“The trouble with stockholders, in my humble opinion, is that not enough of them are disgruntled.” – Benjamin Graham

The Fed has raised interest rates by 25 basis points as widely expected, but fears of a banking contagion have resurfaced in the US. Back home, the India story is still shining, and it does look like the ‘buy-on-dips’ strategy has started working again.

Symphony

The stock could get a boost today after the company announced a share buyback at Rs 2000 apiece, more than twice Wednesday’s closing price of Rs 984. But given the small size of offer (10 lakh shares or 1.4 percent of equity), arbitrageurs may not come rushing. Retail investors would still be better off, given an acceptance ratio of 10 percent. For others, 1 out of 80 shares will be accepted. Once a penny stock-to-multibagger story, Symphony is also a cautionary tale for investors who think multibaggers can deliver forever.

Founder Achal Bakeri turned around the fortunes of his firm company which was on the edge of bankruptcy in 2002 after diversifying way beyond its core business of air coolers. The stock which was available for less than one rupee some time in 2005, went on to top Rs 2000 in 2018 (adjusted for a 5 for 1 stock split and 1:1 bonus). Since then the stock price has halved, as topline growth slowed and margins fell sharply. One of the hot market favourites during the midcap bull run of 2016-18, the stock has fallen out of favour with analysts. Maybe it is time for Mr Bakeri to script turnaround 2.0.

Tata Chemicals

Good set of fourth quarter numbers, but the talking point right now is about the impending supply overhang in the global market which could keep soda ash prices subdued. A couple of weeks back, the company cut prices by 3-4 percent in response to continuously falling soda ash prices in China. Reports suggest huge capacity addition of soda ash in Inner Mongolia from May 2023. Kotak Institutional Equities in a recent note said that Tata Chemicals’ Q4 numbers would be strong but voiced uncertainty about the second half of 2023.

Titan

Strong fourth quarter numbers that does not come as a surprise since the company had already indicated that in its business update. A flood of positive ratings from leading brokers following the numbers. JP Morgan and Morgan Stanley are overweight on the stock, Macquarie has rated it outperform and Goldman Sachs and CLSA have buy ratings. The company’s operating performance has been stellar for many quarters in a row, but the same cannot be said of its stock price move. The general view is that stocks like Titan will always remain expensive, but at the moment few seem willing to overpay.

Money for jam

Low volatility in the options market is keeping most of the professional option sellers on the sidelines. The premium on options contracts is a function of volatility. More the volatility, higher the premium. However, that has failed to temper the enthusiasm of the recent entrants as well as wealthy individuals, who feel there is easy money to be made writing options. Those who have been in the game of years say that the new traders are not paying enough attention to risk management, given that the market has not seen any violent intra-day moves for some time now. As the saying goes: “Fools rush where angels fear to tread.”

Market pulse

“For India, the falling dollar is helpful and the recent string of positive FPI flows could keep markets from collapsing,” writes independent trader Shankar Char in his daily note. “But the market is still looking for a sustainable narrative and that has to come from this result season. Trailing twelve months Nifty earnings comes in at (Rs) 865 and multiples remain close to 21 times. FY23 earnings didn’t hold up at earlier estimates, will FY24 be better?”

Over to RBI

The US Fed has raised the benchmark rate by 25 basis points, what about the RBI? Yields on 10-year government bonds have fallen more than 25 points over the last one month, reflecting expectations that RBI is unlikely to hike interest rates at its June policy meet. A section of the market feels there is still one 25-basis point hike left. But with both consumer inflation and wholesale inflation having cooled, there is no compelling reason at this point for the central to raise rates.

Bond market traders say the impact of unseasonal rains on inflation may be minimal and inflation may remain within RBI’s upper tolerance band given the high base effect. Meanwhile, commercial paper (CP) rates have also fallen 8-17 bps in last one month, as market has taken comfort from surplus liquidity in the banking system throughout April and the RBI rate pause in April.

Bank bear

Legendary bond trader Jeffrey Gundlach is in the camp that thinks the stress in the US banking sector won’t ease till the Fed starts cutting rates. His view is that small banks will continue to lose deposits making it tough for them to grow.

“I’m really turning more bearish,” he told CNBC on Wednesday, adding, “it just seems to me that deposits are going to keep drifting out. I don’t think this is the last chapter in this regional banking problem.”

Dubious distinction

What was common between Signature Bank, Silicon Valley Bank and First Republic? Apart from their massive failures? As it turns out – KPMG.

The Big Four accounting firm was the auditor to all these lenders, raising uncomfortable questions about the quality of its work as well as its independence, reports FT. In all three cases, it was KPMG which gave the banks’ financial statements a clean bill of health. That too as recently as February-end. Thankfully for KPMG, public memory is short and fickle. Remember 2008 and credit rating agencies? Neither do we.

Manish Suvarna and Abhishek Mukherjee contributed to this piece.