Stock Market Investment Shot, 11th May 2023

According to a recent Reuters poll, CPI inflation in India for April 2023 is likely to soften to an 18-month low. This was likely to be triggered by softening of food and fuel prices, even as core inflation is likely to come down meaningfully. Food inflation is likely to soften on the back of weak prices of cereals and edible oils. CPI inflation was 5.66% in March 2023 and it is expected to have fallen further to 4.80% in April. That would be well within the RBI tolerance limit of 6%. CPI inflation data will be put out on Friday 12th May.

For Q4FY23, Larsen & Toubro reported 10% growth in net profits at Rs3,987 crore with revenues growing 10.4% to Rs58,335 crore. In terms of operating profit growth, oil and BFSI contributed the bulk while the OPM of infrastructure was lower yoy while IT services was flat. For Q4FY23, there was a 3% spike in order flows at Rs76,099 crore, with nearly half of them being global orders. For FY23, order inflows were up 19% at Rs2.30 trillion. For the full fiscal year, nearly 38% or Rs86,523 crore of order flows were global orders.

GAIL (India) Ltd plans to build a $4.89 billion ethane cracker near its LNG import plant in Western India. GAIL plans to use this to meet an expected surge in demand. Most of the large Indian PSUs in this space are aggressively boosting their petrochemical production capacity to improve margins and also to de-risk their overt dependence on oil prices. A cracker produces ethylene, a key input for plastics. Demand for petchem products is expected to triple by year 2040. Ethane for the project will be imported from the US.

In a mark of prestige for Pepsi’s largest bottler, the market cap of Varun Beverages crossed Rs1 trillion during the week. The stock has rallied 108% in the last 11 months as India was getting into an exceptionally hot summer when the demand for such drinks is expected to soar. The board of VBL has recommended a stock split in the ratio of 1:1. The company reported 62% growth in PAT for the fourth quarter ended March 2023. VBL saw 15% organic volume growth in last 3 years led by distribution in semi-urban areas.

Reddy Labs saw net profits grow nearly 9-fold to Rs960 crore for Q4FY23. The Surge in profits was largely led by a boost to the gross profit which came from surge in sales. Since costs were almost static, the impact on the contribution margin was huge. Revenues were up 15.3% at Rs5,843 crore. More important, the total expenses were down 4% in Q4FY23. Reddy Labs also recommended final dividend of Rs40 per share. For FY23 overall, bulk of the growth came from the generics business in the US, followed by India.

For April 2023, US consumer inflation fell below 5% for the first time in 2 years. However, MOM inflation remained strong for April 2023. However, it is still more than double the Fed estimate of 2% and the Fed is unlikely to relent on its hawkish rates policy till that is fully rectified. Gasoline prices saw some pressure in the month of April. More importantly, for the US economy, the services inflation is cooling and that is the good news. In an attempt to curb inflation, the Fed already hiked rates by 500 bps since March 2022.

JSW Steel posted 7% higher crude steel production in April 2023 at 17.77 lakh tonnes. In April 2022, JSW Steel had produced 16.67 lakh tonnes. The growth was sharpest in the production of flat-rolled products at 16%, touching 13.92 lakh tonnes. However, the production of long-rolled products fell 9% to 3.21 lakh tonnes in April 2023. This is largely on account of planned capital shutdowns undertaken at Salem and Vijayanagar plant locations in April 2023. JSW Steel is one among the top 6 steel manufacturers in India.

Supreme Court will hear the pleas on the Adani-Hindenburg row on 12th May 2023. This pertains to its order to market regulator SEBI to probe allegations of stock price manipulation by the Adani group as well as lapses in regulatory disclosure. Supreme Court also wanted to set up a panel to explore protection to small investors in such cases, Adani group stocks lost $130 billion in market value after the report was put out. Recently, SEBI moved the apex court seeking a 6-month extension for its probe into the allegations.

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