Short Call: Too much of positives? Harder rally on cards; Dixon Tech dazzles, PVR Inox zooms, Brand Concepts in focus

Market gets mightier after poll results.

“I don't think people understand there's 100 percent correlation with what happens to a company's earnings over several years and what happens to the stock.” - Peter Lynch

The market is passing through a surfeit of positive vibes at the moment. The BJP’s resounding victory in three major states reduces the political uncertainty in the run-up to the 2024 general elections. So, now you have strong macro fundamentals, robust corporate earnings (based on which sectors you are looking at), adequate liquidity flows, and easing of the political overhang. Stocks may now rally harder because of fresh buying and covering of short positions created ahead of the state poll results. That also raises the question if the market is going to price a likely emphatic NDA

triumph in the elections over the next couple of sessions. Heard the saying, too much of a good thing?

Dixon Technologies

The stock jumped 9 percent on Friday as Dixon's Noida production facility for making Xiaomi phones was rolled out. Mobile has been the fastest growing segment for Dixon Tech, while consumer electronics and lighting segment revenues dimmed out in Q2. Most analysts are positive on stock, but valuations remain expensive at 116 times trailing earnings. Plus, Dixon derives almost three-fourths of revenue from original equipment manufacturing, which has lower margins than original design manufacturing (ODM). Mutual funds don’t seem to mind, looking at the increase in their exposure to the stock.

Brand Concepts

Shares of the luggage company gained 2 percent after noted investor Ashish Kacholia picked up a 1 percent stake. The stock has been on a tear this year, rising 3.5 times since April. The company was not into manufacturing till now, but recently acquired the rights to make Tommy Hilfiger bags in India. Founder Abhinav Kumar said it was a no-brainer to get into manufacturing as there are very few luggage-makers in India. Plus, he says that many global brands are keen on India and, not on China.

PVR Inox

The stock zoomed 5 percent last week after the company opened a six-screen property at Jio World Plaza in Mumbai, including an Imax screen. Strong response to Ranbir-starrer Animal is also driving footfalls. Other big releases for later this month include Shah Rukh-starrer Dunki and Prabhas-starrer Salaar.  The stock is trying to make a comeback after a 15 percent decline between September and October. Elara Capital is not so hot on the stock and retains the ‘accumulate’ rating with lower price target on a slowdown in Hollywood movies due to the writers' strike which only ended in November and a lesser number of high-budget Hindi movies from January to June 2024 which might negatively affect the occupancy rates.

Suzlon Energy

The stock will be included in the S&P BSE Power index. This comes a month after Morgan Stanley Capital International added Suzlon to its MSCI Global Standard Index. The multi-bagger has surged 268 percent year-to-date and skyrocketed 730 percent in five years. However, in the September quarter, the promoter cut stake from 14.5 percent to 13.29 percent. The BSE and the NSE too have placed Suzlon Energy under the long-term ASM framework. "Suzlon Energy is bullish but also very overbought on daily charts, with the next resistance at Rs 46.6,” said AR Ramachandran of Tips2trades.

Alkem Labs

An inspection by the US FDA at the company’s API manufacturing facility in Mandava ended with three observations under Section 483 of the US FDA. The Q2 numbers were better than analyst estimates and the stock has steadily climbed 37 percent over the last six months. The latest development could temper the near-term outlook for the stock.

With inputs from Shailaja, Anishaa, Yash, Ananthu and Srushti. Edited by Santosh Nair.