Broad Strokes, July 25, 2024

Nasdaq 100 Faces $1 Trillion Rout

• The Nasdaq 100 experienced a $1 trillion rout as investor concerns over AI investments led to a 3% drop in the index, the worst since October 2022.
• Alphabet Inc.’s earnings report, showing high capital expenses, impacted tech companies like Nvidia, Broadcom, and Arm Holdings.
• Concerns over an AI bubble and historically high tech stock valuations contributed to market turmoil and fears of a potential burst.

Global Market Sell-Off Affects Nifty and Sensex

• Indian indices were impacted by a global market sell-off, with GIFT Nifty futures plunging over 200 points amid significant losses in Asian markets following a sharp decline on Wall Street.
• The S&P 500 and Nasdaq recorded their steepest drops since 2022, driven by tech share sell-offs, including notable declines in Nvidia, Meta Platforms, and Alphabet.
• Additionally, Tesla shares plummeted due to weaker-than-expected earnings, and private equity firm EQT is set to sell a stake in RBL Bank through a block deal, adding to market uncertainties.

Tata Motors Stock Hits Record High

• Tata Motors’ stock surged to a record high, driven by a bullish breakout and strong technical indicators, prompting Nomura to upgrade it to a ‘Buy’ rating with a 26% upside target.
• The company’s transition from premium to luxury vehicles, particularly at Jaguar Land Rover (JLR), is seen as a key factor for future growth.
• Analysts anticipate robust demand for medium and heavy commercial vehicles in India, stable margins, and potential earnings growth supported by higher average selling prices and margins at JLR.

Bank Earnings Performance in Q1 FY25

• Axis Bank’s Q1 FY25 earnings report revealed a disappointing performance with a potential RoA compression, leading to a 6% drop in the stock price.
• Federal Bank showcased a solid Q1 performance, hinting at a gradual RoA improvement and potential valuation rerating.
• ICICI Bank and IndusInd Bank are expected to show profit growth, with varying concerns about margin pressure and credit costs impacting their outlooks.

Midcap and Smallcap Stocks Rally Post Budget 2024

• Midcap and smallcap stocks have rallied post Budget 2024, with brokerages expressing bullish sentiments despite tax hikes on gains in the stock market.
• The budget’s focus on sectors like housing, cement, and solar energy is expected to benefit specific companies, with a positive outlook on FMCG, IT, and consumer stocks.
• Smallcap stocks have doubled investors’ wealth in FY25, backed by over 20 mutual fund schemes, indicating strong momentum and institutional investor confidence.

IPOs by Clinitech Laboratory and Akums Drugs

• Akums Drugs and Pharmaceuticals has launched its Rs 1,857 crore IPO, open from July 30 to August 1, with a price band of Rs 646-679 per share.
• The IPO aims to utilize proceeds for debt repayment, working capital, and growth initiatives, with a strong market presence in the CDMO sector.
• Akums’ IPO listing on August 6 is anticipated to draw significant market attention, supported by book-running lead managers Axis Capital, ICICI Securities, Citigroup Global Markets India, and Ambit.

Stocks in Focus After Budget 2024

• Brokerages are optimistic about sectors like FMCG, consumer durables, real estate, BFSI, and IT services due to the budget’s focus on demand stimulus and employment generation.
• The budget’s emphasis on rural development, affordable housing, and tax cuts is expected to boost consumer demand, benefiting companies in these sectors.
• Stocks like Aptus Value Housing Finance, Dabur India, HDFC Bank, Hero MotoCorp, Hindustan Unilever, IndusInd Bank, InterGlobe Aviation, Kajaria Ceramics, Kalyan Jewellers, and Titan Company are highlighted as potential beneficiaries.

Energy Sector Earnings Performance: IEX, Adani Green Energy

• Indian Energy Exchange (IEX) reported a 27% surge in net profit for Q1, reaching Rs 96.44 crore, driven by higher revenues amidst increased electricity demand.
• Adani Green Energy saw a remarkable 95% rise in net profit for the June 2024 quarter, reaching Rs 629 crore, attributed to capacity additions.
• Indraprastha Gas Limited (IGL) witnessed a 3.42% decline in share price after reporting an 8.63% drop in standalone net profit for Q1FY25, impacted by increased expenses despite higher revenue.

Budget Boosts FMCG, IT, Consumer Stocks; ITC, Titan in Focus

• The Union Budget for 2024-25 is expected to benefit sectors like FMCG, consumer durables, real estate, BFSI, and IT services, with stock recommendations including ITC and Titan.
• The budget’s focus on demand stimulus and employment generation, such as tax cuts and rural development initiatives, is anticipated to boost consumer demand.
• Companies like Zomato, SBI, DLF, and Tata Power are highlighted as potential beneficiaries, with ITC seeing a stock price surge post-budget and Titan witnessing a significant price increase.

Nestle India Q1 Earnings Miss Street Estimates

• Nestle India’s Q1 earnings fell short of street estimates, with net profit rising 7% to Rs 746 crore but missing analyst expectations.
• Revenue from operations increased by 3.33%, impacted by inflation in raw material prices and lower-than-anticipated volume growth.
• Despite challenges, Nestle India’s management remains optimistic about growth, emphasizing mix and volume-led growth strategies, but the stock price dropped 1.56% post-results.