After seven straight weeks of gains, bulls appear to be feeling the fatigue. Not only was the Budget a disappointment but also a sobering reminder that stock market sentiment does not figure high up on the list of the policy makers' priorities.
The market has now fallen for four sessions in a row, but benchmark indices are down barely 1.5 percent.
"Prima facie, hiking the rates is negative, but the rebound from the Budget Day lows is telling you that people are still ready to buy into equities," answers Rahul Arora, CEO of Nirmal Bang Institutional Equities.
Still, it is not a conviction in fundamentals, but rather the fear of missing out that is drawing retail investors in hordes, say market watchers.
Last night, US equities plunged with the Nasdaq diving 3.6 percent, its steepest decline in 21 months. The S&P 500 fell 2.3 percent, its worst single day fall in over 18 months.
Globally, investors are fretting about expensive valuations and Indian investors may soon realise that stock prices cannot stay disconnected from valuations indefinitely.
Coforge (Rs 6,318, +2.2%)
Q1 FY25 results met expectations.
Bull case: Signs of recovery in BFSI and increased headcount suggest strong growth potential. Merger with Cigniti expected to enhance operating margins by FY27.
Bear case: EBIT margins declined due to higher visa and headcount-related costs. Pace of new project initiation was slow. Failure to realise merger synergies, higher-than-expected deflation in Cigniti’s testing services pose key risks.
KNR Constructions (377.50, +5.31%)
Stock rallied in response to Budget announcements of infra projects
Bull case: Rs 2.52 lakh crore or nearly 50 percent of the capex has been budgeted for the Ministry of Road Transport and Highways, thereby providing larger opportunities. Further diversification into other segments bodes well for the company. Has de-risked its transportation business with diverse geography and low client concentration.
Bear case: Lower project awarding, delay in execution of irrigation projects and new orders at lower margin owing to aggressive bidding by developers endangers its future growth prospect. Higher input costs may also impact margins.
Kajaria Ceramics (Rs 1,466, +1.87%)
Profit fell more than expected in Q1FY25
Bull case: The company expects double-digit volume growth despite a slow start in first quarter of this fiscal year. Pickup in exports and robust demand in real estate sector can help bolster investors' sentiment around the stock as well.
Bear case: After June-ended quarter was impacted due to elections, a lot depends on the demand pickup. Tiles exports for the industry was flat YoY in April and May due to high freight rates. If freight rates fail to normalise, it can be negative for stock's future prospects as it can offset strong domestic sales as well.
HUL (Rs 2,720.95, down 1.64%)
Reported a decent set of first quarter earnings.
Bull case: The firm will see low-single digit volume growth as near term operating environment continue to be competitive, in the best-case scenario. The premiumisation thrust could pay off, giving higher returns at better margins.
Bear case: An overzealous focus on the premium portfolio could isolate its rural consumers. Margins are expected to remain flat, according to guidance.
(With inputs from Lovisha, Neeshita, Zoya, and Harshita)
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