Short Call: Retail frenzy catches pros off guard, Macrotech, Nestle, Kirloskar, IndusInd in focus

Enthusiasm of retail investors is driving markets higher

Indices rebounded on Thursday, though much of that strength has been attributed to short covering of positions. The broad trend continues to confuse professional market participants, and massive retail investor inflows appear to be the reason for that.

Immediately after the meltdown in small and midcaps in March, it was widely felt that most investors would take a first safety first approach and shift towards large caps. That trend has only partly played out. A section of good quality stocks has done well but have also become expensive in the process. That has in no way dimmed the appetite for small and midcap stocks though.

With election results less than two months away, the general view was that the market would remain rangebound or even drift lower. That was because it made sense to take a view post-election result as valuations anyway are expensive at the moment. Big ticket individual traders and value investors are sticking to this rule. But that is not stopping the market from climbing, thanks to the enthusiasm of retail investors who are pumping money into equities through both mutual funds as well as direct investment in equities.

Nestle India (Rs 2562, +2.5%)

Company’s Q4 net profits beat analyst estimates.

Bull argument: Confectionary segment delivered strong growth led by KITKAT. The growth has led to India being second largest market in the world for the brand. Milk products led by Milk maid also delivered strong performance despite inflationary pressures.

Bear argument: Coffee and cocoa prices are at record highs. Further hikes in milk prices will start weighing on the margins.

Indusind Bank (Rs 1,496, +1.5 percent)

Stock gained nearly 2 percent during trading hours in anticipation of Q4 earnings which were announced post market hours. The bank reported a 15 percent YoY increase in net profit.

Bull argument: Analysts at Nuvama noted that relative to peers, the bank had a rather “soft” Q4 earning but added that there was a good uptick in asset quality. Management has expressed confidence in improving asset quality further.

Bear argument: While the asset quality improved, NIMs and retail slippage continued to be concerns.

Macrotech Developers (Rs 1212.5, -3%)

The company announced its Q4FY24 results.

Bull argument: The company intends to launch around 10 million square feet in FY25.

Bear argument: Realty prices in Mumbai may be close to peaking out near term. Also, interest rates are expected to remain high, which in turn could affect demand. There is less clarity on company’s ability to replenish high-value inventory, especially in South and Central Mumba

Kirloskar Pneumatic (Rs 913, +14.7%)

Stock made a fresh all-time high after the company’s net profit nearly doubled year-on-year in Q4FY24.

Bull argument: Demand for the company's products remained strong with the new order booking in the year at a record of Rs 1,770 crore, nearly Rs 500 crore higher than the previous year. Broking firm Monarch says the management has so far delivered on order book guidance.

Bear argument: Total expenses rose by 27 percent to Rs 406.81 crore compared to last year, due to higher raw material prices. The company does not expect any significant improvement in FY25 in the Middle East & North Africa region.