Stocks to buy: Reliance Power shares have been on an uptrend after the presentation of Budget 2024. On 23rd July 2024, Reliance Power’s share price finished at ₹26.94 per share on the NSE, and since then, it has been hitting a 52-week high regularly. In post-Budget 2024, this Reliance Anil Dhirubhai Ambani Group or Reliance ADAG stock has risen from ₹26.94 to ₹34.54 apiece, logging around 30 percent appreciation in five straight sessions.
According to stock market experts, Reliance Power is now a debt-free company on a standalone basis. The company has repaid its ₹800 crore dues, and the Reliance ADAG company is expected to compete with other private power sector companies in FY25. The Budget 2024 is a growth-oriented budget focusing on power and infrastructure. They said the market expected the budget benefit to trickle down into the company’s balance sheet in FY25, which has fueled buying interest in Reliance Power shares. However, they maintained that after becoming a debt-free company, the company is facing an acute challenge on the order book front, which is expected to become clear in the upcoming quarters of the current fiscal.
Triggers for Reliance Power shares?
Highlighting the factors instrumental in Reliance Power’s share price rally, Avinash Gorakshkar, Head of Research at Profitmart Securities, said, “Reliance Power is no longer a debt-hit company. The company has repaid its ₹800 crore debt and is now a debt-free company on a standalone basis. So, the company can now work on its order book, especially after the Budget 2024, which is a growth-oriented budget. So, the market expects the benefit to be reflected in the company’s order book in FY25. However, it would be interesting to see how much benefit trickles down into the financials and order book of Reliance Power.”
Reliance Power share price target
Speaking on Reliance Power shares, Sumeet Bagadia, Executive Director at Choice Broking, said, “Reliance Power share price is on an uptrend. The stock has made a strong base at ₹32. Reliance Power shareholders are advised to hold the scrip with trailing stop loss at ₹32 for the short-term targets of ₹38 and ₹40 apiece. Fresh investors can also buy Reliance Power shares for the above-mentioned targets, maintaining a strict stop loss at ₹32. One can maintain a buy-on-dips strategy in this Anil Ambani-owned company until the stock price exceeds ₹32.”
Eicher Motors’ share price declined more than 5% on Friday after the Royal Enfield motorcycle manufacturer reported weak sales for July. Eicher Motors shares fell as much as 5.55% to ₹4,692.00 apiece on the BSE.
Royal Enfield motorcycles sales in July 2024 dropped 8% to 67,265 units from 73,117 units sold in the same month last year. This included exports of 6,057 units for the month which fell 14% from 7,055 units, year-on-year (YoY).
Sales of Royal Enfield models with engine capacity up to 350 cc declined 12% to 56,590 units in July 2024 as compared with 64,398 units in July 2023.
However, models with engine capacity exceeding 350 cc witnessed sales growth of 22% to 10,675 units from 8,719 units, YoY.
In its commercial vehicle segment, VE Commercial Vehicles Ltd (VECV), an unlisted subsidiary of Eicher Motors saw an increase in wholesales during July 2024.
Total sales of VECV in July rose 12.7% to 6,622 units from 5,877 units. Total Eicher Trucks and Buses sold during the month increased 12.3% to 6,444 vehicles from 5,736 vehicles, YoY, while the total sales of Volvo Trucks and Buses jumped 26.2% to 178 vehicles from 141 vehicles, YoY.
The Board of Directors of Eicher Motors will meet on August 8 to consider and approve unaudited standalone and consolidated financial results of the company for the first quarter ended June 30, 2024.
In a separate stock exchange filing on Friday, Eicher Motors said that the GST demand it had received earlier has now been revised to 26.97 crore from ₹129.79 crore.
The original GST demand order was received by the company on December 30, 2023, for an aggregate amount of ₹129.79 crore, which includes a tax demand of ₹117.99 crore and a penalty of ₹11.79 crore.
“As a result of the appeal filed by the Company against the above GST demand order, the demand order is now revised from ₹129.79 crores to an aggregate amount of ₹26.97 crores (which includes tax demand of ₹24.52 crores & penalty of ₹2.45 crores),” Eicher Motors said in a regulatory filing.
Based on the company’s assessment, the aforesaid revised demand is not maintainable and the company is evaluating all options including filing an appeal against the order. The company did not envisage any relevant impact on financials, operations, or other activities of the company, it added.
Eicher Motors share price has gained over 14% year-to-date (YTD), while the stock is up more than 41% in the past one year.
At 2:15 pm, Eicher Motors shares were trading 5.04% lower at ₹4,717.80 apiece on the BSE.
Stock market today: On Thursday, August 1, the Indian stock market benchmarks, the Sensex and the Nifty 50, achieved fresh closing highs, marking their fifth consecutive session of gains. This upward momentum was primarily driven by strong performances from index heavyweights HDFC Bank and Reliance Industries.
Sensex hit its fresh all-time high of 82,129.49, and the Nifty 50 made a fresh peak of 25,078.30 during the session.
Eventually, Sensex closed at 81,867.55, up 126 points, or 0.15 percent, while the Nifty 50 ended 60 points, or 0.24 percent, higher at 25,010.90, thus ending at their fresh closing highs.
However, mid and small-cap indices ended with losses due to profit booking amid rising concerns over rich valuations. The BSE Midcap index fell 0.80 percent, while the Smallcap index lost 0.70 percent.
Global cues were mixed. Major European markets fell, reacting to corporate earnings. However, US stock futures were in the green as the US Fed signaled rate cuts could start in September.
Speaking to reporters after the policy decision on July 31, Federal Reserve Chair Jerome Powell said, “The first interest rate cut could come as soon as the Fed’s next rate meeting in September if the data continue to suggest it is on track to meet its twin objectives of tackling inflation and employment.”
“Overnight gains in the US markets and ongoing optimism over the strong corporate earnings aided benchmark indices to scale fresh all-time highs with Nifty clocking the milestone of 25k mark and Sensex entering the 82k zone. However, weak European market cues and mixed Asian indices tempered the domestic market gains at the close,” Prashanth Tapse, Senior VP (Research), Mehta Equities, observed.
“Overall, the trading session was skewed with most of the broader and sectoral indices faltering amid profit-taking whereas metals, oil and gas, and power stocks notched up gains, indicating that investors are now getting into cherry-picking of stocks instead of mounting full-fledged bullish bets,” Tapse said.
Among the 28 stocks that ended in the green in the Nifty 50 index, Power Grid (up 3.82 percent), Coal India (up 3.47 percent), and ONGC (up 2.03 percent) stood at the top.
On the flip side, shares of Mahindra and Mahindra (down 2.78 percent), Tata Steel (down 1.37 percent), and Hero MotoCorp (down 1.35 percent) closed as the top losers in the index.
Among the sectoral indices, Nifty Media (down 1.89 percent), Realty (down 1.70 percent), PSU Bank (down 0.99 percent), and Auto (down 0.74 percent) lost significantly.
Nifty Bank and the Private Bank indices ended flat.
“The broader market closed on a negative bias due to escalating geopolitical tensions in the Middle East leading to rising crude oil prices. Sector-wise, capital goods and realty were impacted by profit-booking coupled with auto sectors owing to below-expected monthly auto sales figures,” said Vinod Nair, Head of Research, Geojit Financial Services.
“From a short-term perspective, we expect the rally to continue towards 25,330 – 25,530. Crucial support now stands at 24,850 – 24,800. The divergence between the daily and hourly momentum indicators can lead to a consolidation; however, price action is suggesting a breakout. We assign more weightage to the price action and continue to maintain our positive outlook on the Nifty,” said Jatin Gedia, a technical research analyst at Sharekhan by BNP Paribas.
The Securities and Exchange Board of India’s (SEBI) proposed F&O measures to the derivatives trading framework are set to significantly impact the market, particularly with the removal of 12 out of 18 weekly option contracts. Brokerage house Jefferies highlighted that these changes will affect 35 percent of industry premiums.
On Tuesday, SEBI released a discussion paper outlining seven key proposed changes aimed at enhancing investor protection and market stability. Among these, the most consequential is the reduction in the number of weekly option contracts to just one benchmark index per exchange, resulting in a total of six weekly contracts per month, compared to the current 18. Monthly contracts, set for the fourth week of the month, will remain unchanged.
Jefferies warned that exchanges and retail-focused brokers would be most affected by these changes. The BSE might mitigate the impact and potentially benefit if volumes spill over from the discontinued products. Discount brokers such as Zerodha, Angel One, and Paytm Money are expected to face a significant impact due to the tightening of the F&O market and recent orders on transaction charges. Traditional brokers, including MOFSL, IIFL Securities, and ICICI Securities, are anticipated to experience a high impact from the tightening of the F&O market, but only a low impact from the recent transaction charge orders.
Jefferies has listed some key issues that might arise from said amendments.
Reduction in weekly options: Currently, weekly premiums make up 65 percent of overall industry premiums, and depending on the choice of index (to be continued) by exchanges, the supply of contracts amounting to 35 percent of industry premiums can be removed. Spillover of trading activity (if any) from these into the two continuing products can limit the impact to 20-25 percent for the system, noted Jefferies. Also, phased hikes in lot sizes (by 3-4x) and margin hikes near expiry can impact retail traders, said the brokerage.
Lower retail participation (from higher lot sizes) can magnify impact: SEBI highlighted that around 92 lakh unique individuals and proprietorship firms made a cumulative loss of ₹51,700 crore in FY24 and within them, only 15 percent of traders (14 lakh) made net profits, informed Jefferies. On the other side, larger non-individual players like HFTs/algo-traders/FPIs are, in general, making offsetting profits. SEBI has proposed a 3-4x hike in lot sizes in a phased manner over 6 months which will lead to higher ticket sizes even on expiry days. While small retail (less than ₹10 lakh monthly premiums) make up less than 3 percent of system premiums, the overall impact from their reduced participation can be magnified as they may be contributing to the profit pool disproportionately, noted the brokerage.
Higher margin impacts options sellers, other measures are incremental: As per the brokerage, the proposed hike in margins (by 8pp) near expiry will reduce the leverage for option sellers and impact product profitability. While larger institutional players may absorb the impact due to high leverage, HNI/retail individuals with low to NIL leverage will see more impact and can reduce volumes in the absence of additional margin money/assets. Other measures like a) rationalization of strike prices, b) upfront collection of premiums, c) removal of calendar spreads, and d) intraday monitoring of limits are incremental and will improve the quality of premiums over the long term, it noted.
Divergent impact on market players: Jefferies sees exchanges and retail-focused brokers being most affected by the proposed changes. Clearing members like Nuvama (Asset Services business) cater to institutional players (HFTs / FPIs) which are less impacted but may see some second-order impact. For BSE, the removal of the Bankex weekly contract can impact EPS by 7-9 percent over FY25-27E.
In its scenario analysis, gains from the spillover of trading activity from discontinued products can offset EPS impact and in the event of a moderate industry-wide impact of SEBI measures, can even drive EPS upgrades, predicted the brokerage.
The 7 proposals are listed below:
1. Rationalisation of weekly index products: Weekly options contracts are to be provided on a single benchmark index of an exchange.
2. Minimum contract size: Given growth witnessed in the broad market parameters, the minimum contract size for index derivatives contract is to be revised, in a phased manner:
a. Phase 1: Minimum value of derivatives contract at the time of introduction to be between ₹15 lakh and ₹20 lakh.
b. Phase 2: After 6 months, the minimum value of derivatives contracts to be ₹20 lakh to ₹30 lakh.
3. Increase in the margin near contract expiry: The margins on expiry day and the day before expiry shall be increased in a below-stated manner:
a. At the start of the day before expiry, the Extreme Loss Margin (ELM) is to be increased by 3 percent.
b. At the start of the expiry day, ELM is to be further increased by 5 percent.
4. Rationalisation of options strikes: The strike scheme for weekly/monthly index options contracts shall be based on the following principle:
a. Strike interval to be uniform up to a fixed percentage coverage near prevailing index price, i.e. 4 percent around prevailing index price.
b. Beyond the initial coverage threshold, specified at (a) above, the strike interval is to be expanded to ensure that fewer strikes are introduced further away from the prevailing index price.
c. The number of strikes at the time of introduction should not be more than 50.
d. New strikes to be introduced to comply with the aforesaid requirement at and above, daily.
5. Upfront collection of option premiums from options buyers: Members to collect option premiums on an upfront basis from the clients.
6. Removal of calendar spread benefit on the expiry day: The margin benefit for calendar spread positions would not be provided for positions involving any of the contracts expiring on the same day.
7. Intraday monitoring of position limits: The position limits for index derivative contracts shall be monitored by the clearing corporations/stock exchanges on an intra-day basis, with an appropriate short-term fix, and a glide path for full implementation.
Shares of Varun Beverages crashed around 7 percent in intra-day deals today, July 30, even after it posted decent results for the quarter ended June 2024 (Q2CY24). The firm also announced a stock split and an interim dividend with the results.
The PepsiCo bottler reported a 25.5 percent increase in profit after tax (PAT), reaching ₹1,261.83 crore for the June quarter, up from ₹1,005.42 crore in the same quarter last year. This profit growth was driven by volume increases and improved margins.
Revenue from operations grew by 28.3 percent year-on-year (YoY) to ₹7,196.86 crore, compared to ₹5,611.40 crore in the year-ago quarter.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) saw a 31.8 percent rise, reaching ₹1,991.2 crore YoY, up from ₹1,511.02 crore in the same period a year ago. The EBITDA margin improved by 74 basis points (bps) to 27.7 percent in Q2CY24, led by higher gross margins.
Gross margins also showed a significant improvement, rising by 222 bps to 54.7 percent from 52.5 percent during Q2CY23. The company attributed this growth to the timely procurement and storage of PET chips to benefit from pricing advantages, a focus on reducing sugar content, and lightweight packaging.
The consolidated sales volume grew by 28.1 percent to 40.16 crore cases in Q2CY24, up from 31.35 crore cases in Q2CY23. This figure includes 28 million cases from BevCo during the quarter. India volumes grew by 22.9 percent, while international volumes (excluding BevCo) remained flat, primarily due to the transition to zero sugar products in Zimbabwe, which did not affect profits.
“With strong performance in a key quarter, we are on track to deliver healthy double-digit growth this calendar year. India remains a high-demand market with massive growth potential, driven by a growing consuming class and a young population. To capitalize on this demand, we are focused on further strengthening our infrastructure, distribution network, and product portfolio. With a focus on strategic growth and leveraging new opportunities in both Indian and international markets, we are confident in our ability to deliver sustainable value to all stakeholders,” said Ravi Jaipuria, Chairman of Varun Beverages.
Varun Beverages announced a 2:5 stock split and an interim dividend of ₹1.25 per share for its shareholders.
“Sub-division/ split of the existing Equity Shares of the Company, such that each Equity Share having face value of ₹5/- (Rupees Five only) each fully paid-up, be sub-divided/split into such number of equity shares having face value of ₹2/- (Rupees Two only) each fully paid-up, subject to the approval of equity shareholders of the company through Postal Ballot,” the company stated in a filing with the stock exchanges.
This move is intended to encourage wider retail participation, according to Ravi Jaipuria. The record date for the split of existing shares will be decided after obtaining the necessary approval from the equity shareholders.
Despite the strong financial performance, the stock fell as much as 6.9 percent to ₹1,566.85 in intra-day trading on Tuesday. The stock is now over 8 percent away from its record high of ₹1,707.10, reached in the previous session. However, it has advanced 97 percent from its 52-week low of ₹796, recorded on July 31, 2023.
In the past year, the stock has provided multi-bagger returns, rallying nearly 110 percent and adding around 27 percent in 2024 year-to-date.
The sharp intra-day decline in Varun Beverages’ shares indicates a possible profit-booking by investors or market concerns over future growth prospects despite the company’s robust quarterly performance and strategic initiatives.
