The October series is upon us, and while the past four series have seen the Nifty 50 end on a positive note, the all-important question right now is: will the trend continue? Well, there’s an old stock market adage: ‘Sell in May and go away. But remember, come back in November!”
It was often used to describe the poor returns of the key Wall Street index S&P 500 during the months of May to October even as the next six months period – November to May – typically seeing a complete turnaround.
Does it apply to our local benchmark? Of course not. Looking back over the past ten years, July and October have traditionally been the best months for the index, with the Nifty 50 closing in the red only on one occasion in July and just two instances in October.
This is called seasonality, when an index performs better (or worse) during certain periods of the year. The worst month for the index over the past decade has not been September, contrary to popular opinion, it has been January, where it closed lower on seven out of ten instances, which I’m sure investors think is a great way to start the New Year.
So, should we expect a continuation of the October optimism? Probably not. While seasonality can be an important factor to look at, it shouldn’t be the only factor to rely on. Experts have much to say about Nifty 50’s lofty valuations, or retail investors’ blind confidence and with earnings season just around the corner, seasonality shouldn't be the only factor to look at.
Trent (Rs 7,840, +3%)
Stock surged as Citi initiated coverage with buy call and a target price of Rs 9,250, implying 20% upside
Bull Case: The company is well-positioned for strong growth, outpacing peers with expanding Zudio stores and rising revenue per square foot at Westside. Successful new formats like Misbu and Samoh, combined with Star’s turnaround, could further boost profitability, driving significant upside in coming years.
Bear Case: The stock may face downside risks from slowing store expansion, weaker discretionary spending, and intensified competition. Higher raw material costs, coupled with limited success in scaling new formats, could pressure margins, while failure to align with fashion trends may hinder future growth.
Crompton Greaves Consumer Electricals (Rs 420, -5%)
Morgan Stanley maintained its 'Equal-weight' rating on stock with a target price of Rs 323 per share, representing a potential downside of over 26 percent from the current market price.
Bull Case: Innovations and brand investments have significantly ramped up. Supply chain transformation is underway (outsourcing lighting, insourcing fans). The company is aiming for 10 percent market share and double-digit margins. Management sees long-term growth opportunities such as premiumisation, and distribution expansion.
Bear Case: Near-term softness in demand due to pre-buying in cooling devices following a strong summer. Consumer products' demand appears weak, as indicated by lower Onam sales. Penetration challenges remain in certain categories, especially in fans in North and East India. Lighting business is underdeveloped outside South India. Kitchen appliances have yet to realise full potential in West and East India.
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