“If you find three wonderful businesses in your life, you’ll get very rich.” - Warren Buffett
Individual investors appear to have regained their risk appetite for smallcaps and midcaps after the powerful rally in the broader market on April 1. Liquidity in the system is expected to start getting better hereon now that the new financial year has begun. It, however, remains to be seen if investors will chase midcaps and smallcaps with the same enthusiasm as before given the elections are just days ahead.
According to Ambit, the median drawdown from the 52-week highs is 7.3 percent for largecaps, 13.7 percent for midcaps, 17.9 percent for smallcaps and 24 percent for micr caps. Ambit is putting its money on the outperformance of largecaps, and so are quite a few broking firms as well. With the fourth-quarter earnings season underway, it makes sense to look at the numbers before doubling down on small and mid caps.
Banking stocks
Banking stocks may not be the flavour of the season, but there is nothing to worry as far as credit growth is concerned. The problem remains high cost of funds, as a result of which net interest margins have been under pressure.
Non-food credit growth in February was a healthy 16.5 percent year-on-year as against 16.2 percent on-year in January 2024, according to a Nirmal Bang report, citing RBI data.
Credit growth was broad-based across all major segments such as agriculture (at 20.1 percent YoY in February vs. 20.1 percent YoY in January), services (at 21.2 percent YoY in February vs. 20.7 percent YoY in January), Retail (at 18.1 percent YoY in February vs. 18.4 percent YoY in January).
The weak link continues to be industries, where credit growth continued to be in single digits at 8.6 percent YoY in February, but better than the 7.8 percent YoY in January.
RVNL (Rs 262, +3.5%)
The company said that it has bagged multiple orders.
Bull argument: The company has an order book of around Rs 650 billion, plus every year the company has a target for an order inflow of Rs 250 billion.
Bear argument: The stock is widely owned by retail investors and high net-worth individuals. However, it has not been able to attract institutional interest. Also, the price is up 2.5x over the last one year, and factors in most of the positives.
GAIL (Rs 182.7, +0.91%)
The stock gained after Jefferies retained the 'underperform' call but raised the target price to Rs 150 per share.
Bull argument: According to a March 26 report by Reuters, GAIL plans to
commission its first green hydrogen project in central India in April. This Vijaipur, Madhya Pradesh unit is expected to produce about 4.3 metric tons of hydrogen per day and would use renewable power.
Bear argument: Risk-reward unfavourable, says Jefferies, as stock trading above +1 standard deviation over long term average. The brokerage also notes that the Petroleum and Natural Gas Regulatory Board (PNGRB) notification makes no reference to higher gas costs for GAIL.
PNB Housing Finance (Rs 755.8, +20%)
Morgan Stanley gave a ‘overweight’ call on the stock with a target price of Rs 970 per share, sending the stock 20 percent up and hitting the upper circuit.
Bull argument: Healthy loan growth, improved asset quality and attractive valuations, according to Morgan Stanley. CARE Ratings and ICRA recently upgraded the company's long-term rating to 'AA+' citing improvements in the company's asset quality.
Bear argument: Low return on equity and return on capital employed. The management had reduced retail loan growth guidance from 17 percent to 15 percent for FY24 due to demand moderation and internal challenges.
Torrent Power (Rs 1,422,+ 4.7%)
The company has bagged a 150-MW wind solar hybrid project from its distribution unit. The project cost is Rs 1,825 crore.
Bull argument: The company reported decent Q3 revenues. The stock has gained nearly doubled over the last one year; optimism for the segment also adding to gains in stock price.
Bear argument: Analysts at Geojit have raised concerns on high valuations and flat growth in revenues.
(With inputs from Srushti, Ananthu, Anishaa and Yash)
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
