“When you discover that you are riding a dead horse, the best strategy is to dismount.” - Tribal wisdom of Dakota Indians
The adage holds true in the field of investing as well. Even as the Nifty made a fresh record high on April 8, there were plenty mid and small cap stocks that have been going nowhere for a while now. Most of these stocks had a breathtaking run over the last year, fuelled by fancy narratives.
But as the market rally is narrowing, money is moving to stocks where the probability of the company delivering on numbers is higher. The problem for investors in flavour-of-the-season stocks now out of favour is that having seen unbelievable prices, they are now reluctant to sell at 20-30 percent lower.
The outlook on the market remains positive, but there is a growing view that the leaders of the next phase of uptrend will be a different set of stocks.
Titan (Rs 3749, flat)
The company disclosed its fourth quarter operating update to the stock exchanges after market hours on April 5.
Bull argument: Domestic jewellery business, watches and wearables, and emerging businesses Taneira and CaratLane, all showing good growth.
Bear argument: Current prices appear to be factoring in much of the expected growth. Possibly explains why the stock was sluggish on a day
when the benchmark indices hit fresh highs.
Exide Industries (Rs 375.85, +16.78)
Hyundai Motor and Kia Corporation announced a partnership with Exide Energy Solutions, a subsidiary of Exide Industries, for electric vehicle battery localisation in India.
Bull argument: Nuvama builds in an 8 percent CAGR in lead acid batteries business over FY23-FY26. The company is working on a lithium cell manufacturing unit which will start production in Q4FY25.
Bear argument: Low return on equity. Domestic institutional investors have reduced stake in the company.
Bandhan Bank (Rs 185.1, -6.21%)
The stock tanked following CEO and MD Chandra Shekhar Ghosh's decision to step down.
Bull argument: Equiries Securities expects gross loan growth to be healthy during Q4FY24 at 18-19 percent YoY. Further, MFI disbursements are likely to be healthy leading to healthy overall loan growth.
Bear argument: Uncertainty over appointment of successor can slow growth and push up credit costs, according to Jefferies, which has slashed its price target for the stock by over 41 percent to Rs 170.
Wipro (Rs 480.25, -1 %)
MD and CEO Thierry Delaporte resigned way ahead of his full term. Wipro veteran Srinivas Pallia has been appointed as the new MD and CEO.
Bull argument: Focus on AI and newer forms of technology could benefit the company in the long-term. Valuations reasonable because of prolonged underperformance.
Bear argument: Weak Q3, and March quarter unlikely to be much different. Resignation to create near term uncertainty says Morgan Stanley. Loss of senior talent over last few months raises questions on company’s ability to execute well, say analysts.
Nykaa (Rs 179.5, +6.6%)
The company reported a better-than-expected performance update for the March quarter.
Bull argument: Efforts to increase brand loyalty, widen customer base, establish partnerships with new brands, and expand online and offline businesses will improve profitability in the long run, says Geojit Financial Services. Plus sales have grown at a CAGR of 43 percent in the last three years.
Bear argument: Cost of retaining customers for beauty and personal-care products has become expensive says HDFC Securities.
(With inputs from Srushti, Anishaa, Yash, and Ananthu)
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