Short Call: GDP boosts D-St bulls, Kesoram cracks on cement spin-off, Tata Power charged up, and Dalmia Bharat gets sweeter

Cyclical headwinds on the cards.

Strong second-quarter GDP numbers have come as a shot in the arm for the already charged-up bulls on Dalal Street. To a large extent, this may have been factored in. So, how does the road ahead look? Emkay Global’s lead economist Madhavi Arora cautions that the GDP growth is likely to slow down in the second half of this fiscal to around 5.5 percent. She listed her reasons: Cyclical headwinds in the form of (1) relatively slower government spending growth, (2) fading terms-of-trade benefits of lower commodity prices on an annual basis, (3) sub-par agri performance, (4) banks’ tighter lending standards, and (5) weaker exports.

Cement business to be demerged into UltraTech, with Kesoram shareholders to get one share of UltraTech for 52 shares of Kesoram. At Thursday’s closing price of Rs 139, the Kesoram stock is at a 25 percent discount to the swap ratio. This is now likely to be an arbitrageur’s playing ground till the demerger is completed. Cement contributes 99 percent of Kesoram’s topline. Minus that, there will only be the rayon business left. For investors looking to bet on rayon, a clearer picture will emerge in the days ahead as it is what this business is being valued at.

The stock rallied 10 percent after announcing its entry to real estate through a Rs 250-crore joint venture with Peninsula Land. Is the worst behind for the stock? The Calcutta High Court recently gave an interim relief in the Rs

6,000-crore show-cause notice issued by the directorate general of GST Intelligence. There could be the occasional bounce-back considering the stock is oversold, but a sustainable rise looks less likely at this point.

The stock fell 2 percent on Thursday after the company revised its FY27 revenue and net profit guidance, prompting negative outlooks from Morgan Stanley and Citi. MS has an 'underweight' rating on the stock, while Citi has based its sell rating on an expected delay in the final resolution for Mundra and the company's reluctance to add new thermal capacity, This comes a day after Tata Power MD and CEO said that the company aims to double its revenue and PAT in the next four years.

Given the euphoric mood in the market and that everything related to power is hot, bulls may be willing to bet that the management could be proved wrong.

Parent Whirlpool Corporation plans to sell up to 24 percent of its 75 percent stake in the Indian arm and use the proceeds to repay debt. Whirlpool India shares are still quoting below peak Covid lows. Over the last five years, the topline has grown barely 45 percent and the trend in bottomline has been erratic. The stock has rallied 45 percent from its February lows, and to some extent the announcement may be priced in.

The stock gained 2 percent after its resolution plan for Baghauli Sugar was approved by the NCLT. The acquisition of Baghauli Sugar will  increase capacities in Uttar Pradesh for Dalmia Bharat Sugar. Baghauli Sugar's cane crushing capacity is 13 percent of Dalmia Bharat's. This is what noted investor Anil Goel had said about the sugar sector in an interview to Moneycontrol last month:

“Globally, sugar is in deficit because of El Nino. The export ban won’t hurt because there is not much sugar available to export. By the next crushing season, my hunch is that India will become a net importer of sugar.”