Short Call | Macros in fine shape, but bulls know it; Berger Paints shines; Gujarat Gas, Venus Pipes in focus

Much of the good news has been factored in by the market.

“The underlying driving force behind market timing decisions seems to be emotional - fear, greed, chasing performance - buying something after it has gone up, disappointment, and sales after something has declined.” - David Swensen

Bulls will point to the blowout GDP headline for the December quarter, while bears are likely to show the Gross Value Added (GVA) figure, which stays pretty much in line with what economists were expecting. The good news is that India’s economy is in good shape amid gloom in some other large economies. At the same time, much of the good news has been factored in by the market.

AMFI’s circular to mutual funds calling for greater caution in small and mid cap schemes has been shrugged off by the market, so it seems. But a warning bell has been sounded nevertheless. Investors will be ignoring it at their own peril.

JSW infrastructure: (Rs 257.20, + 4.2%)

Broking firm has MOSL initiated coverage with a 'buy' call.

Bull argument: Strategic location of ports, growing volumes, acquisitions and increasing market share are making analysts positive on the stock

Bear argument: Risk of slowdown at a global level and overdependence on a limited number of customers. The equity base has swelled in the last couple of years. Company will need to grow earnings in a big way to support current valuations.

Berger Paints (Rs 607, +. 7.5%)

The stock surged on heavy volumes on Thursday.

Bull argument: Steady improvement in earnings. Company has been able to defend market share according to HDFC Securities. The boom in residential

property improves the outlook for medium term demand.

Bear argument: Grasim is entering the industry in a much more aggressive way than analysts were expecting. This could affect the profit margins of the other players. Also, Grasim has made it clear that it is aiming for the number two position, which is where Berger is right now.

Gujarat Gas (Rs 550, +3.1%)

Sentiment for the stock has improved over the last three months.

Bull argument: Margins to benefit from falling prices of spot LNG. Propane prices too have been firm in recent months. If price of propane falls, that is bad news for the company as customers then switch to that gas to save on production cost.

Bear argument: Earnings are yet to show a clear sign of pick up

Shriram Finance (Rs 2,437.95, +3.8%)

The stock soared after the company was included in the Nifty 50 post the index's latest rejig.

Bull argument: The company is likely to attract inflows of around $217 million from the inclusion, Nuvama estimates. Earnings has been strong for the last three quarters. This reduces any concerns that the street may have had over the three-way merger.

Bear argument: SHFL has a unique position in the commercial vehicle finance market. However, CV financing is seen as a tough segment to crack within the vehicle financing umbrella. Farm Equipment loans share to the AUM mix has been gradually trending down from 2.1 percent in 3QFY22 to 1.6 percent in 3QFY24.

Venus Pipes & Tubes (1,830, +5.43%)

The stock gained after announcing entry into fittings business and capacity addition for pipes and tubes. The company also announced a capex of Rs 175 crore.

Bull argument: The capacity expansion and entry into fittings, hygienic stainless steel and titanium tubes will enhance volume growth and margins for the company. Toline has been steadily growing for the last 10 quarters and bottomline, for the last seven quarters.

Bear argument: Chinese dumping of low cost imports is a problem. The stock has more than doubled in last 1 year and at 50 times trailing earnings, is not exactly cheap.