Short Call | HNIs, operators stay on the sidelines; Petronet, Railtel, Prince Pipes, CG Power in focus

With inflows into mutual funds strong, the fund houses have little choice but to plough the money back into shares.

“Investing is not a discipline based on absolutes or precise mathematics. There simply aren't enough data points available to work out the exact odds.” - Mohnish Pabrai

Strong comeback by the market on Thursday, but one that looks to have been driven mainly by short-covering of positions. Foreign institutional investors are not biting yet, and domestic institutions continue to do the heavy lifting.

With inflows into mutual funds strong, the fund houses have little choice but to plough the money back into shares. Not so the case with high networth individuals and market operators who have played a key role in the market rally over the last year. Since they play with their own money and are answerable only to themselves, there is no compulsion to buy when the general mood in the market is cautious. They are OK missing out on a 5 percent upside, but are loathe to lose 20-30 percent, which seems to be the bigger probability at the moment.

Railtel Corp (Rs 358, +2.2%)

The company has bagged a work order worth Rs 99 crore from the Bihar Education Project Council.

Bull argument: The company has been steadily winning orders through the year. According to CMD Sanjay Kumar, the order book stands at Rs 4,900 crore, 40 percent of which will be converted into revenues in FY25.

Bear argument: The railway sector is over-owned by retail investors. The stock has fallen over 25 percent from its peak. Technical factors could keep the price in check near term.

Petronet LNG (Rs 259, -1.2%)

The stock underperformed in a rising market on Thursday.

Bull argument: Rising gas consumption in the country, better capacity utilisation at its key LNG terminals, and expectations that demand will pick up as global LNG prices stabilise.

Bear argument: Citi has rated the stock 'sell', citing increased competition from HPCL’s greenfield Chhara LNG terminal which is close to becoming

operational, and also from GAIL which is close to completing its debottlenecking at its Dabhol terminal. Spot LNG prices in Asia have been steadily rising.

IRB Infrastructure (Rs 58.9, +9.18%)

Kotak Institutional Equities upgraded the rating on IRB Infrastructure and raised the fair value driven by adjustments to traffic estimates for private InvIT assets.

Bull argument: Robust order pipeline, new order wins, and better-than-expected toll growth is set to benefit the company. The Ministry of Road Transport and Highways has amended the model concession agreement for build-operate-transfer and toll-operate-transfer mode of awarding, which bodes well for the company, says Kotak Institutional Equities.

Bear argument: The company has delivered a poor sales growth at 2 percent CAGR in the last five years.

Prince Pipes and Fittings (Rs 544.8, + 2.8%)

The company acquired Rs 55 crore worth assets, including the bathware brand Acquel, from Klaus Waren Fixtures and NM Shah.

Bull argument: According to Nuvama, piping business is expected to see strong volumes due to strong real estate and infrastructure push.

Bear argument: The company lost market share in the last two years due to  ERP implementation and over premiumisation says Nuvama.

CG Power and Industrial Solutions (Rs 544.4, +8.39%)

The stock has been rising steadily over the last one week after subsidiary CG Semi-Private laid the foundation stone for the OSAT facility in Sanand, Gujarat.

Bull argument: The joint venture with Renesas Electronics and Stars Microelectronics will invest Rs 7,600 crore over 5 years and will cater to industries like automotive, consumer, industrial, and 5G. It may open up optionality for large orders, going forward.

Bear argument: The stock is trading at a trailing P/E of 96.3 times. Amit Goel, Co-Founder and Chief Global Strategist at Pace 360 expects a correction in semiconductor stocks as he believes that current valuations are not justified. EBITDA/PAT declined 6 percent/3 percent in Q3FY24 led by drag on OPMs on weak demand for motors led price war in tier 2/3 cities.

Gland Pharma (Rs 1,759.90, 3.5%)

Brokerage Motilal Oswal reiterated its 'buy' call for the stock with a target price of Rs 2,240.

Bull argument: According to the brokerage, they expect the stock to deliver a 20 percent earnings CAGR over FY24-26 on the back of superior performance in core markets and expect earnings growth to improve over the next two years.

Bear argument: Net profit fell around 17 percent in Q3. According to the brokerage, growth was previously impacted excess inventory in the system, financial distress of key customer, Athenex, and the re-prioritization of portfolio strategy by another customer.

With contributions from Ananthu, Anishaa, Yash and Srushti