Short Call | Bulls tread warily despite rally, focus on Tech Mahindra, United Spirits, Karnataka Bank

Bull traders will be looking to play the bounce, but ready to jump at the first sign of trouble.

Relief rally or resumption of uptrend? The Street is not so sure yet. Remember, the Sensex and Nifty had gone on to make new highs after the big correction in December. But a month later, indices fell below the low made during that sell-off. Bull traders will be looking to play the bounce, but ready to jump at the first sign of trouble. As for investors, there is no compelling reason to buy aggressively at these levels, valuations being what they are. Purchases could likely be opportunistic, should some of the better rated stocks correct sharply.

Other than company-specific issues, unrelated events too could give an opportunity. Brokers told Short Call that the broad-based wave of selling on Tuesday was partly because of the chaos in the Zee stock. Faced with margin calls, bulls in that stock were forced to unwind positions in other holdings as well which, in turn, could have triggered margin calls for another set of investors, leading to a cascading effect.

The company reported 60 percent year-on-year fall in net profit, but there is a sequential improvement in numbers.

Bull argument: Investors confident that new MD and CEO Mohit Joshi will be able to deliver on the company’s plan to improve margins. Domestic institutional investors have been increasing stake in company.

Bear argument: Weak deal wins. High trailing P/E compared to larger peers. Too much hinges on the new CEO's strategy.

The company reported earnings after market hours.

Bull argument: Strong growth in topline and bottomline compared to same period last year. Outlook on crude and rubber prices benign. Investors

willing to pay a premium for tyre stocks as seen from the recent rally in the sector.

Bear argument: Sales and net profits have been rangebound for the last four quarters. A big improvement in margins from these levels look less likely. Signs of auto sales cooling off.

The company reported a 63 percent year-on-year increase in net profit in Q3FY24.

Bull argument: Strong premiumisation trend, with Prestige and Above category sales growing faster as compared to the Popular category. Entered Tequila segment with Don Julio in December, another ultra-premium addition to portfolio.

Bear argument: Prices of extra neutral alcohol, a key raw material, are still inflationary and would lead to limited operating margin growth in FY24.

Third quarter earnings missed estimates.

Bull argument: The management has maintained its earlier Return on Asset and Return on Equity guidance of 1.2-1.4 percent and 14-16 percent, respectively. Stock fairly priced, says Axis Securities.

Bear argument: Gross NPAs increased to Rs 2,536 crore as fresh slippages increased from the restructured book. Growth in margins tepid, could add to pressure on net interest margins.

Fevicol maker’s Q3 profits were up 67 percent to Rs 511 crore.

Bull argument: Volume growth of 10 percent backed by growth in both sales to consumers as well as sales to businesses in rural and urban markets.

Bear argument: Company plans to venture into NBFC segment with a pilot project and an outlay of Rs 1 billion outlay if pilot is successful. Investors may not view this fgavourably.

Stock gains on strong third quarter earnings.

Bull argument: Healthy growth in net income  and net profit. To lend up to Rs 1,20,000 crore for the installation of rooftop solar panels under the Pradhan Mantri Suryoday Yojana

Bear argument: Valuations are beginning to look stretched after the stellar run over the last year.