Auto, Finance Ride On Demand Spurt; Tech, Metal Stocks Reel Under Slowdown Scare

Financial and auto stocks will remain at the center of the Indian stock market as the rate hike regime is driven by demand for the financial and auto sectors and eases pressure on the supply chain.

Indian automakers have launched several models in ICE (internal combustion engine) and EV (electric vehicle) segments, which have been well received and received huge orders.

It is therefore not surprising that companies in these two sectors have received numerous updates from sell-side analysts over the past year. This is confirmed by data from Bloomberg.

Bloomberg regularly follows the recommendations of sell-side analysts. But sharing reports and recommendations is voluntary; In this regard, it does not fully represent the market.

Most Updates Last Year

Like every August, Eicher Motors, maker of the iconic Royal Enfield motorcycle, continues to attract buyers and experts to its shelves. Its latest launches have been successful and well received and its older models are still in high demand. Volvo's joint venture, Volvo Echer Commercial Vehicles, has performed well and demand for commercial vehicles and buses in the country is now on the rise.

As a result, no less than 35 analysts and brokers have a "buy" recommendation on the stock at the end of September 2022, compared to 18 "buys" a year ago.

HDFC Life Insurance Company, one of India's largest private life insurance companies, ranked second among the best performing stocks last year. Annual Premium Equity (APE) and New Business Value (NBV) are showing significant growth and using Exide Life Insurance offers additional benefits. As a result, 32 analysts support buying this company, up from 27 a year ago.

FMCG and cigarette giant ITC is facing a strong surge across all of its business units. "The company's key growth drivers are de-risking its business model by reducing reliance on its core cigarette business and increasing its FMCG business; ITC Infotech shows significant potential; related incentives to the PLI to develop agribusiness and boost exports, as well as a higher dividend and reasonable prices compared to their peers," Axis Securities said in a statement. "Compared to 28 years ago.

As far as cars are concerned, two other big companies in the sector - Tata Motors and Maruti Suzuki - also received the highest purchase offers. Reliance Industries, India's largest company by market capitalization, is ranked fifth and sixth along with jeweler Titan Company Limited.

Most updates in the last quarter

Reliance Industries got several updates in the last quarter thanks to its growth in renewable energy, 5G and retail. Motilal Oswal Financial Services analysts said, “The pace of industry growth and improved profitability profile will drive RIL's revenue growth of 25% and EBITDA of 32% in FY23.” However, they do not foresee any additional growth due to capital investments in 5G, new energy sources and other sectors.

According to Matilal Aswal's note, "In the next two to three years, RIL could create the next engine of growth, but this could put pressure on production ratios in the short term."

Reliance achieved 7.2% renewal during the quarter, followed by ITC Ltd and HDFC Life Insurance with 5.6% and 5.2% renewal respectively.

The other two companies that improved significantly during the quarter were Eicher Motors and Titan Company Limited.

“Titan is well positioned to benefit from long-term growth opportunities through network expansion, regional development and unique strengths in jewelry sharing. Global strategy for jewelry, watches and eyewear; new Growth engines such as Caratlane, Titan Eye+, Taneira and wearables such as smartwatches, headphones and truly wireless headphones have entered high-growth segments, research firm Prabhudas Leeladar said in the report. .

Most updates in the last month

HDFC Life Insurance posted the highest growth rate last month, up 5.9% from the previous month. It was followed by Reliance Industries and Eicher Motors each registering a 2.1% growth in August 2022. Bajaj Finance, Tata Consumer Products followed Eicher Motors with an increase of almost 1% in the purchase price.

According to analysts at Inred Equities, "Bajj Finance's digital transformation translates into adding new customers and reducing lead times to near-zero manual intervention, resulting in further efficiency improvements operational and the cost of borrowing". Low (from ~2%), which results in a high coefficient of performance.

The biggest discount of the year

As the global economy prepares to freeze, their commodity price dream comes to an end. Experts are particularly concerned about the recovery in demand in the steel sector and the recovery in China will be another negative point for Indian steelmakers. As a result, JSW Steel topped last year's list of best cuts. The number of "declines" increased by 35%, while the number of purchase requests fell by 14.7% at Tata Steel, India's largest steelmaker.

At the same time, uncertainty surrounding global economic growth has clouded the outlook for Indian IT companies. Indian tech giants including HCL Technologies, Tech Mahindra and Tata Consultancy Services fell 29.8%, 18.4% and 16% respectively.

Other contributors to this list were Bharat Petroleum, Britannia and ONGC.

Quarterly discount

Britain topped the big hitters last quarter, with ratings up 16.7%. The ask price for the stock fell to 20 from 26 three months ago. While the company has raised prices to offset commodity prices, "accelerating volume growth coupled with improved margins will be a challenge in the current difficult environment," HDFC Securities said in a statement. .

Second on the list is the government NGO, whose rating fell 15% quarter-on-quarter, from 23 "buys" a quarter ago to 18 today. In the last quarter, the number of calls for this "Gateway" company increased from 3 to 7. The foreign division of ONGC Videsh Ltd is facing problems due to the sanctions imposed on Russia. It owns three properties in Russia: Sakhalin (20% of the shares), JSC "Vankomefti" (26% of the shares) and Imperial Energy (100% subsidiary).

"The ongoing war between Russia and Ukraine has resulted in supply and demand constraints and has affected the operations of ONGC Videsh, our foreign subsidiary in Russia, and therefore, based on a conservative view , we are lowering our recommendation on the stock to “Hold,” the message read. Geogit Research Report on Retail Equity.

India's IT sector is bracing for a reduction in IT spending expected by global businesses amid rising interest rates and increasing monetary tightening. Tech Mahindra, a top five IT services provider, is expected to put pressure on its margins in the short to medium term, prompting to 'cut' and 'hold' ratings, while 'buy' calls have declined . 14 percent. In the last quarter.

Decreasing month by month

Along with energy and tech stocks that fell sharply last month, there are some surprising inclusions at the top of the list. Two-wheeler giant Bajaj Autos rose more than 3.7% last month. The company is facing strong headwinds in its main African export market, and the sharp devaluation of the naira has severely dampened demand. Africa represents 53% of exports.

"The government's proposal to introduce a total ban on motorcycles in Nigeria is difficult to implement but remains a serious challenge," HDFC Securities Institutional Research said in a statement.

BPCL and JSW Steel added more than 3% to the "down" number last month, while IT firm Infosys Ltd joined the list at number four. It saw the call "Buy" demoted to "Sell" while the "Hold" on the headline remained unchanged.

Apart from the Infosys technology pack, Tech Mahindra, Tata Consultancy Services and HCL Technologies have seen their buy calls turn into sell calls.

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