Nifty midcap mania!

10th May 2024 – 17th May 2024 | Another week in the markets

S&P 500	Nasdaq	VIX	DJIA	Russell 1000	NYSE
5,303.27	16,685.97	11.99	40,003.59	2,903.33	18,388.26
1.54%	2.11%	-4.46%	1.24%	1.52%	1.25%
Nifty 50	Gold	Silver	Brent crude	USD-INR	EUR-INR
22,466.10	$2,419.80	$31.77	$84	83.30	90.55
1.86%	2.23%	11.90%	1.47%	-0.30%	0.58%

Source: MarketWatch 

Hello Saturday,

This week, Tesla remains silent on India expansion plans, Bandhan Bank’s Q4 net profit plunges by 94% to ₹54 crore and the Nifty Midcap 150 index climbs to a new record high.

• Elon Musk-led Tesla is silent about its India expansion plans, and is yet to communicate its roadmap to the Indian government on the anticipated setting up of new manufacturing facilities under the newly proposed EV policy.
• Bandhan Bank’s Q4 results suffered a drastic drubbing as Y-o-Y net profit of Q4 plummeted to ₹54.6 crore compared to ₹808.3 crore 
• The Nifty Midcap 150 index hit a new high of 19,222.60 on Friday powered by strong demand for Dixon Technologies (India), Endurance Technologies, Solar Industries and other stocks. 
• Tyre makers Ceat and Apollo hike prices as input costs keep surging

Taking stock | Mum’s the word for Tesla! | Bandhan Bank’s bummer! | Midcap mania! | Tyre troubles! | Invest wisely | Another week in the markets

Taking stock

The Dow Jones closed above the 40,000 mark for the first time on Friday. Goldman Sachs, Microsoft, UnitedHealth Group and Caterpillar contributed to its growth from the 30,000 level. The S&P 500 logged a weekly gain of 1.5%, while the Nasdaq moved up by 2.1%. Renewed hopes that the Federal Reserve will slash interest rates later this year have ignited another rally in the markets.

Mum’s the word for Tesla! 

After much fanfare and alluring promises of investing in India, Tesla has gone on the back foot and is keeping mum about its future plans in the country.

In April, Tesla CEO Elon Musk tweeted that he was looking forward to his India visit, and was keen on meeting the Indian Prime Minister. However, his scheduled visit to India on April 21-22 was canned at the last moment on account of “very heavy Tesla obligations,”

Back in July last year, Musk had met Indian Prime Minister Narendra Modi in the US. Then, Musk said that he plans on visiting India in 2024, and confirmed that Tesla will make a foray into the Indian automotive market.

His statements fanned hopes that Tesla’s entry into the Indian automotive segment will yield investment inflows worth billions of dollars, alongside the setting up of manufacturing units. Musk had also demanded that import duties should be reduced in India enabling Tesla to sell cars in the country. His proposed visit to India came after the government unveiled a new electric vehicle policy, where import duty concessions will be provided to companies setting up manufacturing units comprising a minimum investment of $500 million.

As per the policy, companies that do abide by the $500 million investment norm were allowed to import a limited number of cars at lower customs/ import duty of 15% on vehicles priced above $35,000. This relief would be available to companies for five years from the date of issuance of the approval letter by the Indian government.

Currently, cars imported as completely built units or CBUs attract customs duties ranging from 70% to 100%, after considering the engine size, cost, insurance and freight value.

Market grapevine suggests that Musk was also eyeing an entry into the satellite internet business alongside the automotive segment. 

Bandhan Bank’s bummer!

Elevated provisions and written-off bad loans triggered a massive drubbing in net profit in  Q4FY24 for Bandhan Bank. The net profit tumbled from ₹808.3 crore in Q4FY23 to ₹54.6 crore in Q4FY24. Meanwhile, the Net Interest Income (NII) expanded by 16% to ₹2,866 crore compared to ₹2,471 crore as reported in the same quarter of the previous year.  

Bandhan Bank has recommended a dividend of 15% pegged at ₹1.5 per equity share for FY24.

“The board has also recommended a dividend of Rs. 1.50 per equity share having a face value of Rs. 10 each (i.e., 15 per cent) from the profits of the bank for the financial year ended March 31, 2024, subject to approval of shareholders at the bank’s ensuing Annual General Meeting (‘AGM’),” said Bandhan Bank in a regulatory filing to the stock exchanges. 

Much to the dismay of Bandhan Bank investors, provisions and contingencies of the bank leapfrogged from ₹735 crore in the year-ago period to ₹1,774 crore in the last quarter. In the January -March quarter alone, the bank wrote off bad loans worth ₹3,850 crore. Bandhan Bank’s Gross Non-Performing Assets ratio, a metric that measures the quantum of loans that have gone bad out of the total loans disbursed, improved from 7.02% to 3.84% as of March-end. 

Bandhan Bank will also witness a key change in leadership as Managing Director and Chief Executive Chandra Shekhar Ghosh is set to retire on July 9, after helming the bank for close to a decade.

Source: Google Finance

Midcap mania!

The Nifty Midcap 150 climbed to new record highs of 19,222.60 on Friday powered by greater demand for shares of companies like Mazgaon Dock Shipbuilders, JSW Infrastructure, Container Corporation of India, Dixon Technologies, Endurance Technologies and Solar Industries.

These select few stocks have rallied by over 10% after they delivered strong numbers for Q4FY24. 

In the past six trading days, the Nifty Midcap 150 index has surged ahead 5.4% compared to the Nifty 50 which moved up 2.4% only. The midcap index also managed to surpass its previous record of 19,064, which it touched on May 3. 

Market experts indicate that the midcap index is performing well given the expectation that the incumbent government is likely to surpass its 2019 tally. 

In the Nifty Midcap 150 index, Dixon Technologies hit a new record of ₹9,062 per share. The stock surged over 10% after the company entered into a MoU with Acerpure to manufacture several consumer appliance products.

Shares of Endurance Technologies also raced ahead to ₹2,315.60 after the company reported a solid 54% net profit jump to ₹210.2 crore in Q4FY24 compared to ₹136.5 crore in the same quarter in the previous year.

Tyre troubles!

Tyre companies are finding themselves boxed into a corner.

Leapfrogging rubber prices — cost jumped from ₹150 to ₹180 in the last five months — coupled with a gradual and persistent weakening of the Indian rupee against the dollar are forcing tyre companies like Ceat and Apollo to pass on the increased costs to the customer.

It doesn’t help the cause of tyre manufacturers that crude derivatives like synthetic rubber and nylon fabric prices have also witnessed substantial escalations. Exacerbating the pricing situation further for the companies is the rapidly escalating cost of crude oil, which has hovered in the range of $88 to $90 in the past three months. The jump in crude oil prices has further crimped the profitability margins of tyre companies.

Apollo Tyres has announced a 3% hike in the replacement market in this quarter. The move is aimed at reducing the impact of increased prices on the company’s profitability.

Ceat management also expects raw material costs to go up in Q1FY25 by 4-5% compared to the previous quarter. 

“We have to mitigate this increase in raw material costs through progressive pricing. That’s the way we have to manage inventory strategic buying. However, these measures will have their limitations,” Kumar Subbiah, Chief Financial Officer, Ceat said.

Invest wisely 

Investing intelligently requires finely cultivated research skills, the inclination to burn the midnight oil studying financial statements of companies, and the academic prowess to sift the great companies from the good, and good companies from the bad. However, possessing all these qualities, by itself, is no guarantee of stellar returns. In addition to these qualities, one must also have the appetite to absorb market disturbances and volatility. For new and inexperienced investors, this is a tall order. That is where the Appreciate app can be of great help to you. With our deep troves of market intelligence and tested academic rigour, we can help young investors navigate the ups and downs of the global markets with ease and quiet confidence.

Warm regards,
Another week
in the markets