It remains a confusing market. Aggressive purchases ahead of a key risk event (election results) make little sense for two reasons: one, NDA returning to power has been largely factored in, and two, valuations are expensive. But such has been the power of retail money inflow that price moves are defying logic.
In the specialty chemicals space, the news is mixed. The good part is that the earnings of companies catering to end-user industries other than agrochemicals are unlikely to fall any further, according to Nuvama. The not-so-good news is that a recovery in demand is likely to be gradual. There are signs of demand picking up in segments like industries like textiles, pharmaceuticals, FMCG, dyes, and pigments, says the Nuvama report.
In the metals space, Ambit is making a case for betting on steel and aluminium. Outlook on copper right now is most bullish among the trio of copper, aluminum and steel. But Ambit analysts say a further rise in copper prices could lead to a switch to aluminium, which is lighter and much cheaper, even if not as efficient as copper. Similarly, aluminium prices have never sustained for long at 5 times steel prices, as is the case right now.
Dalmia India (Rs 1833, +2%)
The stock trimmed some of its losses suffered last week in the wake of disappointing March quarter numbers.
Bull argument: Government spending on infrastructure and strength in construction should keep demand for cement buoyant. Raw material prices have begun to cool off.
Bear argument: Cement prices have been under pressure of late. This trend is likely to continue as more capacity comes on stream. Brokerages like Morgan Stanley and Systematix have slashed price targets and earnings estimates.
Indus Tower (Rs 352, flat)
Kotak Securities has downgraded its rating citing expensive valuations.
Bull argument: Vodafone’s successful fund raise means Indus Tower will be able to recover its pending dues from the company. Also, growth of 5G services will increase demand for towers.
Bear argument: Long-term growth would remain muted as network expansion would likely be in the form of loadings, leaner towers, which could cap revenue upside, says Kotak. Also, Vodafone is still not out of the woods yet, as far as the pending AGR dues to the government is concerned.
Five Star Business (Rs 753.05, +3.27)
The company announced a strong set of Q4 results.
Bull argument: Assets under management up 39 percent year-on-year. 30+ Days Past Due--the number of days by which a borrower is behind on an EMI or credit card payment, has improved to 7.9% from 8.4% in the previous quarter.
Bear argument: Management expects GS3 loans which are overdue for more than 90 days to increase slightly to 1.7% from the current 1.4%. The company offers loans to low income borrowers who will find it difficult to repay during an economic downturn.
IOC (Rs 168.95, -4.41%)
Fourth quarter results below analysts’ expectations, consolidated net profit down 49 percent.
Bear argument: Domestic retail volumes flat at 21 MMT (million metric tonnes), but diesel sales down 5 percent. Volumes in chemical segment higher, but margins poor, says Nuvama.
Bull argument: Retail fuel prices to be hiked post-elections.
Coromandel Fertilizers (Rs 1210, -0.5%)
Company to set up a phosphoric acid-sulphuric acid complex facility at Kakinada, Andhra Pradesh.
Bull argument: Additional capacity to add to revenues.
Bear argument: Operating performance of the fertilizer business could face challenges in the near term, due to the lower nutrient-based fertilizer rates announced by the government for the Rabi season, says Motilal Oswal.
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