Short Call | All eyes on Budget now; L&T, Zee, Marico, BPCL in focus

Liquidity flows continue to remain strong.

The focus now shifts to the interim budget. The good part is that market expectations are quite low. All that the bulls would be praying for is that there will be no nasty surprises. Liquidity flows continue to remain strong, and the frenzied rally in PSU stocks is surprising even for the most seasoned market players.

The stock fell ahead of Q3 results. December quarter net profit at Rs 2,947 crore failed to meet estimates.

Bull case: The country's largest EPC company stands to benefit from increasing thrust on capex and infra. International order wins also on rise. Has good execution history and all ‘buy’ calls from analysts.

Bear case: The stock has run up quite a bit. Inability to scale up margins from 13 percent back to 17 percent levels. Geopolitical conflicts, focus shift

from domestic capex and labour scarcity could be some key risks for the stock. Besides, over ownership of the stock could pose its own challenges.

The stock rallied in a bearish market on Tuesday

Bull case: Worst already priced in. There could be other buyers interested in buying a stake.

Bear case: The recent rally is driven largely by short-covering. Once the short positions are covered, the price will again start to flag. Concerns over the company’s financials will limit upside in the stock in the near term.

The stock gained after the consolidated December quarter net profit jumped 16 percent.

Bull case: Marico is hopeful of an expansion in gross operating margins because of falling raw material prices. to expand aided by input cost tailwinds.

Bear case: Muted demand from rural areas remains a concern. Category-wise, honey not doing well due to a delayed winter.

The company reported an 82 percent jump in the third-quarter net profit.

Bull case: According to JP Morgan, the stock has typically traded at a higher multiple to peers because of potential upside from its exploration and production venture. While the premium gap has narrowed, it could again return if development at the Mozambique block resumes. Valuations, in general are reasonable compared to many of the other PSUs.

Bear case:  Potential equity infusion by the government at a discount to current market price could be a near-term overhang, according to Jefferies. There is talk that the government may cut fuel prices ahead of the elections.

Ace Investor Ashish Kacholia sold 1.03 lakh shares in Venus Pipes & Tubes at an average price of Rs 1,511.68.

Bull case: Strong sales and profit growth of 46 percent and 120 percent in three years, respectively. The period from 2010 to 2020 was a lost decade for pipe manufacturers, tide starting to turn now.

Bear case: Most expensive among peers. FII holdings decreased from 6.6 percent in September to 4.81 percent in December.