WEEKLY TRENDSETTER (AUG 7TH,2021)
| 2021 | JULY 30 | AUG 6 | Ch % |
| NIFTY | 15763 | 16238 | 3.01 |
| BANK NIFTY | 34584 | 35809 | 3.54 |
| USD/INR | 74.34 | 74.11 | -0.31 |
MARKET REVIEW –The market began the week on a fine fettle and finally the 16000 level on Nifty was cleared. The rise was fairly broad-based though for once the mid cap and small caps took a breather and the large caps led from the front.
BACK TO RESULTS (JUNE QTR)
With the mid-cap and small cap witnessing a great rally time to catch up on the results which will give cues on moves ahead! Broadly results should be seen sequentially rather than y-o-y as the June ,20 quarter was a wash out for most companies as it was the first Covid affected quarter.
Rs in cr, Bracket indicates ch in % against March,21 quarter
| Company | Revenue | Net profit |
| Varun Beverages | 2483(+10.8) | 319(+133) |
| JSW Energy | 1727(+10) | 205(+107) |
| Adani Green | 977(-0.2) | 219(+111) |
| IPCA Lab | 1566(+40) | 309(+89) |
Varun Beverages(773) –The company is the 2nd largest franchisee in the world outside US of carbonated and non-carbonated drinks sold under trademarks owned by PepsiCo.It has 30 manufacturing plants in India and 6 in other Asian countries.In addition, it has set up backward integration facilities for production of preforms, crowns, corrugated boxes, plastic crates and shrink-wrap films.The company has seen a sequential growth in topline and bottomline in the last 4 qtrs.EPS stands at 5.50 for the June quarter on an expanded equity base post issue of 1:2 bonus.Clearly a sustainable growth story.
JSW Energy(248)-The big trigger to look forward to is the splitting of its businesses into green and thermal .It expects to draw strategic investors into the renewable segment and this is expected to be rolled out in the next 3-4 months.Falling interest costs and improving margins have seen a boost in the bottomline.
Adani Green(911)-One of the fastest growing companies in the renewable energy space ,it builts and operates grid connected solar and wind farm projects.Its customers include NTPC and several State discoms.Valuation also has run ahead as EPS for the quarter stands at Rs 1.23 which by far the best quarter so far.Interest cover is just 1.25 times which leaves little room for comfort .However,it belongs to a sunrise sector and the company currently is one of the early entrants .
IPCA Labs – Despite a sequential improvement ,the overall performance over the last few quarters has been flat .The company’s products are now exported to over 100 countries across the globe. The international business amounted to 2717 cr in FY20-21 as against 2143 cr in the previous year, a growth of 27%. The company’s formulations manufacturing sites at Silvassa and SEZ Indore and APIs manufacturing site at Ratlam continue to be under US FDA import alert. Any lifting of this ban will be a big boost to the company as it has been under this cloud for over 4 years.
MARKET OUTLOOK.
1.The Asian markets have been mixed and still fully to recover from impact of the crackdown measures announcement by China. The impact on the Indian markets were surprisingly minimal and FII s were huge buyers during the week. It almost appeared the market was sensing something and so it transpired as the unpopular retrospective tax was repealed which would a big relief to foreign investors. The PSU banking pack has been the surprise segment of the June quarter segments as almost all of them posted decent results on the back of write backs and lower provisions. If the suspense over VI is sorted out and doubts over its survival are cleared this could come as another big sentiment boost for PSU banks which are saddled with loans of 25000 cr to the struggling company.
2.The coming week see results from several frontline stocks like BOB, Divis, Power Grid, Cadilla, Ashok Leyland, BPCL, PFC, Auro Pharma and Bata India.
3.A range bound week was expected last week but a sharp breakout past 16000 has now put the market on track to seek higher levels. Some profit booking could be considered at levels of 16350-400.
Results will again be critical for sustenance of the sharp rally in many scrips. Broadly results should be seen sequentially rather than y-o-y as the June ,20 quarter was a wash out for most companies as it was the first Covid affected quarter.
Some technical cues are as follows going by market trends
Scrips to watch out
The mid-cap and small-cap rally have been breathtaking in the last 18 months. However, some caution also needs to be exercised. Several stocks have risen sharply and look overbought. Investors should not get carried away by chasing many of these. Trade but also exercise caution. Couple of technical set-ups are discussed with potential trades for the coming week:-
ACC Ltd(2340)-After a sustained rise over the last few weeks,the scrip is showing signs of weakness .The intermediate top of 2456 is likely to act as a resistance .Selling can be considered around 2400 levels for a possible target of 2000 in the short to medium term .
BEL (175)-The scrip made a high of 191.55 in the July series and since then has gone into a profit -taking mode .Levels of 180-85 would be ideal to sell for a possible target of 170 in the near term.
There is still a lingering fear that the 3rd wave of Covid could be round the corner. Optimism is however prevalent going by crowded tourist spots. Stay positive but take precautions as well so that we live to see better times!
Have a great trading week!
Note: Any queries /clarifications may be addressed to stockmasala@gmail.com .
Krish Subramanyam