News you can use

Welcome back to yet another week of exciting events.

On Friday we witnessed a massive sell off in HDFC twins. Most brokerages have a 'buy' rating on HDFC, with CLSA having set a target price of ₹3050.  On Thursday, after the market hours, HDFC reported a standalone net profit of ₹4425 crore for the quarter ended March 31, 2023- an increase of 19.6% compared with the corresponding period a year ago. Its net interest income grew 15.6% to ₹5321 crore, and net interest margin improved by 20 basis points to 3.6%.  Yet,  the stock nosedived by a massive 5%.

 

Why HDFC twins were sold off?

HDFC's weightage in the MSCI India index will come to 6.5% than the previously expected 6.74 per cent. In the MSCI Emerging Markets index, the weightage will come to 0.90 against earlier 0.93%.

MSCI informed the index weightage factor for the HDFC twins to be 0.5 from the expected 1.0. This may result in outflow to the tune of  ₹1200 crore against market expectations of buying to the tune of $300 crore. 

This is the reason why HDFC twins were hammered down. We have been a perennial HDFC bear since last 5 years. We have been vocal about investing in ICICI ever since the dangerous lady was kicked out of the bank. Back in 2018, when the  stock plummeted from ₹360 to ₹260 aftermath of the lady’s scandal we insisted that the stock should be bought without any hesitation. Looking back the large cap has given a good returns without any hiccups. It has been a safe large cap bet which potentially delivered nearly 4x returns in the next 5 years. During the same time frame HDFC has given 60% gains and that speaks volumes about investing in the right stock. You don’t have to tune into media to get right stock. All you have do is a simple analysis  or better still read our newsletter regularly.

Raymonds vs GCPL

The hot news is Raymond group sold out off its FMCG biz to Godrej for ₹2825 crore in all-cash deal. The deal will be  completed by May 10, 2023. 

Henceforth. Raymond will be a pure-play realty business entity along with investments in engineering (JK Files, which is the world's largest files maker) and denim businesses. Godrej acquired four brands - the condom brands KamaSutra and Premium, and the deodorant brands Park Avenue and DS. The 4 brands  had revenue of ₹522 crore in FY22 and Rs 622 crore in FY23. GCPL had paid almost five times the revenue for the deal.  GCPL has paid exorbitant amount to acquire these 4 brands and the clear beneficiary is Raymond as the company will become debt free after the deal. For GCPL it may take at least 3 years to digest this grandiose deal.

US markets 

You are aware that the Fed raised interest rates by another 25 basis points. 

Three  additional banks, PacWest Bank (PACW), Western Alliance Bank (WAL) and First Horizon Bank (FHN) were down nearly 50% on Thursday. 

One good thing is earnings.  (plenty of earnings beats on lowered expectations). Select stocks may give good returns. 

As informed earlier India is inversely tied with US markets. India market will gain when US markets suffer.

Coming back to India markets, Nifty may stabilise and the blip on Friday was expected owing to HDFC MSCI adjustments. We don’t have to worry about it.