“So many investors today focus on earnings, but I focus on assets and don’t try to predict next months’ earnings, which is a much more difficult approach to investing.” - Walter Schloss
The market appears to be showing signs of fatigue as far as largecaps and some midcaps are concerned. But there's no dearth of enthusiasm in the small and micro cap space. A saying goes as one never gets poor booking profits. But over the last three years, the compounding effect theory has become so widespread that people are applying it even to the wrong set of stocks, the bull market wonders.
IT picture
Hiring trends in the IT sector suggest that a meaningful improvement in the business environment could still be some way off. The IT sector index within the Naukri’s JobSpeak Index dropped 21.5 percent on-year in December, and has now noted a decline for all months in the year, writes Emkay Global’s IT analyst Dipeshkumar Mehta.
In his words:
“Muted demand has generated weak hiring trends in the last few quarters, in sync with the recent management commentary. Latest interactions with the management suggest no material change in demand; potential recovery in hiring remains contingent on a macro recovery.”
SRF (Rs 2,311.90, -3.5%)
The stock fell after Jefferies downgraded it to 'underperform' with target of Rs 2,140.
Bull argument: A key player in the refrigerant gas industry, penetration of ACs and fridge remains very low in India. The stock has been in a range over the past two years and there can be a strong positive breakout
Bear argument: A massive Rs 15,000-crore capex could keep the return ratios muted. Once the specialty chemicals outlook improves, a comeback for many players could result in pricing pressures.
Polycab India (Rs 4,874.95, -8.78%)
The company has received a Rs 200-crore tax evasion notice from the
authorities following raids in December, reports CNBC TV18.
Bull argument: The wires and cables segment is expected to have a strong Q3 due to continued demand in real estate projects and strong government capex.
Bear argument: Valuations are no longer cheap, after doubling from the March lows. The fast moving electric good (FMEG) segment shows sluggishness. Tuesday’s fall was on heavy volumes.
Larsen and Toubro (Rs 3,560, 1.7%)
The company won an order to build an AIIMS in Haryana.
Bull argument: The order book looks strong because of wins both in local and international markets. Capex story still has many takers among fund managers and HNIs.
Bear argument: Nearly all analysts are bullish on the stock. So, most of the positives may have been priced in.
Sobha (Rs 1298, +0.16%)
Jefferies has downgraded Sobha to 'hold' with a target price of Rs 1,265.
Bull argument: Strong project pipeline of 15 million square feet. The company is moving from projects in Bengaluru to places like Pune, NCR, Kerala, and Tamil Nadu.
Bear argument: The company has been underperforming its peers in sales growth over FY21-23. Margins in the residential segment are contracting despite Sobha's properties being 10-15 percent costlier compared to its peers.
Tata Motors (Rs 801, +1.51%)
The stock hit a 52-week high after JLR delivered the highest wholesale figures in 11 quarters in the October-December period.
Bull argument: Elara expects free cash flow of over £2 billion with net debt reducing to less than £1 billion by the end of FY24.
Bear argument: The company's order book declined by 20,000 units QoQ to 148,000 units in 3QFY24. MOSL expects growth to moderate in passenger and commercial vehicle businesses in the coming years.
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