Short Call | Bulls could be on backfoot, Paytm, Voltas, Cochin Shipyard, Tata Motors in focus

Bulls could be in for a rough ride today.

"The strength of our economy is that it is dynamic and always adapting to changing conditions. That's our advantage in the world." - Peter Lynch

Bulls could be in for a rough ride today. The US Federal Reserve has reiterated that it is in no hurry to cut rates, and the possibility of one coming through in March looks just about zero. This means that a rate cut by the RBI too is most likely to be delayed. Not that interest rates are a deal-breaker for the Indian market, but stock market loves it when the cost of funds goes down.

The RBI strictures against Paytm is likely to dampen sentiment for the financial sector, which even otherwise has been under pressure of late. It is not a pretty picture out there for now. Banks are struggling to sustain net interest margins, credit growth is decent but not spectacular, the RBI is closely watching the unsecured loans segment, which has been a big driver of growth for many banks and NBFCs. The mood for one of the most loved sectors has suddenly changed over the last month.

One97 Communications (Rs 761, unchanged)

Stock is expected to open sharply lower as RBI has dealt a huge blow to Paytm Payment Bank by asking it not onboard new customers.

Bull argument: Given first mover advantage, company a leading fintech

beneficiary of rising credit demand in India. Company has been guiding towards profitability. Mutual funds have been increasing stake.

Bear argument: Wallets and Fastag are high-margin businesses. In addition to that, persistent regulatory challenges could result in loss of faith and merchants could stop lending from the fintech, believe brokerages. Lending makes for 20 percent of the company's revenue.

Cochin Shipyard (Rs 910, + 3.6%)

The company reported a strong set of Q3 numbers

Bull argument: Healthy Q3 earnings and growing order book along with demand for the sector could boost the stock.

Bear argument: Valuations looking stretched as the stock has rallied 4.5x since April 2023. Order book is strong, but a lot will depend on execution

Tata Motors (Rs 884.8, +3.02)

Shares hit an all-time high ahead of its Q3 results announcement on February 2

Bull argument: Analysts expect the company to post 20 percent plus revenue growth in the quarter on the back of strong JLR volumes.

Bear argument: The company lost market share in the commercial vehicles segment. Competition hotting up in the electric vehicle segment. Dealers protesting that car markers are pushing more vehicles on to them than there is demand.

Dr Reddy's Laboratories (Rs 6,120, +4.78%)

The stock jumped after company recorded highest-ever quarterly revenue in December quarter.

Bull argument: The company is planning to launch at least 30 products in the US in FY24. Strategy of investing in various businesses may provide growth in the long term.

Bear argument: CLSA believes the strong dependence on Revlimid, which will go off-patent in January 2026, will keep overall revenue growth tepid over the medium term. The company has received a serious nature of 10 observations for the Telangana unit, which may lead to warning letter.

Voltas (Rs 1092.75, +7.46%)

Net loss narrowed to Rs 27 crore in the December quarter

Bull argument: Overall volumes grew by 22 percent, room air-conditioner (RAC) was even higher at 27 percent. Company market leader both in split and window air-conditioners with a YTD (Year to Date) market share of 19% as of December 2023.

Bear argument: The company reported a loss at the operating level. Net profit and profit margins have been falling four quarters in a row.

With inputs from Shailaja, Ananthu, Anishaa, Yash and Srushti