The Nifty IT index has been a surprise gainer post elections, climbing 15 percent even as some of the other fancied names appear to be losing steam.
The current rally in the information technology space is attributed to three key factors: an overwhelmingly positive set of numbers from the Nifty 50 IT majors, TCS, Infosys and HCLTech; expectations of a rate-cut from the US Federal Reserve starting as early as September; and market players pooling their money into the tech space as a ‘defensive’ play, following the surprising election verdict.
Of course, the irrational exuberance in the markets could be considered a fourth factor.
The widely held view is that the upcoming Budget could have a welfarist slant, which could come at the expense of higher allocations towards capex, infrastructure and other growth measures. Some even fear some tinkering with the long term capital gains structure.
That is causing a section of the market to move some of their profits into defensive plays, such as IT, pharma and FMCG. As Street darlings such as PSUs, defense and railway stocks faltered in trade on July 18, the Nifty IT jumped over two percent.
Cello World (Rs 972, -1.85%)
Mirae Asset initiates 'buy' coverage
Bull case: Company to benefit from capacity utilisation of opalware and glassware, and distribution expansion of writing instruments. Funds raised from the QIP likely to be used for acquisitions.
Bear case: Stock expensive at 65 times trailing earnings. Changes in customer preferences and volatility in raw material prices could hit profits.
LTIMindtree (Rs 5,756, +3.5%)
Reported first quarter numbers
Bull case: Most encouraging management commentary among peers so far, noted MOFSL. Green shoots of recovery in BFSI and Communications, Media, and Technology (CMT) verticals. Data modernisation to lead next leg of growth.
Bear case: Despite signs of recovery, margin pressure continues and this is likely to persist through FY25, notes Nomura
Bajaj Auto (Rs 9,635, -0.9%)
Shares slipped after brokerages issued bearish calls
Bear Case: Bajaj Auto's two-wheeler (2W) market share is slipping despite the launch of multiple new models. The company's monthly sales in Nigeria, which typically hover around 50,000 units, are 70 percent below the benchmark.
Bull Case: Bajaj Auto's popular motorcycle Pulsar also retained its double-digit growth trajectory, aided by a premiumisation thrust. The company said that this motorcycle witnessed "3X growth" over the rest of the industry on sports motorcycles, buoyed by product upgrades over time.
Eicher Motors (Rs 4,928, flat)
Launched Royal Enfield Guerrilla 450 at starting price of Rs 2.39 lakh
Bull Case: Royal Enfield leads the premium motorcycle market with a 29.5 percent share. Dominates the >250cc segment with an 88.3 percent share in FY24. New model could support export volumes, aiding in revenue and profitability.
Bear Case: Despite the new launch, overall growth for Royal Enfield is expected to remain stagnant. The segment above 400cc has seen limited market share increase due to higher prices and difficulty in traffic due to overheating issues. Royal Enfield is losing market share as competitors continue to scale up.
Justdial (Rs 1,242, +20%)
Reports highest-ever quarterly revenue and net profit, marking 13.6 percent and 69.3 percent YoY growth, respectively for Q1FY25
Bull Case: Share of revenues from tier 2 and tier 3 cities on the rise, notes ICICI Direct. Company has guided for 15 percent revenue growth this year, driven by volume growth and price hikes. Automation to reduce manpower costs.
Bear Case: Faces risks of losing market share to specialized vertical classified platforms, potential pricing erosion in smaller cities, increased advertising costs impacting margins, and challenges in effectively implementing new strategic initiatives.
(With inputs from Neeshita, Harshita, Lovisha, Veer, Vaibhavi)
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