Short Call | Market running out of boosters, AC stocks feel the heat, Tata Tech, Cummins, UltraTech, Eicher in focus

Market throws up sale-the-rise vibes.

It is foolhardy to shut our eyes and buy just any stock because of prospects for a substantial rise in the indices. In a bear market nearly every stock goes down, but in a bull market not all stocks advance. - Fred C Kelly

The Nifty and the Sensex rebounded from the day’s lows, but it now appears to be a sell-on-rise market. The popular strategy is to sell at the start of the session and then cover the positions in the second half. With institutions being in no hurry to load up on shares, bears are taking their chances.

And, the mood appears to be souring for most sectors. After Nomura’s bearish call on tyre stocks, Kotak Institutional Equities too has forecast a bumpy ride for tyre makers. Similarly, KIE has a dim outlook on the cement sector as cement prices have been weakening. This, despite decent demand and easing raw material prices. Centrum’s Mangesh Bhadang expects cement demand to remain soft in the first half of the coming fiscal and says that demand in rural markets is tepid.

Morgan Stanley recently upgraded its rating and price target for Voltas, citing the IMD’s forecast of a harsh summer. But the investors don’t appear to be as gung-ho about shares of cooling companies. Reason: fierce competition which is forcing all the players to cut prices. Amber Enterprises rebounded after a steep fall, but the stock is down 20 percent from its record high seen in February. Blue Star, Johnson Controls and Epack Durable fell between 2-3 percent, and Voltas closed flat.

Cummins India (Rs 2,794, +2.90%)

The stock rallied in a tepid market on Wednesday and continues to hover around its record high seen in the last week of February.

Bull argument: The company has the advantage of being the first mover with the launch of CPCB IV+ products. These products command higher margins and, with full implementation of the norm from June 2024, Cummins can ramp up its capacity utilisation to meet higher demand and reap the benefits in the coming quarters, writes our colleague Jitendra Gupta in MC Pro.

Bear argument: Exports have been a weak spot and the trouble in Red Sea could keep transportation costs high for a while. The stock has doubled over the last year. While the management is hopeful of exports picking up soon, most positives may have already been factored in.

Eicher Motors (Rs 3,875, +4.25)

The stock surged after UBS upgraded rating to ‘buy’ with a target price of Rs 5,000.

Bull argument: UBS is bullish on the company due to company’s upcoming new launches and lacklustre performance by competitors. Harley Davidson

and Triumph’s models have not seen a significant volume pick up.

Bear argument: The company’s Volvo trucks and buses sales declined 6 percent in February. Outlook on the auto sector in general is turning cautious.

Tata Technologies (Rs 1,032.5, -0.92%)

The stock dipped after JP Morgan initiated coverage with an 'underweight' call, with a price target of Rs 800.

Bull argument: The company reported strong numbers for the December quarter. It also won five large deals during the quarter, including one deal with over $50 million in total contract value (TCV) and another one with $25 million TCV.

Bear argument: The company has a high client concentration and faces challenges in scaling non-anchor clients, JP Morgan said. Further, the brokerage believes valuations are excessive at 53 times the one-year forward price/earnings.

Garden Reach Shipbuilders (Rs 753, -1.1%)

Elara Securities has rated the stock a 'sell'.

Bull argument: Overall optimism for the sector continues, the stock gained over 70 percent in one year and over seven times in five years.

Bear argument: Delayed order inflows and decline in order book could impact the company’s financials going forward, says Elara Securities . It expects the situation to improve only after FY2026.

UltraTech Cement (Rs 9478, +0.26%)

The Competition Commission of India approved UltraTech Cements' proposed acquisition of Kesoram Cement business from Kesoram Industries.

Bull argument: The company has a total growth capex of Rs 250 billion, of which Rs 180 billion will likely be spent in FY24-25.

Bear argument: Cement demand during Q4FY24 was weak. The company's net debt has increased and it is also seeing higher operating overheads, says Emkay.

With inputs from Anishaa, Ananthu, Srushti and Yash