Short Call | Bulls upbeat, bears zoom in on Zee, Street unsure of Polycab, focus on RITES, ICICI Bank

Bulls may be justified in thinking that rally still has plenty of steam left.

The third-quarter earnings have so far played to the script—nothing spectacular, but no nasty surprises, either. HDFC Bank may have been an outlier, considering that other banks have managed to meet market expectations. The market lacks triggers for huge upsides from current levels, other than the oft-repeated theory of money waiting on the sidelines. China’s economy is not showing any sign of recovery so far, and some global market experts think matters could worsen from hereon.

According to Shaun Rein, founder of the China Market Research Group, China may be staring at a deflation. From a foreign capital flow perspective, that means less competition for India. Also, the mood in global equity markets remains upbeat. Bulls may be justified in thinking that rally still has plenty of steam left.

Stock rallied on a Rs 400-crore order win

Bull argument: The sentiment remains strong for railway stocks. Big announcements anticipated in Budget for railways. Healthy return ratios

Bear argument: Topline and bottomline have fallen in the past twelve months. FII holding lowest in last four quarters. Jefferies believes capex growth could slow down in this Budget, disappointing several related stocks.

Stock held ground in a weak market; has risen 20 percent over the past month.

Bull argument: The company has been reporting a consistent improvement in operating margins over the last many quarters. Benign outlook on crude oil and rubber should help maintain the performance.

Bear argument: Car sales are showing signs of slowdown. Dealers are protesting that auto makers are dumping stock on them even there is not enough demand. Strong growth in commercial vehicles too showing signs of slowdown.

The Street has turned bearish on the stock following the termination of $10 billion mega-merger with Sony Pictures Network.

Bull argument: Zee’s all-India TV network share improved in Q2FY24. Over

the last seven quarters, TV viewership has increased by 320 basis points. Zee5’s position in the market has improved significantly. This could draw fresh bidders into the fray.

Bear argument: According to CLSA, valuation will likely decline to 12x PE levels. Further, competition will intensify with the reported merger of Reliance and Disney Star.

The company’s third quarter numbers were in-line with market expectations.

Bull argument: The bank has been consistent in its operating performance over the past many quarters now. The problems at HDFC Bank could lead to some fund managers shifting from HDFC Bank to ICICI Bank.

Bear argument: Unsecured loans have increased to 14 percent of the loan book. Net interest margins are unlikely to expand much given the high cost of deposits. So a rerating of valuation multiple looks less likely.

The stock is under pressure despite a decent set of Q3 numbers.

Bull argument: Analysts believe that bulk sales to businesses are likely to stay healthy while retail sales may recover over the next 12 months.

Bear argument: Margins were lower due to lower exports and higher ad spends. Weak demand during festive season also resulted in below estimates earnings. The recent IT raids is still weighing on sentiment.