"Not even the 'safest' investment is without some risk and some element of speculation." - Bernard Baruch
Noted value investor Howard Marks never tires of saying that it is not the quality of asset that decides your returns, but the price that you pay for it. Marks echoes in the Indian equity market dynamics at the moment. While the India equity story is shining bright, late entrants to the game would be better off keeping their expectations low.
Besides, there are other reasons why one should be guarded about the popular narrative that foreign investors don’t have much of a choice when it comes to choosing from emerging markets.
“While India’s EPS growth should be steady, it will not be the fastest among top world markets. Yet it is trading at the biggest relative premium. We believe equities are pricing in a 'perfect' US soft-landing and any disappointment on growth or sticky inflation will hurt stocks,” write CLSA’s Vikash Jain in his report.
Sula Vineyards (Rs 554, +11.34%)
Sudden surge in volumes, over 8 million shares changed hands. Trading volumes surged to 94 lakh compared to one-month average of 10 lakh. HFT Graviton was active in the stock on January 5.
Bull case: Only listed wine player in India. Rising per capital to boost wine consumption. Sula's wine tourism sees good traction, with activity peaking during Christmas season.
Bear case: Verlinvest’s 8 percent stake an overhang; market talk is that it may further pare holdings. In FY23, the company's topline just about crossed the pre-Covid levels. Customer base concentrated largely in Maharashtra. Strong competition from imported wine.
HAL (Rs 2,999, +3.2%)
The market cap crossed the Rs 2-lakh-crore mark on Friday after UBS initiated coverage with a ‘buy’ call.
Bull argument: UBS expects HAL’s order book to triple in FY26. With India's military aircraft strength depleted, government likely to accelerate
production of domestically manufactured fighter planes and helicopters.
Bear argument: Q2 results fell short of analyst estimates. For valuations to sustain, much will depend on execution. Stock price is fully factoring in smooth execution.
Kalyan Jewellers (Rs 357.75, -1.66%)
Revenues grew 40 percent in Q3, according to the company’s business update.
Bull case: Demand for gold and jewellery looks strong and likely to sustain for some more time. Has expanded beyond its core south India market. Performance has been better than what the company had guided during Q1.
Bear case: Stock has more than trebled in the last seven months. Most of the earnings growth already reflecting in the price.
HDFC Bank (Rs 1,679, - 0.7%)
Gross advances soared 62.4 percent to Rs 24,69,500 crore during the third quarter.
Bull case: Among the best-placed private banks. Valuations not expensive as stock has been rangebound for three years even as its profits have grown by over 50 percent.
Bear case: FIIs appear to be sceptical of the stock as improvement in margin and asset quality could take longer to play out. That has kept the stock in check despite domestic funds being bullish on stock.
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