Short Call | Inflation beast on the path to being tamed? Birlasoft, Eicher Motors in focus

January's CPI painted a rosy price, as inflation slipped to five-month lows at 4.31 percent, as against 5.22 percent reported in December, marking a decline for the third consecutive month.

Analysts are penciling in softening inflation for the month of February too, with their FY25 estimates falling in line with RBI's 4.8 percent assumption.

The Union Budget's tax relief coupled with the Reserve Bank of India's rate cut are expected rev consumption, however, with moderating inflation, on the back of lower prices for vegetable and pulses, could we see another rate cut on the cards?

Well, the central bank maintained a neutral stance, indicating policy flexibility, and while the RBI might undertake a shallow rate easing cycle of a further 25-50 basis points over the next few meetings, the markets will be eyeing the forex interventions and the liquidity measures more closely.

Shares extended fall after lower-than-expected Q3.

Bull Case: Royal Enfield’s domestic sales grew 13 percent in Q3FY25, outpacing the industry’s 2 percent decline. Strong demand for new models like the Bullet and existing variants, coupled with aggressive marketing, is expected to sustain momentum.

Bear Case: ICICI Securities flagged weaker-than-expected margins due to an unfavorable product mix and rising expenses. With management prioritizing brand-building and demand-generation efforts, margin pressure could persist.

Shares fell after a sharp fall in Q3 net profit.

Bull case: Management continues to focus on deal bookings while investing in scaling existing capabilities. It is also exploring opportunities in S4HANA and anticipates a turnaround in the next two–three quarters. Overall anticipated recovery in the IT services space may also aid a rebound in earnings growth on a low base.

Bear case: The company's total contract value has remained weak all along FY25 so far, which as per Nuvama, casts serious concern on FY26 growth prospects. Revenue also likely to decline further in Q4 due to furloughs extension and client ramp-down.