Short Call | October blues hit Nifty 50; Waaree Energies, Cipla in focus

Short Call

The Nifty 50 index faced its worst month in over four years, dropping a steep six percent as foreign investors scrambled to sell.

Cheaper Chinese valuations, subdued earnings, rising turbulence in the Middle East and uncertainty regarding the US elections caused record selling from foreign investors. For the month, foreign investors pulled out a record Rs 94,000 crore in equities, casting a global shadow on Indian equities.

Asian indices, such as China, Japan, and Korea, coupled with US equities all ended the month with gains, making Indian markets a global outlier for the month of October.

Could November revive the Nifty 50 and Sensex? Historically, Nifty's been in the green six out of the past ten November, but with looming Chinese fiscal stimulus, US election results, and sluggish earnings, experts remain cautious.

Waaree Energies (Rs 2,890.10, +6.2%)

Stock up 80% from the issue price

Bull case: Waaree Energies is well-positioned to benefit from the global shift towards renewable energy, with solar energy emerging as a key pillar of this transition. As one of the leading solar module manufacturers in India, holding a 21% market share domestically and a 44% share in solar exports, Waaree's growth prospects are supported by a substantial track record and robust market presence.

Bear case: While Waaree Energies has a promising position in the solar market, several risks could impact its performance. The solar industry is highly competitive, and price pressures from both domestic and international players may compress margins, especially as new entrants continue to expand.

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Cipla (Rs 1,559.55 , +3%)

Shares rose after the company's Goa facility was classified VAI by the USFDA.

Bull case: VAI classification for Goa facility removes overhang over Abraxane's drug launch, providing pipeline visibility, notes Citi. Now Cipla can take advantage of its first-mover status for the drug, launching it before its Chinese rival, further boosting earnings growth.

Bear case: Delays in launch of another key drug Advair due to regulatory snags at Pithampur facility may dent its revenue potential. If supply issue persist for Lanreotide longer than Q3, it may also hamper its market share and revenue potential, putting pressure on earnings growth.

Tata Power Company (Rs 445.45, +1.1%)

Shares extend gains following the release of its Q2FY25 results, with multiple brokerages reaffirming their 'Buy' ratings.

Bull Case: The Pump Storage Project (PSP) in Bhivpuri, with a capacity of 1 GW, has received approval from the Central Electricity Authority (CEA) and commercial operation date (CoD) is anticipated by FY29. Transmission and distribution segment's rose YoY fueled by strong performance across all regions, driven by higher volumes, improved realisations, and benefits from favorable orders related to its Delhi distribution network.

Bear Case: Net debt rose to Rs 43,580 crore, an increase of Rs 1,100 crore from Rs 42,470 crore in Q1 FY24. Thermal generation segment's revenue declined due to a reduction in the plant load factor (PLF) at the Mundra plant, driven by lower power demand attributed to heavy rains during the quarter.