Broad Strokes, July 3, 2024

Sensex hits record high at 80,000

📈 Sensex Hits Record High of 80,000: The Sensex reached a new milestone of 80,000, with outperformers including M&M, Power Grid, and 11 other stocks. This marks the fastest 10,000-point rally in its history.

📊 Investment Advice and Market Drivers: Nilesh Shah recommends a long-term perspective and proper asset allocation. The rally was driven by banks like HDFC Bank, ICICI Bank, Axis Bank, and SBI, alongside outperformers such as Power Grid Corporation, Adani Ports, Bharti Airtel, and Tata Motors.

🔍 Importance of Long-term Horizon and Upcoming Influences: The journey to 80,000 emphasizes the value of a long-term horizon and asset allocation, as noted by experts like Nilesh Shah and Shrikant Chouhan. The upcoming earnings season and budget are expected to influence market movements, with predictions focusing on fiscal prudence and capital inflows.

Sebi’s new diktat impacts brokerage revenue model

📉 Impact on Brokerage Revenue Models: Sebi’s new diktat, highlighted by Ajay Kejriwal, CEO of Choice Equity Broking, could reduce brokerage profits by 2% to 30%. The directive eliminates preferential rates and mandates uniform charges, potentially adjusting brokerage models and eroding around Rs 2,000 crore from discount brokers’ income.

Share Declines and Client Impact: Firms like IIFL Securities and Motilal Oswal Financial Services experienced share declines. The regulatory order may force discount brokerages to revise their fee structures, affecting profitability and market dynamics.

🔍 Enhanced Surveillance and Control: Brokers must now report suspicious activities biannually under Sebi’s amended PFUTP rules, effective from June 27, aiming to enhance surveillance and control systems within the industry.

HDFC Bank MSCI weight increase, FII stake falls

📈 Potential Turnaround for HDFC Bank: HDFC Bank is expected to outperform as its MSCI weight increases. With foreign institutional investors’ stake falling below 55% in the June quarter, analysts predict a doubling of the bank’s weighting in the MSCI Standard index during the upcoming reshuffle.

💰 Significant Inflows and Price Target: The anticipated MSCI weight increase could attract inflows of around $3.2 billion to $4 billion, potentially pushing the stock price towards Rs 1,900. Mutual funds have been increasing their stakes, with shares gaining around 10% in the last month.

📊 Positive Technical Outlook and Market Sentiment: The technical outlook is positive, with the stock forming a Higher High, Higher Low pattern and showing momentum towards higher levels. Overall, market sentiment is bullish on HDFC Bank’s prospects following these developments.

Renewable Energy Stocks

📈 Renewable Energy Stocks Surge: Renewable energy stocks, particularly IREDA, have seen a significant surge, with IREDA’s stock jumping 107.50% this year, doubling investors’ money. The stock hit an all-time high of Rs 218.85 on the NSE, driven by investor interest and block deals worth Rs 100 crore and Rs 189.4 crore.

💰 IREDA’s Financing Plans: IREDA’s CMD announced plans for a Follow-on Public Offer (FPO) to raise between Rs 4,000 crore to Rs 5,000 crore to enhance financing for green energy projects. The company raised Rs 1,500 crore through bond issuance, oversubscribed 2.65 times, supporting India’s goal of 500 GW non-fossil fuel capacity by 2030.

🔋 Positive Outlook: With the government’s focus on renewable energy, analysts are optimistic about IREDA’s long-term growth prospects, expecting healthy business growth and a potential target price of Rs 250.

Emcure Pharma IPO subscription reaches 75%

📈 Emcure Pharma’s IPO Subscription: Emcure Pharma’s IPO reached 75% subscription on the first day, with strong participation from employees and non-institutional investors. The company aims to raise Rs 1,952.03 crore through shares priced between Rs 960-1,008 each.

💼 Financial Performance and Investor Interest: Emcure Pharma, ranked 13th in domestic sales in India, reported a net profit of Rs 527.58 crore for FY24. Anchor investors like Abu Dhabi Investment Authority and Goldman Sachs have shown strong interest, contributing to a positive outlook.

🌟 Brokerages’ Recommendations and Future Prospects: Brokerages are optimistic about Emcure Pharma’s growth, recommending a ‘Subscribe’ or ‘Subscribe for long term’ rating. The company’s focus on chronic therapeutic areas and plans for debt reduction post-IPO are expected to enhance future profitability.

Federal Bank and YES Bank stock surge in Q1.

📈 Federal Bank’s Strong Performance: Federal Bank’s stock hit a 52-week high, driven by a 20% increase in deposits and gross advances. Total deposits rose 19.6% to Rs 2.66 lakh crore, while gross advances surged 20% to Rs 2.24 lakh crore. The retail credit book increased by 25%, and the wholesale credit book grew by 14%.

📈 YES Bank’s Growth and Concerns: YES Bank saw a 14.8% YoY increase in loans and advances to Rs 2.3 lakh crore, with deposits growing by 20.8% YoY to Rs 2.64 lakh crore. Despite this strong growth, analysts at ICICI Securities expressed concerns about profitability due to the unproductive rural infrastructure development fund.

🏦 Banking Sector Outlook: The banking sector is expected to experience stable loan growth in Q1, with varying impacts on net interest margins for different banks.

Global Stock Markets Rise on Rate Cut Expectations

📈 US Stock Market Highs: US stocks reached record highs, with the S&P 500 and Nasdaq hitting all-time highs following Federal Reserve Chair Jerome Powell’s comments on inflation and labor market strength.

📉 European Market Concerns: European bourses retreated, with markets in Paris and Frankfurt declining amid concerns about the upcoming French elections and potential economic repercussions if the far right wins in France.

🌏 Mixed Performance in Global Markets: Asian markets closed higher, with Tokyo’s Nikkei surpassing 40,000 points for the first time since April. Investors are focused on upcoming elections in France and the UK, while closely monitoring central bank policies and economic data for further market direction.

Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) stocks surge

📈 Surge in PFC and REC Stocks: Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) stocks surged up to 4% following a ‘buy’ rating from Bernstein, with potential upsides of 23% in power financier stocks.

💹 Impressive Returns and Analyst Endorsement: REC has delivered impressive returns of 224% in one year, while PFC has gained around 186%. Bernstein highlighted both companies as preferred plays in the power cycle due to their superior return on equity (RoEs) and growth rates compared to industry peers.

📊 Positive Outlook and Government Support: Analysts believe that the government’s increased allocation for power generation and distribution in the upcoming Budget, along with potential relief from stringent norms, could further benefit PFC and REC. The perceived risk of non-performing assets (NPAs) is lower this cycle, and both stocks are trading at comparatively lower valuations within the power sector.

Remarkable surge - Shakti Pumps (India)

🚀 Remarkable Surge in Shakti Pumps (India) Stock: The smallcap stock of Shakti Pumps (India) has surged 251% from its QIP price in less than four months, hitting a new high and gaining 27% in the past week alone. The company has rebounded 81% from its previous month’s low and is currently trading significantly higher than its QIP price.

🌞 Strong Market Position in Solar Pumps: The surge in stock price is attributed to Shakti Pumps’ strong market position in solar pumps under the PM-KUSUM scheme and its global footprint. The company’s robust order book is a key driver of its growth.

📊 Strategic Deployment of QIP Funds: With strategic deployment of funds raised through QIP, Shakti Pumps is poised for further growth in the solar pumps industry, enhancing its market prospects and financial stability.