Markets Espresso: The IT Vs Pharma 'Deewar' and a big market lesson!

Aadar, Aadaab, Abhinandan, Abhaar! We're back with the latest brew on the markets. Kaale Megha have arrived, but the taps haven't opened in full force just yet. Yes, there was an occasional downpour in Mumbai, but lake levels are still sub-10% and just as we did in school, if writing Barso re Megha Megha a 100 times in a notebook would bring some rains, we're ready to do that too!



If we were ever inspired to make a film on Wild Wild West, the protagonist and antagonist would both be South Korea's benchmark, KOSPI. Twice last week, trading had to be halted because lower circuit limits were triggered and yet, the index managed to pull off days where it gained 4% and 5% as well. With only two stocks (SK Hynix and Samsung) powering its 100% upmove so far this year, such moves were also bound to happen as one smidge of bad news, and BOOM! That's why the experts advice to never put all your eggs in one basket. How about Wild Wild KOSPI as a title?

Last week had a lesson for all of us. No matter the narrative, tailwinds, headwinds, commentary, guidance, whatever, at the end of the day, the market rewards only one thing - EARNINGS. Look at Micron. A stock that has gone up 700% over the last 12 months. And yet, with the kind of results it delivered, a 4x jump in revenue, a 7x jump in its core business, the street rewarded it with equal gusto. Sending the stock higher by over 15% and taking its market cap to nearly $1.5 trillion.



Back home, the Nifty has managed to conquer one hurdle. But that isn't the only one. The market had one big positive this week. Crude oil prices reversed all of their gains made during the Iran war. They are now back at $70. But nobody knows what happens on Monday as the US and Iran have once again exchanged strikes over the weekend! If the falling oil prices was a tailwind, there are some more headwinds to encounter. The strengthening of the US Dollar is one such, which has battered metals across the globe and in India as well. The Nifty Metal index was the worst performer last week with losses led by Vedanta and Hindustan Zinc, both of which fell between 8% to 10%!

Another sector that just cannot catch a break is IT. Optimists are turning pessimists even though managements continue to fight another day. JPMorgan last week downgraded HCLTech, Wipro and Tata Technologies, while highlighting TCS, Infosys, Tech Mahindra, Coforge, Persistent Systems and Sagility as their key overweights. BofA Sec initiated coverage on Midcap IT names, expecting a 63% upside for Coforge and an "underperform" rating on Persistent Systems and LTM. It is "neutral" on Mphasis. In two weeks from now, IT will kick-start yet another earnings season. The meme could well be what the sector may be wanting to tell OpenAI and its friends.

Jonathan Schiessl of West Minister Asset Management expects the stress in India's software players to continue, although he expects some small rotation back to India in the short-term as the memory / AI / chip trade unwinds. "I think India looks like its bottoming out here," were his words and if that's so, aapke muh me ghee shakkar

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So where do you put money to work? Mihir Vora of Trust Mutual Fund is positive on the capital goods and infra-focused themes. He's playing the renewables and solar theme through transmission & distribution stocks where he has invested in Clean Max. Although he is bullish on the New Age segment, he warns of higher competitive intensity. Envision Capital's Nilesh Shah is cautious on the Metal names where he expects price consolidation. He owns stocks within the Defence, Pharma and Auto Components themes. He sounded an optimistic note stating that a below average monsoon is likely priced in the market.



Abbakkus' Aman Chowhan wants to keep it simple. He is in no rush to buy IT stocks that he sold six months ago, does not have a big OMC or aviation exposure either, but continues to prefer private banks over its PSU peers. Solar and wind are sectors he wants to bet on, expecting a re-rating and is positive on the Metals space too, despite the US Dollar heading higher. He has added on to Aluminium positions but it positive on steel than any other metal this year.



The one sector outperforming in a market like this has been Pharma and the sector was also the best performer last week. The street likes it too. Deven Choksey says Pharma as a sector is positioned for higher growth, it is also one of Aman Chowhan's bullish positions, Dipan Mehta wants to look at the sector through the CDMO space and through companies like Sun Pharma and Sudeep Bandhopadhyay also likes the sector as a whole. At least six stocks on the Nifty Pharma index are up between 20% to 35% so far year-to-date.



For all the Apple Paglus out there, you'll have to just shell out a little more money to buy your favourite 'i's". In her tech-talk, our friend Rachna Dhanrajani explains the price hikes right here. There's a reason why people are "paglus" because they would buy it regardless of the price hike. But the street did not like it. Apple lost over $260 billion in market value on Thursday after the announcement, although it recovered half of that on Friday with a 3% jump.



June is finally coming to an end, and with the kind of month that it has been, you'd only hope that July brings upsides to everything! Starting Wednesday, companies begin reporting their Auto Sales, business updates for the quarter along with macro data from both India and the US! There is plenty to track, the action begins again next week, and who better than CNBC-TV18 to keep you abreast of all that is happening, one brew at a time! The meme above is a dedication to June from all of us! Until next Saturday, thank you for reading us and do like, share and subscribe as well! Ciao!