Short Call | Where do markets go from here? Swiggy, LT Foods in focus

Short Call

Earnings season is over and the verdict is in: India Inc fared poorly. All things considered, a solid C on its report card. Not just that, with earlier run-up, even the ensuing correction hasn't turned a lot of stocks into reasonable buys. Add a pinch of consumption slowdown and what you get is brokerages seeing a limited upside to the markets over the next year.

In a recent note, international brokerage Citi reported that it foresaw Nifty 50 at 25,000 - a level already concured and subsequently given up - by 2025. When the report was shared, that was just a seven percent climb in 10 months. From today's vantage point, the upside is tightened to just around three percent over 10 months.

Near-term challenges are also likely to weigh heavy, as poor earnings hit companies' cash flows. The sour sentiment has left Emkay Global with a bad taste, as the brokerage slashed its Nifty target to 25,000 from 26,000.

Even the more optimistic, starry-eyed estimates, such as Goldman Sachs' target, only see the frontline index at 27,000 by December 2025. Sure, it’s 11.6 percent higher than the latest close, but just a small step - 2.7 percent - past the index’s all-time high.

A silver lining shines behind the dark clouds: a full-fledged recovery is likely in FY26. With restarting government capex in H2FY25 and the stress in the unsecured lending segment expected to bottom out with the next few quarters, consumption will kick into high drive and earnings growth is likely to impress.

But could the Nifty 50 dance the same tune it danced in FY24? That, only time can tell.

Swiggy (Rs 469.6, 9.03%)

Shares rose after UBS initiated coverage with 'buy'

Bull Case: The brokerage highlights that Swiggy is well-positioned for growth, currently trading at a 35 percent discount to Zomato. UBS says that in the online food delivery (OFD) segment, Swiggy is narrowing the gap with Zomato in terms of margins and scale. Meanwhile, in the quick commerce (q-com) space, Swiggy has shown encouraging signs but still has areas for improvement.

Bear Case: Some analysts suggest that Swiggy has a significant growth runway ahead, though its journey to profitability may be challenging and uneven.

LT Foods (Rs 362, 2.07%)

Expands presence in Saudi Arabia's $2 billion rice market

Bull case: LT Foods' strategic investment in Saudi Arabia, backed by SALIC as a shareholder, positions the company for significant growth in one of the world's largest rice import markets. The planned SAR 185 million investment in infrastructure and the establishment of local manufacturing facilities could drive efficiencies, boost revenues to the targeted SAR 435 million, and strengthen its presence in the region over the next five years.

Bear case: The ambitious growth plans in Saudi Arabia face potential challenges such as high competition, regulatory hurdles, and execution risks. Any delays in setting up local manufacturing or unforeseen market dynamics could impact LT Foods' ability to achieve its revenue goals and dilute the expected returns on its investments.