“At some point, we will have a major correction and everybody will get scared again, and we will have another buying opportunity.” - Peter Lynch
Independent market expert Shankar Char sums up the prevailing market mood best when he says in his morning note: “This bounce did start with zero conviction but levels have a way of forcing a narrative.”
Monday’s resounding rally has again lifted the sagging morale of bulls, and yet the incentive to buy aggressively is limited. Index heavyweights were the star performers on Monday, and there is talk that the much awaited shifted from mid and small caps to large caps may be underway. This could give a lift to the Sensex and the Nifty, but at the same time could take a toll on the second line names as liquidity in small and midcaps usually tends to vanish when too many investors land up to take money off the table.
Nippon Life India Asset Management (Rs 523, +1.26%)
Q3 net profit up 39 percent.
Bull argument: Increased market share in equity market, SIP segments. The company recorded 1.55 crore unique investors which is the largest in the industry.
Bear argument: Share of passively managed funds has increased. Passive
schemes earn less money for AMCs than actively managed ones. Also, according to a Nuvama report, the management has hinted at the possibility of a 2-3bp/annum compression in equity yields due to SEBI formula of TER calculation for the next 4-5 years.
Shriram Finance (Rs 2,399.60, +4.01%)
Stock gained on strong Q3 show. The NBFC's AUM grew over 20 percent in the quarter gone by.
Bull argument: Top contender to replace UPL in Nifty 50. Company is diversifying into MSME and gold loans. Also expanding subsidiary Shriram Housing Finance's book. Brokerages expect the stock to get further re-rated.
Bear argument: Cost of funds may rise going ahead as banks cut down on NBFC lending. FII stake has come down over the past two quarters. Asset quality issues could rise as asset mix changes because of foray into new areas.
SBI Cards (Rs 716.25, -5.74%)
Shares tanked after third-quarter earnings missed estimates.
Bull argument: Lot of negatives already priced. SBI Cards still the market leader. Card issuances continue to grow at steady clip. Revolver mix likely to improve once interest rates start coming off.
Bear argument: Net slippages in the Q3FY24 exceeded estimates and management anticipates two more quarters of heightened credit costs. Further, adverse policy actions by RBI on unsecured lending may keep the margins under pressure.
Balkrishna Industries (Rs 2509, -0.72%)
Stock has fallen over 10 percent from its record high over the last week because of the crisis in the Red Sea
Bull argument: Retail demand in both India and key European Union markets steady. Crude prices stable. It is a matter of time before the Red Sea crisis is resolved.
Bear argument: Management has guided for a flat volume growth—year-on-year and sequentially—for the March quarter because of shipment delays. Higher freight costs likely to weigh on earnings. Natural rubber costs rising.
HPCL (Rs 452, +5%)
Stock rebounded after Thursday’s sell-off on lower than expected third quarter showing.
Bull argument: Earnings miss was mainly because of refinery shutdown. Management says no more shutdowns going into FY25, according to Morgan Stanley report. Gross debt down, good dividend yield, attractive valuation and demerger of lubricant business key triggers.
Bear argument: Market is worried that government may nudge oil marketing companies into cutting fuel prices ahead of election.
With inputs from Shailaja, Ananthu, Yash
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