Short Call | Supply chain in Red Sea blues; SpiceJet bid for bankrupt GoFirst; Siemens power split; pharma booster dose

Dalal Street bulls took a breather on December 18 after a long rally.

War has turned out to be the greatest unknown for fund managers and markets today. After the Ukraine-Russia conflict, came the Israel-Gaza war, and now the focus is on the Red Sea shipping crisis. It could be the first signs of supply chain disruption, though government officials have assured that India's exim volumes will not be impacted and order will be restored soon. However, crude prices have jumped 2 percent and the impact cannot be brushed off.

SpiceJet's stock gained on its bid for the bankrupt GoFirst Airlines.

Bull case: The company has raised Rs 2,250 crore recently from warrants and shares which could help in acquisition. If successful, this could help raise the low-cost airline's current market share from 6.2 percent.

Bear case: The airline has its own debt to take care of, to the tune of Rs 6,000 crore. About 40 percent of its own fleet is also grounded. Sales yet to touch pre-Covid highs.

The stock gained after its board asked the management to take steps to demerge the company’s energy business into a separate entity.

Bull case: Order book stands strong, with a backlog of over Rs 45,000 crore.

The stock is viewed as a key beneficiary of the capex cycle and increased spending in power transmission and distribution.

Bear case: Domestic institutional investors have reduced their stake in the company. The stock is trading near expensive valuations. Corporate governance issues arising from complex holding structure (three different Siemens entities) cannot be ruled out.

The company surpassed the Rs 3-lakh-crore market cap. The stock will be in focus today on the back of a 16.7 percent stake acquisition in Lyndra Therapeutics.

Bull case: The Street is now betting big on Sun's speciality business, for which it had made heavy investments a few years back. The speciality pipeline has products to treat alopecia, acne and more. The company has strong domestic presence as well.

Bear case: Compliance concerns surrounding Halol and Mohali plants can act as headwinds.

Shares slumped 2 percent on profit-booking after 6 percent jump on Friday. According to CNBC-TV18, there were buy flows at the FII desk on December 15.

Bull case: The AC manufacturer stands to be the biggest beneficiary of AC under-penetration in India. FIIs increased holdings from 24.20 percent to 29.69 percent in the September quarter.

Bear case: Net loss increased from Rs 3 crore in Q2 FY23 to Rs 7 crore in Q2 FY24. Customer concentration, volatility in commodity prices and increasing competition could continue to affect the business.\

The focus of the week in the derivative segment will be on the pharmaceutical sector. Among individual stocks, Zydus Life, Lupin, Laurus Labs, Granules, Biocon, and Divis Lab are witnessing long build-up positions, while short covering is observed in Dr Reddy’s, Alkem, and Ipca Labs. Rajesh Sriwastava, a derivatives trader, specifically recommends adding Dr Reddy's scrip to your radar. "A short unwinding of 1,750-plus lots during last Friday's trade indicates that the stock is poised for more short covering. These were the shorts added on the day of FDA's severe observations for Telangana plant."