One more event out of the way now that the ministerial portfolios have been allocated, and there is nothing so far to suggest that BJP’s allies are driving a hard bargain. But the market is closely watching every move of this government for now and over analysing policy decisions. For instance, PM Modi beginning his third term by authorising the release of around Rs 20,000 crores under PM Kisan Nidhi is being interpreted by the street as a signal that welfarism will be the buzzword for NDA 3.0.
No chemistry yet
Another negative vote for the chemicals sector, and this time from Morgan Stanley. The broker has a cautious view on the sector as it is not convinced that the companies will be able to regain their pricing power anytime soon.
From the report, on the negative surprises:
“An uncertain demand picture, with recovery expectations pegged well into 2HF25, still not without its risks; (ii) Uncertainty around customer offtakes; (iii) Lackluster customer sentiment limiting significant price/margin inflection amid rising competitive uncertainty and supply imbalance in some cases (iv) Slowing capex intensity.”
GMDC (Rs 383.25, +1.09%)
Held ground in a sluggish market
Bull argument: Heavy global infrastructure investment, defense budgets driving up demand for metals and supply not keeping up. Domestic demand also rising due to infrastructure and construction. Major reforms in the metal and mining sector expected.
Bear Case: Change in leadership team, sharper-then-expected decline in coal prices, and environmental concerns could temper institutional interest. High capex in coal mining, delay in land acquisition impacting lignite volume growth could put pressure on earnings.
CEAT (Rs 2,525.90, +2.84%)
Held an analyst meet.
Bear Case: Soaring natural rubber prices and inflation in raw material basket could hurt margins. Passing on higher costs to customers could affect demand as company already charging a premium on its products, compared to peers.
Bull Case: To step up marketing, expand retail network and dealerships. Most of the capex is already done, and this will help improve margins and Return on Equity.
SBI (Rs 830.80, +0.10%)
Closed higher for the fourth day in a row after the sharp fall last Tuesday.
Bull argument: Healthy capital adequacy ratio, improving asset quality and solid growth in advances and deposits. Strong deposit base means the bank’s net interest margins are better insulated to rising cost of funds, compared to peers.
Bear Case: Private sector banks are regaining favour with the street after prolonged underperformance. After a near 50 percent jump in the last six months, the stock could consolidate.
Mahanagar Gas (Rs 1,407, +1.88%)
The company unveiled its growth plans during an analyst meet.
Bear case: CNG volume growth seen tepid amid reducing price arbitrage and rising EV threat, according to Kotak Institutional Equities. Inability to pass on rising input costs to users may dent margins.
Bull case: City gas distribution companies have made a plea to the government for inclusion of gas in GST. Even if this proposal takes time to be implemented, there could be relief on excise duty in the interim, according to Kotak.
KEC International (Rs 809, +5.29%)
The company secured new orders of Rs 1,061 crore across its various businesses.
Bull argument: A robust tender pipeline of Rs 1.3 trillion ensures future order inflows, better execution and selective order booking will internally fund the working capital requirements while reducing the working capital days to around 100.
Bear argument: Exports expected to be subdued in FY25 due to a slowdown in Bangladesh and Africa. Labour constraints continue to affect execution.
(With inputs from Harshita, Zoya, Lovisha, Vaibhavi and Neeshita)
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