Short Call | Is Nifty poised for a reversal? What history shows; M&M and Senco Gold in focus

Short call

The Indian equity market managed to put the brakes on its eight-day fall after closing marginally higher yesterday. Analysts across the board are anticipating a relief rally in the market as the selloff in recent times has turned conditions oversold.

However, underlying scepticism also lingers over the sustainability of any relief rally from hereon given that several sentiment dampening global headwinds still persist.

Regardless, historical data may come to the rescue at the current juncture, offering some relief as an analysis of previous daily price returns by JM Financial suggests that the seldom occurrences of the Nifty closing in the negative territory for 8-or more consecutive sessions have been followed by a rebound in the index on a one-month as well as three-month basis.

Other metrics of such occurrences also align as the Nifty has usually declined by an average of 4% in such falls, similar to the 4% correction seen this time. Recovering from such events, the Nifty's average return on a daily closing basis stands at 5.4% for the next one-month period and close to 9% for the three-month period, the report showed.

Now while underlying caution may persist, the benchmark Nifty can still make a sustainable gradual recovery, if history repeats itself.

M&M ( Rs 2,841, -3.45%)

Shares fell despite the auto player seeing an overwhelming response for its new electric SUVs, the XEV 9e and BE 6.

Bull Case: The company's newly launched electric sports utility vehicles have received a significant response, recording 30,179 bookings on the first day. The total booking value stands at Rs 8,472 crore (ex-showroom price). International brokerages Citi Research and Nomura issued bullish calls following the development.

Bear Case: The company's international tractor business faced challenges due to macroeconomic factors in certain markets, leading to lower-than-expected growth in the third quarter. Furthermore, an increase in EV volumes may put pressure on profitability in the auto segment, ICICI Securities said.

Senco Gold (Rs 332, -7.2%)

Shares tanked since Q3 show.

Bull Case: Despite the high volatility in gold prices, which surged 22 percent year-on-year and 20 percent since April 2024, consumer demand remained robust. "We are likely to achieve a 7-8 percent EBITDA margin in Q4 and beyond, supported by our strong brand positioning and operating leverage. Additionally, we aim to further boost sales through innovative offerings and premium pricing," said the management.

Bear Case: Any changes in taxation could have an adverse impact on the firm. Further, as gold prices soar, customer sentiment is likely to be softer going ahead. Further, this also has an impact on the firm's gold lease rates, squeezing margins.

Inputs from Zoya and Veer