The Nifty Midcap 100 index ended in the green with gains of 0.3 per cent while the Nifty50 and Nifty Smallcap 100 fell 0.3 per cent each. While not much can be read into one day’s action, midcap investors will breathe a sigh of relief and welcome the move.
In August so far, midcaps stocks have largely underperformed their largecap peers on concerns over valuations and sustainability of earnings growth. Those concerns still remain as the June quarter earnings, while largely in line with Street’s expectations, failed to provide any positive surprise to continue the bullish price momentum.
While investors will pray that today marks a turnaround for midcap stocks, especially, given the capitulation in the benchmark index in the last hour of trade, they would secretly know that it is only stellar September quarter earnings that can help the segment go back to its glory days.
HDFC Bank fizzles out
For the most part of the session, the movement in shares of HDFC Bank suggested that the private sector lender was rediscovering its moxy. The stock rose over 3 per cent at one point in the session and maintained those gone for the bulk of it as the Reserve Bank of India allowed the lender to start issuing credit cards again.
However, in the last hour of trade, a bout of profit booking meant that the stock eventually ended in the red suggesting that investors weren’t too hyped by the development as the bigger concern around HDFC Bank remains its underperformance to banks like ICICI Bank on the technology front.
Further, investors currently aren’t in the mood for owning banks with high exposure to retail borrowers given concerns over high delinquencies in that segment in a COVID-ravaged economy. For HDFC Bank to put up a sustained show, it will need to again convince investors it is still the benchmark in banking it used to be under the leadership of Aditya Puri.
Defying skeptics
Shares of
India ended at their lifetime high with gains of nearly 1 per cent in a weak market. The stock’s recent performance has defied skeptics, who are concerned over the jump in raw material prices eating into the company’s margins.
However, one view that investors might be taking is that high food inflation may not damage the company’s margins as long as it can lean on its massive market power to pass it onto customers steadily.
Further, analysts believe that without home consumption recovering the company will stand to benefit whereas, a strong monsoon should ensure that food price inflation peters out in the coming months. “The company’s high innovation, ‘premiumisation’ agenda and cluster-based distribution strategy are on track, and we expect this to sustain,” said Edelweiss Securities.