Short Call | Fed rate fodder cheers D-St bulls, PTC India, Religare, UPL, HPL Electric, United Spirits in focus

Expensive valuations remain a bugbear.

“Everyone says they're a long-term investor until the market has one of its major corrections.” - Peter Lynch

The Fed has sprung a pleasant surprise for the bulls by hinting at rate cuts in 2024, something that few were expecting. This means a rate cut could be around the corner in India too. Foreign fund inflows have picked up pace over the last couple of weeks, and the consensus view is that this will only accelerate in the days ahead. One more positive trigger has been discounted. Expensive valuations remain a bugbear, but then fundamentals matter little in the face of massive liquidity flows

PTC India (Rs 196.30, +15.7%)

Wednesday’s rally in the stock was accompanied by heavy volumes, almost six times the average daily volumes over the last month.

Bull case: Investors who have missed on the IREDA rally, are now looking at PTC India. Also, the company has reduced its debt.

Bear case: Topline has reduced over the past two years. Corporate governance issues continue to haunt the company. The RBI and Sebi have been probing the company.

Religare Enterprises (Rs 218.45, + 0.25%)

Sebi has suspended the registration certificate of Religare Commodities as a commodities derivatives broker for three months.

Bull case: The company is in the process of coming out with an IPO for its subsidiary Care Health Insurance.

Bear case: Ongoing tussle with the Burman family over controlling stake may weigh on sentiment.

UPL  (Rs 599, +0.29%)

The market was cool to the announcement of the stock being included in the Dow Jones Sustainability World and Emerging Markets Indices.

Bull case: The management has indicated a better H2FY24 due to key regions for UPL entering main crop season, end of most of the high-cost inventory, and revival in molecule prices. UPL also said that volume growth is likely to be strong in H1FY25.

Bear case: Analysts feel high inventory levels and adverse weather conditions will keep the demand under pressure for UPL. Plus falling raw material costs are said to impact the margins. Net debt has increased by Rs 45 billion sequentially.

HPL Electric and Power (Rs 220.9, +10%)

The company has secured a Rs 545-crore order to supply smart meters.

Bull case: The company has the largest market share in electric meters in India and stands to benefit as the government plans to replace 250 million conventional electric meters with prepaid smart meters by 2025-26.

Bear case: Despite a three-fold rise in the stock price since March, institutions are not biting. Domestic funds in fact have been reducing exposure to the stock.

United Spirits (Rs 1,072.55, +2.17%)

The stock has gained nearly 20 percent in six months. USL has guided for 15 percent+ EBITDA margins in FY24 despite continued volatility in raw material prices.

Bull case: Better pricing, better product mix with higher share of premium brands and productivity gains should drive profitable growth, according to analysts. Initiatives such as the abolition of monocartons expected to support EBITDA margins.

Bear case: While the impact of paper and PET have lessened, prices of glass, and extra neutral alcohol, a key raw material, remained volatile and may continue to compress gross margins.