Short Call: No market for bears, AC stocks have a cool run, steel, paints, Man, HUDCO, Kalpataru, Bajaj Auto in focus

Stock markets around the world seem to prefer losing money after buying stocks rather than missing out on profits by selling early.

It is tough being a bear in this market, even if your arguments are sound. Ask Marko Kolanovic of JP Morgan and Mike Wilson of Morgan Stanley. Kolanovic’s consistent bearish calls have cost him place at JP Morgan, while similar calls by Wilson have meant that he will no longer chair Morgan Stanley's Global Investment Committee even while staying on as chief U.S. equity strategist and CIO.

For some reason, stock markets around the world seem to prefer losing money after buying stocks rather than missing out on profits by selling early.

This is nothing new. In the 90s, UBS strategist Gail Dudack found herself out of favour with the management her contra calls in a rising market. Jefferey Vink, star fund manager at Fidelity was fired because of his bearish call on technology stocks during the dotcom boom in the late 90s.

Vink’s story though had a happy ending, according to Maggi Mahar in her book Bull.

He set up a hedge fund after leaving Fidelity, collected $800 million from wealthy clients, and racked up a return of 646 percent over the next four years as technology stocks crashed, and retired at the top of his game.

Chill pill

Q1 was a bumper quarter for room air conditioners and air coolers, write Chirag Mucchala and Rahul Mishra of Centrum. They estimate volume growth to be around 45-50 percent for RAC and around 40 percent for air cooler.

AC players were able to hike prices to offset higher input costs, but competitive intensity remains elevated, say the duo in their earnings preview report. That means no pricing power beyond a point.

Short call view: Question is how much of the earnings jump has already been priced in. Shares of Voltas, Blue Star, Amber, Johnson Hitachi and Amber Enterprises have almost doubled over the last year. If margins expansion is tepid, will the Street be willing to give higher multiples hereon?

Steel
Not much cheer for ferrous players in Q1, write Ashish Kejriwal and Jyoti Sing of Nuvama. That is because gains from lower coking coal costs have been offset by lower volume and lower flat product prices. Volume decline to be between 1.5–15 percent with SAIL reporting the highest decline.

Short Call view: Steel stocks had a good run between January and March, but the uptrend has slowed down significantly since. Tepid Q1 performance may already be in the prices. The big picture story of rising domestic steel consumption still looks promising.

Paints
The paint market slowdown, which started in Q3FY24, has continued even in Q1FY25, write the team at ICICI Securities. Paint dealers feel the slowdown may continue even in Q2FY25. Berger and Indigo have likely continued to gain market shares, says the ICICI Securities report.

Bajaj Auto (Rs 9,537, -1.03%)

Launched the world's first CNG-integrated motorcycle 'Freedom 125'

Bull Case: Priced attractively and competitively, CNG network covers 70 percent of motorcycle market. Booking open in Maharashtra, Gujarat; plans for pan-India expansion. Export plans in Egypt, Tanzania, Columbia, Peru, Bangladesh, and Indonesia.

Bear Case: Too early to gauge success. Unclear if customers will adopt for personal use. Stock has already seen a significant rerating over the last year

Man Industries (Rs 484.50, +4.4%)

Bagged Rs 1,850 crore line pipe order, the largest single order in its history.

Bull case: Management likely to raise growth guidance following the mega order. Orderbook of Rs 4,000 crore points to demand picking up, says broker Emkay.

Bear case: Muted foreign institutional holding. Despite high hopes of carving a strong earnings trajectory, the company has a poor track record of just 7.2% sales growth over the past five years.

Kalpataru Projects International (Rs 1,274.70, +3.8%)

Shares surged nearly 4 percent, snapping a two-day losing streak.

Bull Case: Well diversified order book across power transmission, railways, building & factory construction, urban infrastructure, and water. As of FY24 end, order book stood at Rs 58,415 crore.

Bear Case: Promoters have pledged 31.5 percent of their shareholding. Company experiencing a slow execution pace of existing orders. Prices of key raw materials like cement, bricks, sand, steel and copper may rise amid demand-supply dynamics, leading to an increase in input costs.

HUDCO (Rs 335, + 2%)

Shares hit a fresh high on Monday

Bull case: Niche financier in the social housing and urban infrastructure space. Has key role to play in various government schemes such as PMAY-Urban, PMAY-Rural, Smart City, Swachh Bharat, Jal Jeevan among others. Huge growth opportunity in infra lending space, says Nirmal Bang.

Bear case: Valuations no longer cheap after six-fold jump prices over last year.

(With inputs from Harshita, Veer, Vaibhavi and Neeshita)