddit, Wall Street Bets, X, and other social media platforms creates an environment where information moves faster than ever. Add that anyone can now trade from their phone for free, and you get situations where groups of people can quickly act together to buy or sell a security and ultimately impact its price. ⏩

So the next question is, what types of stocks have the potential to get caught up in that social virality loop and become a true “meme stock?”

• They tend to have several things in common:

• They’re an iconic brand or well-known company

• There’s a high short interest showing many people/institutions betting on the stock going to zero (or close to it)

• There’s some sort of catalyst that puts the stock back on people’s radars and/or creates an opportunity for a business turnaround (bankruptcy, restructuring, etc.)

These primary types of meme stocks, such as GameStop, AMC, Tupperware Brands, etc., have played out to varying degrees over the last few years.

But there’s also a secondary type of meme stock driven less by brand recognition and more by the stock’s public market structure. 🤔

In these situations, there are very few shares available for the public to trade, and the stock begins to move rapidly upward on little to no news, drawing people into the upward momentum. Lots of demand and little supply make the price rise rapidly, but the lack of underlying substance causes it to unwind eventually.

Think VinFast Auto back in the summer of 2023 or any of the many Chinese equities that were listed in the U.S. and saw crazy (though short-lived) moves of their own. 🤪

But ultimately, they all have high short interest and high retail investor/trader participation in common. That combination enables the “short squeeze” mechanism in the market to occur.

What is a short squeeze and how do market mechanics play into this?

And if you’re confused by what happens when a short squeeze occurs, think about it this way. When prices begin to rally sharply, you lose a lot of natural sellers during the process. Existing shorts need to cover their losses, longs want to add to their positions, and new longs are looking to get involved in the move…creating lots of demand and not a whole lot of supply. 🤑

The options market also adds a significant twist to things too. When traders make directional bets via call options, they’re being sold them by market makers who don’t take directional risk. So in order to hedge their exposure and remain “delta neutral,” these market makers have to go out and buy the underlying stock to stay fully hedged. And as the price rises further, they have to buy more stock to hedge their short call option positions.

In other words, the upward momentum in these stocks creates a ton of short-term demand and exacerbates the already crazy market action even further.

It’s how we’re able to see triple-digit moves in GameStop, AMC, and other names in a day. And it’s also why things can quickly unwind when the momentum stops heading in the right direction, as all that marginal demand becomes marginal supply real quickly… 😬

What does it mean for the businesses?

For businesses struggling with structural fundamental issues, an artificial jump in their stock price is an opportunity for some much-needed financial engineering. Management’s job is to use these higher equity prices to raise equity capital and lengthen their remaining runway.

Some have been able to pull it off, while others have not. 👨‍💼

AMC is still around because of this, with the company issuing millions more in stock at the market yesterday. But ultimately, that can only work for so long. Eventually, the core business needs to become profitable for these stocks to maintain their elevated prices. If you need evidence of that, just ask Bed Bath & Beyond.

So, how are people making money (or attempting to)?

Ultimately, volatility like this attracts many traders looking for a significant short-term win. It also provides an exit opportunity for longer-term investors who have been holding onto their bags or potentially adding to their positions the whole way down.

The playbook is clear for traders specifically. Look for highly shorted, beaten-down, well-known stocks vulnerable to being squeezed. 💡

Markets & Mayhem on X provided a list of heavily shorted stocks in the Russell 3000 that he’s looking at for potential squeeze candidates, and many in the comments agreed with his approach.

However, at Stocktwits, we’re uniquely positioned to see which stocks retail investors and traders are talking about the most. 👀

Here’s a complete list of 50 symbols with largest % change in message volumes. You probably wouldn’t expect many of the names currently popping up on retail’s radars, I know I didn’t. 🧐

What’s next?

Time will tell how this emerging saga plays out. But for now, the U.S. stock market indexes are hitting new all-time highs, and the animal spirits are alive and well. As long as the momentum continues, traders will look to capitalize on it and take advantage of the latest “meme stock” market move.

(PS - kudos to Tom Bruni from our US team for contributing to this piece)

Specials

Raising A Toast

Can United Breweries go from being the King of good times to the King of your portfolio? Check out our latest YouTube video where we break down the company’s latest quarterly earnings, technical chart setup, brokerage ratings and more!

Earnings

Earnings Roundup

Titagarh Rail Systems (+7%) posted a strong set of Q4 numbers! Strong growth in the freight rail system vertical helped offset passenger segment weakness. Better operational synergies helped boost margins and the bottomline!

Here is its Q4 report card:

• Revenue: Rs 1,052 cr; +8% YoY

• EBITDA: Rs 120 cr; +26% YoY

• EBITDA Margin: 11.4% vs 9.8% YoY

• PAT: Rs 79 cr; +64% YoY

The stock also rallied on bullish management commentary. FYI - they expect the passenger coach biz to start yielding substantial revenue from FY26 through the GOI’s large Vande Bharat orders. They are also guiding for steady growth in margins in FY25.

Titagarh Rail System is +2.5x over the last year.

Hindustan Aeronautics (+11%) reported a blockbuster set of Q4 results. Strong demand for defence aircraft helped boost the topline. Better order execution and lower employee expenses aided margins and the bottomline! FYI - its Q4 order inflow came in at Rs 17,600 cr (according to Elara Capital), a whopping +135% YoY jump.

Here are its stats:

• Revenue: Rs 14,769 cr; +18% YoY

• EBITDA: Rs 5,901 cr; +82% YoY

• EBITDA Margin: 40% vs 26% last year

• PAT: Rs 4,309 cr; +52% YoY

HAL is up nearly +3x over the last year.

Charts

Chartbusters

Sometimes all it takes is one quarter to change a company’s fortunes! Here are three companies that saw big movements today:

1) Somany Ceramics: The stock zoomed +20% intraday after it reported strong Q4 numbers despite sluggish demand for tiles. Lower expenses helped boost its net profit +39% YoY. To top it off, it also guided for volume growth recovery from Q2FY25. FYI - Nuvama has upped its target price on the stock to Rs 914 p/sh; +27% from current levels!

2) NCC: The company’s shares jumped after it reported a scorching 31% YoY jump in its topline. Margins dipped slightly but its revenue growth still ended up boosting the bottomline! FYI - it also announced its entry into the smart meters segment, having bagged orders worth Rs 8,080 cr.

3) Mahindra & Mahindra: The stock perked up after a solid Q4 show. Strong double-digit growth in both the topline and bottomline, as its PV biz offset weakness in its farm equipment vertical. But the real sweetener: the firm announced an interim dividend of Rs 21.1 p/sh, the HIGHEST payout in at least seven years!

Links That Don’t Suck

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🐐 Sunil Chhetri Announces Retirement, To Play Last Match For India On June 6

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