“Investors should think more and trade less.” - Tom Russo
A volatile start to the year, with indices hitting record highs and then coming off sharply. The consensus view is that returns for 2024 won’t be as juicy as that of last year. Many are even warning of negative returns. But that scenario is most likely to play out when you would be comparing 12-month returns at the end of the year. In the meantime, it is very much possible that the market could see more irrationality (never mind the India growth story), and there is no saying how high it can take stock prices.
“The risk-reward trade-off at this point is 20 percent upside and 40 percent downside in the short term,” a veteran trader told Short Call. Many have perished chasing this risky 20 percent over the years, but the lure is simply irresistible.
Fortis Healthcare (Rs 439, +4.72%)
Trading volumes were 2x the 20-day average. Nomura raised target price on the stock from Rs 388 to Rs 475.
Bull argument: Cheaper than Apollo Hospitals and Max Healthcare. Stands to benefit from rising spends on healthcare and well-being. SRL Diagnostics IPO can unlock further value.
Bear argument: Margin bump up to 17-19 percent from single digits could be difficult to sustain. FIIs have reduced stake last quarter. Legal troubles of promoter IHH could be seen as a deterrent by prospective investors.
Alkem Labs (Rs 5120, -1.6%)
The company has completed the sale of one of its units in the US for Rs 66.26 crore.
Bull argument: The company is targeting 8-9 filings for FY24 with a focus on products that have low price erosion. Easing raw material costs and moderating price erosion to benefit in near term.
Bear view: There is slowdown in the acute segment of the Indian pharma market. This is where the company draws a large portion of its revenue. Also, stock has run up close to 50 percent in less than four months, some consolidation likely.
Bajaj Auto (Rs 6698, -1.26%)
The stock fell after December sales fell short of analyst estimates.
Bull argument: The management is confident of better exports in Q4;
analysts continue to favour the stock as the two-wheeler sector appears to have bottomed out.
Bear argument: The management says the Red Sea conflict has caused some disruptions for Latin America and Africa shipment - freight rates increase could be a concern.
Adani Ports (Rs 1,041.1, +1.64%)
The stock was up 18 percent in the last one month. To consider a proposal for the issuance of non-convertible debentures on January 3.
Bull argument: During H1FY24, APSEZ’s domestic cargo volume growth was over 2x India’s cargo volume growth rate. Also, eight of the company’s ports achieved record-breaking half-yearly cargo volumes. It has also received a funding commitment of $553 million from the US International Development Corporation for its port in Sri Lanka.
Bear argument: Gross debt of Rs 47,200 crore in September 2023 on the higher side. Besides, most of it in foreign currency long-term debts. A slowdown in EXIM trade due to the resurgence of Covid-19 may affect the company’s performance. FII decreased holdings from 16.99 percent to 13.83 percent during the September quarter.
Gujarat Gas (Rs 483.8, +4.83%)
Increasing propane (LPG) prices and decreasing spot LNG prices have pushed the stock more than 9 percent in the last one month.
Bull argument: The company sources most of its gas from spot markets and LNG contracts, and so benefitted from falling LNG prices. Increasing propane prices reduces attractiveness for industrial users and provides pricing advantage to Gujarat Gas.
Bear argument: Volume growth in the last four years has remained flat. Apart from Morbi city in Gujarat, the growth has not picked up in other cities for the company.
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