Short Call | AMC stocks sahi nahin? Bajaj Finance flashes! And, steel bulls, play it cautious

The IPL extravaganza is in full flow and there’s no reason why brokerages can’t have a ball amid the flurry of earnings.

“The difference between playing the stock market and the horses is that one of the horses must win.” — Joey Adams

Lacklustre quarterly numbers from Wipro and Tech Mahindra rounded off what has been a forgettable earnings season for frontline shares. But the picture does not look as bad for the midcap IT names, where there have been a few positive surprises. The popular view was that second line IT names would suffer more than the heavyweights in an uncertain business environment. This shows why making money from stocks is so tough: things frequently go off-script. Like the rally that began at the start of this month and shows no signs of slowing.

Kohli + Dravid = Bajaj?

The IPL extravaganza is in full flow and there’s no reason why brokerages can’t have a ball amid the flurry of earnings. Maybe that’s the reason CLSA chose a sporty phrase to describe Bajaj Finance’s sparkling Q4 show: ‘Kohli’s aggression, Dravid’s defence’. The consumer lending major really hit it out of the park, with an around 30 percent growth in revenues, net interest income and net profit. To retain this momentum despite a massive size of business is akin to a cricketer having both Inzamam-ul-Haq’s girth and Jonty Rhodes’ agility.

And, now comes the challenge. Will the market be happy with the current pace of growth and lavish the valuations seen two years back? Remember, the stock is still some way off the peak price seen in October 2021. This, despite a significantly improvement in operating performance over the last couple of years. That apart, there are also concerns about intensifying competition and lack of clarity on whether Bajaj Finance will stay an NBFC or decide or take the bank route.

MFs sahi, lekin AMC stocks nahin

It has been a washout earnings season for asset management companies even as the ‘mutual fund sahi hai’ is still finding plenty of takers among retail investors. Investors are not so much worried about whether these companies’ operating performance will improve as much as they are worried which hoop Sebi will ask AMCs to jump through next. This can be seen from the way in which investors continued to shun the HFDC AMC stock, even as the fund reported an improvement in scheme performance and market share, and strong SIP flows. Kotak Institutional Equities could be well speaking for the industry in its post-earnings note on HDFC AMC.

“There is considerable regulatory uncertainty facing the industry, leading to a disconnect between operating trends and stock price performance of AMC stocks. Material downward revision of TER will further hamper operating leverage, whereas any action toward a fair split between mutual funds and distributors will bode well for the sector.”

Labour pangs

So far, the Fed’s biggest headache has been a tight labour market that kept wages high and upset its efforts to tame inflation. But looks like the Fed’s prayers are being answered.

From multiple reports in the Wall Street Journal:

“Lyft Inc.is cutting over 1,000 additional jobs or 26 percent of its staff, following a round of layoffs of 700 people in November. Gap Inc. is eliminating 1,800 jobs as part of a broad restructuring aimed at making the company more nimble and less bureaucratic. Vice Media is restructuring its global news operation, and expects to cut more than 100 jobs as part of the broader reorganization. Dropbox Inc. will cut 500 jobs, about 16% of its workforce, amid slowing growth and an industrywide push toward artificial intelligence.

No China booster

Traders and investors bullish on steel stocks in hope of strong demand from China firing up steel prices may need to rethink their strategy. Iron ore price dipped below $100 a tonne this week for the first time since early December, due to a weaker-than-expected peak construction season in China, reports mining.com.

“President Xi Jinping’s flagship campaign to squeeze debt from the real estate sector has stifled commodities demand, as developers focus on completing existing projects with few new ones in the pipeline. That’s crimped the appetite for iron ore and metals during a period when building sites should be buzzing.”

Waxing Lyrical

It’s earnings season around the world, which means a deluge of data, graphs, corporate speak and semantic obfuscation during concalls. How refreshing, therefore, to come across an exchange worthy of a Virginia Woolf stream-of-consciousness novel.

Questioned by an analyst about why Teleperformance SA is looking to buy Majorel Group Luxemborg SA now instead of last year when the target firm was engaged in M&A discussions, here’s what the French company’s 70-year-old boss Daniel Ernest Henri Julien observed:

“So really, the beauty of the life and again, I'm sorry, I'm almost a old man. And when I say almost, it's because [indiscernible] … What? You are a bachelor. You decide to be a bachelor because you prefer to have different dates and so on. And one day you are introduced to somebody who match exactly your values, your sense of purpose, your vision. Maybe you could have met this person a year ago, two years before. Maybe you were ready. Maybe you were not ready. Maybe you were focused on something else. This is the life. This is the beauty of the life. And even with the smartest computer, we are never going to change the fact that the life is also made by the fact to be with the right people at the right time, with the common and right expectations. I know that I don't answer to your question was why it was not last year, but because last year, I was doing something else; that's it.”

Abhishek Mukherjee contributed to this piece