CEO Succession Plan Worries
- 14th January 2025
Aaj Ka Bazaar
The US market ended on a mixed note, with the Dow posting a gain while the Nasdaq declined, as investors shifted their focus away from tech stocks, which saw the most significant declines during the session. Following this trend, Asia-Pacific markets also traded mixed. GIFT Nifty is trading on a positive note, indicating a positive start for Indian benchmark indices, which is expected to react to retail inflation data that declined to 5.22% in December, owing to a decline in food inflation, boosting the possibility of an interest rate cut. FPIs remained net sellers on Monday. Investors will focus on the release of December WPI data later today. Furthermore, investors will continue to monitor India’s rupee, which weakened to a record low against the US dollar. On the stock front, BEL will remain in focus as the company has received work orders totalling Rs 561 crore, with major orders including communication equipment, electro-optics, upgrades for the satcom network, radar and fire control systems, spares, services, and more.
Markets Around Us
BSE Sensex -76,569.84 (0.32%)
Nifty 50 – 23,156.50 (0.31%)
Bank Nifty – 48,555.65 (1.07%)
Dow Jones – 42,298.12 (0.01%)
Nasdaq – 19,087.82 (-0.39%)
FTSE – 8,224.19 (-0.30%)
Nikkei 225 – 38,371.13 (-2.09%)
Hang Seng – 19,141.13 (1.39%)
Sector: Breweries
Macquarie's underperform Call Hits United Spirits
United Spirits’ shares dropped by more than 4% to Rs 1,411 on January 14 after the company announced a leadership change as part of its CEO succession plan. Macquarie analysts gave the stock an “underperform” rating with a target price of Rs 1,175, suggesting a potential 16% decline. Hina Nagarajan, the current CEO, will step down on March 31, 2025, after four years in the role and will take on a new position within the Diageo Group. Praveen Someshwar, who is currently the CEO of HT Media and has a long career at PepsiCo, will take over as CEO starting April 1, 2025. The smoothness of this leadership transition will be closely watched by investors. Over the past week, United Spirits’ shares have fallen by more than 13%, significantly underperforming the Nifty 50 index, which has only dropped by 2%.
Why it Matters:
The leadership change at United Spirits raises uncertainty about its future, which could negatively affect stock performance. Macquarie’s “underperform” rating with a target price of Rs 1,175 suggests further downside potential. This uncertainty, combined with recent share price declines, signals potential risk for investors.
NIFTY 50 GAINERS
ADANIENT – 2351.95 (5.70%)
INDUSINDBK – 976.00 (3.64%)
NTPC – 308.75 (3.54%)
NIFTY 50 LOSERS
HCLTECH – 1810.80 (-8.98%)
TECHM – 1643.80 (-1.50%)
HINDUNILVR– 2421.60 (-1.20%)
Sector: IT
HCLTech Stock Drops 9% on Weak Guidance
HCLTech’s stock dropped more than 9% on January 14 after the company released its Q3 results. While the company met earnings expectations, a small increase in its revenue growth forecast raised concerns about weaker growth in the coming quarter. HCLTech revised its revenue growth forecast for fiscal year 2025 to 4.5-5%, up from the previous 3.5-5% range, but analysts were disappointed by the forecast’s suggestion of a slower Q4. This was mainly due to a planned reduction in a large telecom deal and delays in some discretionary projects. Despite some positive news, such as higher profit and expanding margins in Q3, the revised guidance pointed to a weaker Q4 exit. Brokerages expressed concern about slower growth in the upcoming quarter, especially since HCLTech had been seeing increased demand in certain areas. As a result, the stock faced a significant decline.
Why it Matters:
HCLTech’s revised growth guidance signals potential weakness in Q4, which disappointed investors. The company’s 9% stock drop reflects concerns about slower growth despite positive Q3 results. This update raises uncertainty for future performance, affecting investor sentiment.
Around the World
Asian stocks were mixed on Tuesday. Chinese shares surged, with the Shanghai Composite and CSI 300 indices rising on reports that Donald Trump’s economic team is considering a gradual increase in U.S. tariffs. The plan could raise tariffs by 2% to 5% each month, aiming to improve negotiations without causing too much inflation. However, Japanese stocks took a hit, with the Nikkei dropping 1.7% as markets adjusted their expectations for fewer U.S. interest rate cuts in 2025 after stronger-than-expected payroll data. Investors are now focused on upcoming key economic data, including China’s GDP, industrial production, and retail sales figures for December. In South Korea, there is speculation about a possible interest rate cut due to political and economic struggles. Overall, Asian markets are under pressure from the expectation that the U.S. Federal Reserve will be less aggressive with rate cuts this year, which has impacted investor sentiment across the region.
Option Traders Corner
Max Pain
Nifty 50 – 23,350
Bank Nifty – 50,000
Nifty 50 – 23,158 (Pivot)
Support – 22,975, 22,864, 22,681
Resistance – 23,268, 23,451, 23,562
Bank Nifty – 48,181 (Pivot)
Support – 47,757, 47,473, 47,049
Resistance – 48,465, 48,889, 49,173
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