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Avantel, a telecom product manufacturing company, has witnessed a sustained spike in its shares over an extended period, resulting in substantial returns for investors. After a prolonged period of stagnation, the stock gained momentum in March 2023 and has since maintained a steady upward trajectory.

During this period, its share price has surged from ₹26 apiece to the current market price of ₹170, marking a significant gain of 554%. Notably, the stock closed positively in 13 out of the past 16 months, with June 2023 recording the highest monthly gain of 50%.

In the current month, the stock reached a new record high of ₹194 per share, nearing the ₹200 mark. It has already risen by 40% in June, driven by investor optimism bolstered by the company’s steady stream of order wins.

The recent surge in the stock has propelled it to achieve a remarkable gain of 1800% over the past three years and an astounding 4150% over the past five years, rising from ₹4.

Avantel specializes in designing, developing, and maintaining wireless and satellite communication products, defense electronics, radar systems, and network management software applications primarily for the aerospace and defense sectors.

Since the early 2000s, the company has strategically repositioned itself to focus on providing system-based solutions across four key verticals: satellite communications, HF communications, electronic warfare, and radar systems.

Increased capex for defense

The government’s Atmanirbhar Bharat initiative has placed a significant emphasis on India’s defense sector, aiming to promote indigenous production and reduce dependence on imports. As part of this initiative, the government is focusing on the defense industry as a critical area to achieve self-reliance.

Several policy initiatives have been introduced under the ‘Make in India’ program, along with reforms to encourage the Indigenous design, development, and manufacture of defense equipment. These efforts benefit companies like Avantel.

The government has also increased the budget for the defense sector for 2024–25 to ₹621,540.85 crore, constituting 13.04% of the total Union Budget. This allocation represents a 4.71% increase from the 2023–24 budget estimates of ₹593,537.64 crore.

The MoD notes that the interim budget for FY2024–25 continues the upward trend in capital outlay allocations aimed at addressing critical capability gaps through the modernization of the Armed Forces.

Over the past decade, the modernization budget and capital outlay on defense services have grown consistently. For BE 2024–25, ₹141,160.9 crores has been allocated under the modernization heads, marking a 5.52 percent increase over the BE 2023–24 allocation of ₹133,871.26 crores.

Well positioned

The company is well positioned in the strategic electronics segment, particularly with its indigenous offerings in satellite communications (satcom), high-frequency (HF) systems, and various types of software-defined radios.

The privatization of the space domain has opened new avenues, and the company is poised to capitalize on these significant business opportunities. It is actively planning to enter additional segments of space technology to provide unique, customized solutions to the Indian defense sector, the company said in its FY24 annual report.

The company plans to introduce several new products, including SCA-compliant HF Software Defined Radios and MSS Xponders for fishermen, expanding its current product lines.

It is also establishing a facility in E City, Shamshabad, Hyderabad, with a built-up space of about 70,000 square feet on approximately 4 acres of land. This facility, scheduled to be operational by October 2024, will feature state-of-the-art facilities and infrastructure for space technologies, according to the company’s FY24 annual report.

In line with its diversification plans, the company has embarked on new initiatives and submitted proposals to IN-SPACe, ISRO, and the Government of India for the establishment of a Ground Station as a Service (GSAAS) facility and SATCOM as a service through a dedicated satellite.

Additionally, the company is setting up a state-of-the-art R&D and production center on about 2 acres of land, with a built-up space of approximately 30,000 square feet. This center is expected to become operational by Q3 FY2024–25, further enhancing its capabilities in the strategic electronics segment.

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On the back of the likely rise in gas prices as well as the electric vehicle (EV) policy of the Delhi government, domestic brokerage house InCred Equities has downgraded Indraprastha Gas to ‘reduce’ from ‘add’ and cut its target price by 22.2 percent to ₹419 from ₹539 earlier. The new target indicates a downside of 12 percent for the gas stock.

According to Incred, the expected increase in gas costs driven by higher APM (Administrative Price Mechanism) prices and rising Henry Hub (HH) prices will offset the impact of lower LNG prices. As a result, earnings per share (EPS) are projected to decline after peaking in FY25F.

Moreover, the electric vehicle policy of the Delhi government poses a challenge, but a projected 9 percent compound annual growth rate (CAGR) in CNG vehicle sales is expected to drive a 7.4 percent CAGR in sales growth from FY24 to FY31F.

Incred has valued the stock at 16.3x FY26F EPS to set its target price at ₹419, leading to a downgrade recommendation to REDUCE.

Stock price trend

Indraprastha Gas stock has been completely flat for the last year, down 0.04 percent but has gained almost 14 percent in 2024 YTD, giving positive returns in 4 of the 6 months of the current calendar year. It jumped 7.5 percent in June so far, after a 5.8 percent fall in May. Before that, the scrip advanced 8.9 percent in April and 1.1 percent in March after declining around a percent in February. In January 2024, the stock added 2.84 percent.

Currently trading at around ₹475, the stock is just 5 percent away from its 52-week high of ₹501.35, hit on July 7, 2023. Meanwhile, it has risen over 26 percent from its 52-week low of ₹375.80, hit on November 11, 2023.

Rationale

Delhi’s EV policy impact: According to Incred, the Delhi government’s electric vehicle initiatives, including the EV and EV 2.0 policies, aim to convert 3,200 DTC buses to electric by FY25F, affecting 13.3 percent of total CNG demand. The phased replacement of CNG vehicles, including 4,200 DIMTS buses, represents a significant transition, with about 50 percent of CNG buses already decommissioned by FY23.

In addition, the Delhi Motor Vehicle Aggregator and Delivery Service Provider Scheme 2023 mandates a complete shift to electric vehicles for fleets with more than 25 vehicles by 2030F, impacting 19 percent of current CNG demand. Despite these policy challenges, the growth in CNG vehicle additions at 9 percent annually and a 13 percent year-on-year increase in PNG volumes due to new connections and robust expansion are expected to drive a 7.4 percent CAGR in sales from FY24 to FY31F.

Low APM availability: Incred further informed that IGL currently sources its gas through a diverse strategy, with 75 percent coming from the Administered Pricing Mechanism (APM), 14 percent from long-term contracts (a mix of Henry Hub (HH) and Brent crude oil pricing), 3 percent from High-Temperature and High-Pressure (HTPT) sources, and 8 percent from spot purchases. Looking forward, IGL plans to increase its reliance on long-term contracts and spot purchases as the availability of APM gas decreases. By 2030F, the sourcing mix is expected to shift significantly towards Re-gasified Liquefied Natural Gas (R-LNG), reducing the share of low-cost APM gas to around 45 percent.

Despite potential cost reductions from anticipated lower global LNG prices, the impact could be offset by rising Henry Hub (HH) prices, affecting approximately 60 percent of total long-term contract pricing linked to HH rates, predicted the brokerage. This strategic shift reflects IGL’s proactive approach to adapting its sourcing strategy amidst evolving market dynamics, it said.

EPS likely to fall

Incred anticipates that due to persistently higher gas costs, along with lower margins and regulatory challenges, IGL will likely see its EPS peak in FY25F, followed by a projected decline at a 14.4 percent rate from FY24 to FY27F.

Looking beyond FY26F, growth prospects are expected to moderate unless there are significant policy interventions by the government. An upside risk noted is any potential change in the Administered Pricing Mechanism (APM) formula, it added.

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Capital markets regulator Securities and Exchange Board of India (SEBI) is investigating Sanjiv Bhasin of IIFL Securities, for his part in an alleged market manipulation, according to a report by news website Moneycontrol. SEBI officials have examined Bhasin’s digital devices as part of the investigation and gathered evidence, said the report. Bhasin regularly discusses stock trading ideas on various business news channels and digital media platforms.

The stock trading platform told Moneycontrol that Bhasin was not a member of its Board of Directors and that his term with the company was discontinued prematurely. The report said that initial investigations by SEBI revealed Bhasin would order a private company to buy specific stocks after which he would recommend these stocks for traders to buy on media channels.

According to the report, Bhasin’s digital records over the past few years have provided evidence of his involvement in the above. The probe is also looking into the connection between Bhasin and this entity. In market parlance, the actions being probed by the market regulator are referred to as a ‘pump and dump’ scheme. 

The report quoted IIFL Securities in a statement, “Mr Sanjiv Bhasin was associated with IIFL Securities as a Consultant on a contractual basis. His term was to end on June 30, 2024. However, due to health reasons, Mr. Bhasin’s contract has been discontinued prematurely with effect from June 17, 2024.”

IIFL Securities added that Bhasin had informed the company about SEBI’s enquiry but the details of the same were not disclosed. Hence, the brokerage refrained from making any comments on the ongoing SEBI investigation.

Usually, in SEBI investigations, gathering evidence from various sources such as personal gadgets happens in the initial stages, according to the report. After the gathering of evidence, SEBI issues a show-cause notice and then passes an order that may impose penalties or restrictions on the investigated entity, depending on the findings and submissions made by the person or entity under scrutiny.

Recently, Bhasin has reduced his appearance on media channels. Instead, he has been retweeting his followers’ comments that thank him for his stock recommendations. 

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Stock market today: Defying weak global cues, Indian stock market benchmarks—the Sensex and the Nifty 50—hit fresh record highs on Tuesday, June 25, even as the mid-cap small-cap segments faltered.

Domestic market benchmarks witnessed healthy gains even as top markets in Europe traded lower, following losses in the key US indices, S&P 500 and Nasdaq, due to a 7 percent fall in Nvidia shares.

Nifty 50 hit its fresh all-time high of 23,754.15, while the Sensex scaled its fresh peak of 78,164.71 during the session on Tuesday, June 25.

Shares of Axis Bank, ICICI Bank, and HDFC Bank ended as the top gainers in the Sensex index.

On the flip side, shares of Power Grid, Tata Steel, and Asian Paints ended as the top losers in the index.

The Nifty 50 finally closed 183 points, or 0.78 percent, higher at 23,721.30, while the Sensex ended with a gain of 712 points, or 0.92 percent, at 78,053.52. Both indices settled at their fresh closing highs.

On the other hand, the mid-cap and small-cap segments failed to mirror the trend in the benchmarks. The BSE Midcap and Smallcap indices ended 0.26 percent and 0.03 percent lower, respectively.

Due to the losses in mid and smallcap indices, the overall market capitalization (midcap) of BSE-listed firms rose barely to about ₹435.8 lakh crore from nearly ₹435.6 lakh crore in the previous session.

Why did the Sensex, and Nifty 50 hit a fresh all-time high today?

The biggest reason behind the rise in the benchmark indices on Tuesday was solid gains in the shares of banking heavyweights.

The Nifty Bank index hit its fresh all-time high of 52,746.50 before ending 1.74 percent higher at 52,606.00. The Private Bank and PSU Bank indices rose 1.70 percent and 0.13 percent respectively. Top banking stocks, including Axis Bank, ICICI Bank, HDFC Bank, and SBI rose 1-4 percent on valuation comfort.

Since banking heavyweights carry significant weight in the benchmark indices, their gains boosted the benchmarks.

“The rally in the market is driven by the large private banking stocks as they are attractively valued at this juncture. PSU banks also look attractive from a valuation perspective,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

The Nifty Bank index is up almost 9 percent year-to-date, while the Nifty 50 has gained over 9 percent in the same period.

“Most of the private banking stocks had missed the upsurge seen in recent weeks, and hence there was a flurry of activity in the financial space ahead of the monthly expiry on Thursday,” Prashanth Tapse, Senior VP (Research), Mehta Equities, observed.

Factors such as the prospects of a healthy monsoon, a solid macro outlook, and expectations of policy continuity after the new government took charge also contributed to underpinning market sentiment.

Technical factors

Shrikant Chouhan, the head of equity research at Kotak Securities, pointed out that a bullish candle on daily charts and higher bottom formation on intraday charts indicate a continuation of an uptrend wave shortly.

“For the trend-following traders now, 23,600/77,500 would act as a trend decider level. As long as the index trades above the same, positive sentiment will likely continue,” said Chouhan.

“On the higher side, 23,835-23,900/78,500-78,700 would be the immediate resistance zones for the bulls. However, below 23,600/77,500 uptrend would be vulnerable. Below the same, trades may prefer to exit out from the trading long positions,” said Chouhan.

Technical charts indicate Bank Nifty index may rise further.

According to Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, the Bank Nifty index broke above the resistance of 52,000, where the highest open interest was built up on the call side.

“The index is trading in a strong uptrend with higher highs and higher lows intact on the daily chart. The support now stands at 52,000, and intraday dips should be viewed as a buying opportunity for targets of 53,000/53,500,” said Shah.

Where is the market heading?

Overall, experts are positive about the Indian stock market for the medium term due to the country’s healthy macro outlook. As the elections are over now, the next big trigger for the market is the Union Budget, which is expected in July.

Besides, expectations of rate cuts by the end of this year are another factor that can boost the market.

“A favorable Budget can further boost the market, which has already touched new highs since the election results were out. Investors are also looking forward to rate cuts by the central bank,” Sarvjeet Singh Virk, the co-founder and managing director of Shoonya by Finvasia.

“If the Fed cuts rates, foreign investors will turn towards the equity market, and India, one of the brightest spots now, will attract them further. Moreover, with rate cuts, both demand and supply can surge, boosting the business environment and the economy,” said Virk.

But the rising valuation of the Indian stock market can spoil the party.

“All equity segments—large-caps, mid-caps, and small-caps—are trading at the higher end of their TTM (trailing 12-month) P/B (price-to-book) ranges, indicating subdued returns in the coming year,” Nitin Bhasin, the head of institutional equities at Ambit.

Bhasin pointed out that large caps are relatively inexpensive. However, there is a significant divergence in valuations between BFSI and non-BFSI sectors.

“Currently, the Nifty Ex-BFSI universe trades at an all-time high premium of 44 percent over BFSI on a 12-month forward P/E (price-to-earnings) basis, compared to a five-year average of nearly 6 percent,” said Bhasin.

“We do not anticipate market multiples sustaining, as FY25 is expected to normalize earnings trajectory estimates,” Bhasin said.

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Shares of the Indian Renewable Energy Development Agency (IREDA) rose over 4 percent on June 24, following the company’s announcement of raising ₹1,500 crore through a bond issuance.

The state-run company’s bond issuance included a base issue of ₹500 crore and a green shoe option of ₹1,000 crore.

IREDA’s exchange filing revealed that the issue was oversubscribed by 2.65 times. The funds were raised at an annual interest rate of 7.44 percent for a tenure of 10 years and two months.

“We are happy with the overwhelming response to our bond issuance. The oversubscription by 2.65 times underscores the trust and confidence that investors have in IREDA’s vision and its crucial role in driving renewable energy growth in the country. This successful capital raising will enable us to further strengthen our efforts in financing green energy projects, contributing to India’s goal of achieving 500 GW non-fossil fuel installed capacity target by 2030,” said Shri Pradip Kumar Das, Chairman & Managing Director.

The stock of the state-run renewable energy financier received a boost following its inclusion in the FTSE All-World Index, with the adjustment taking effect during the June 21 session.

IIFL Alternate Research had predicted inflows of $57 million into IREDA shares. Consequently, the stock experienced a sharp surge in the final 30 minutes of the trading session as the FTSE adjustments were implemented.

IREDA, a Mini Ratna (Category – I) PSU under the Ministry of New and Renewable Energy, provides financial assistance and other services to projects focused on renewable energy sources and energy efficiency/conservation.

Brokerage firm Choice Broking had earlier assigned a ‘buy’ rating to the IREDA stock, with a target price of ₹203 per share. “IREDA is presently trading at ₹181, having recently formed a cup & handle pattern with a notable surge in trading volume. This breakout suggests potential further upward movement, with projected price targets set at ₹203. A significant support level is identified near ₹170 on the downside,” the firm said in a note.

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