Angel One Soars with 44% Revenue Surge: A Record-Breaking Quarter

Angel One, a leading broking firm, announced impressive financial results for the second quarter of FY25, reporting revenue from operations of ₹1,514.7 crore. This figure represents a remarkable 44% year-on-year increase, highlighting the company's robust growth trajectory in a competitive market.

Profit Growth and EBITDA Margin
The company's net profit also saw a significant rise, reaching ₹423 crore, which is a 39% increase compared to the previous year. Angel One achieved an EBITDA margin of 44.4% during this quarter, up from 42.3% in the same period last year, underscoring its operational efficiency and profitability.

Client Base Expansion
As of the end of September, Angel One's client base reached an impressive 2.75 crore, marking an 11.2% increase quarter-on-quarter. This growth included the addition of 20 new clients in the last quarter, reflecting the company's successful strategies in attracting and retaining customers.

Market Position and Competitive Landscape
Dinesh Thakkar, CMD of Angel One, highlighted that the company now holds a 19.3% share of the overall retail equity turnover in India. This positions Angel One favorably against competitors like Zerodha, Groww, and Upstox, with its market share of total demat accounts increasing to 15.7% from 13.2% a year ago.

Challenges and Expenses
Despite these positive outcomes, Angel One's shares have faced a 22% decline this year. The company attributed part of its higher expenses to costs associated with employee and stock options, particularly due to the onboarding of talent in wealth management, technology, product development, and data analytics.

Conclusion

In summary, Angel One's robust financial results for Q2 FY25 reflect its strong performance in revenue and profit growth, driven by an expanding client base and effective market strategies. While the company faces challenges in the form of increasing expenses and share price fluctuations, its commitment to enhancing operational efficiency and market share positions it well for continued success in the competitive broking landscape.

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Stock Valuations Exceed Fair Value, Increasing Risk: Kotak Institutional Equities

Kotak Institutional Equities has expressed concern over the current state of the Indian equity market, which has been trading at significantly higher-than-average valuations. The firm's analysts noted that the stock market has seen a rapid pullback following an earlier record-breaking rally. The valuation, represented by India's price-to-earnings (PE) ratio, has risen to 25.8, which is substantially above its one-year average of 21.6, as per Bloomberg data. Despite the increasing risk, many investors appear to be driven by the greed for returns, disregarding the potential dangers posed by inflated valuations.

The Greed vs. Risk Dilemma

Kotak's analysts highlighted that the pursuit of high returns is overshadowing fears of potential risks, both visible and hidden. This greed is evident in the flow of investments towards equity mutual funds, especially from retail investors, and overall market trends. A significant number of these investors display high conviction in the stock market's performance but often lack the depth of investment experience. This limited knowledge coupled with overconfidence has fueled an environment of unchecked risk.

Ignoring Risk Factors and Potential Triggers

Despite negative developments, such as political changes, tax hikes, and market uncertainties, investor sentiment remains buoyant. Kotak's report emphasized that recent adverse events—including the BJP losing its majority in the 2024 national elections, the government increasing capital gains tax in the July 2024 budget, underwhelming first-quarter results for FY25, and geopolitical unrest in the Middle East—have not been enough to temper market optimism. The analysts warned that this divergence between current stock prices and their fair value may lead to a correction in the near future.

Outlook: Expect Market Correction

Kotak's analysts cautioned that the current market levels are unsustainable, and a correction is inevitable. The catalyst for this correction could arise from any unexpected negative event, but the ultimate outcome would likely be a realignment of stock prices to their intrinsic value. They recommended a more cautious approach, suggesting that investors should reassess their expectations and risk tolerance given the current overvalued market conditions.

Conclusion: The Indian equity market is showing signs of an overheated valuation, driven by investor greed and a lack of risk awareness. Kotak Institutional Equities is urging caution, pointing out that the current trajectory could lead to a market correction as stock prices eventually align with their fair value.

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FIIs Net Buy Shares Worth ₹404 Crore, DIIs Net Buy ₹1,023 Crore on September 23, 2024

Key Highlights:

• Foreign Institutional Investors (FIIs) purchased shares worth ₹12,095 crore and sold shares worth ₹11,690 crore on September 23, resulting in a net purchase of ₹404 crore.
• Domestic Institutional Investors (DIIs) were also active buyers, with a net purchase of ₹1,023 crore, after buying shares worth ₹11,666 crore and selling ₹10,644 crore in the same trading session.

Overview of FIIs and DIIs Activity:

• The provisional data provided by NSE (National Stock Exchange) revealed that on September 23, 2024, both FIIs and DIIs showed a positive buying sentiment, though DIIs outpaced FIIs in net purchases.

• This marked a significant trading day where FIIs and DIIs both contributed to market liquidity. FIIs, despite being net sellers for most of the year, showed a renewed interest in purchasing equities.

Year-to-Date FII and DII Trends:

• In the year so far, FIIs have net sold ₹1.2 lakh crore worth of shares, indicating a cautious or bearish sentiment in international investments toward Indian markets.

• On the other hand, DIIs have been more bullish, with a net purchase of ₹3.3 lakh crore worth of shares in 2024. DIIs, including mutual funds, insurance companies, and other institutional investors, have shown consistent buying interest, offsetting the selling pressure from FIIs.

Stock Market Performance on September 23:

• Sensex closed up by 384.30 points or 0.45%, reaching 84,928.61, while Nifty gained 148.05 points or 0.57% to close at 25,939.

• Major gainers in the Nifty were stocks like Mahindra & Mahindra (M&M), ONGC, Bajaj Auto, SBI Life Insurance, and Hero MotoCorp. These stocks saw substantial buying interest from investors, contributing to the market's overall positive sentiment.

• On the losing side, Eicher Motors, Divi's Laboratories, ICICI Bank, Tech Mahindra, and IndusInd Bank saw declines, dampening the broader market's gains.

Market Analysis:

• According to Ajit Mishra, Senior Vice President of Research at Religare Broking, the markets opened the week on a positive note, with gains nearly reaching half a percent. This positive momentum was largely driven by global market optimism, which influenced Indian market trends.

• Mishra noted that with Nifty nearing the key milestone of 26,000, a brief consolidation phase could be expected. However, the outperformance of rate-sensitive sectors such as banking, financial services, auto, and realty was a key highlight.

• Mishra suggested that traders should adopt a "buy on dips" strategy, focusing on stock selection with a preference for large-cap and large mid-cap stocks.

Broader Trends in Institutional Activity:

• The contrasting activity between FIIs and DIIs reflects global versus domestic investment behavior. While FIIs have largely been net sellers in 2024, possibly influenced by global macroeconomic conditions like interest rate hikes, inflation concerns, and geopolitical uncertainties, DIIs have maintained a positive outlook on the Indian economy.

• DIIs' consistent buying has been a supportive factor for the Indian markets, helping absorb the selling pressure from foreign investors. This strong domestic institutional participation highlights confidence in India's growth story, particularly in sectors like financial services, infrastructure, and consumption.

Conclusion:

The net buying activity by both FIIs and DIIs on September 23, 2024, signals a positive sentiment in the Indian stock market, with DIIs taking a stronger position. As the market approaches key psychological levels, experts suggest a strategic buying approach focusing on select stocks. The overall market dynamics reflect a balance between global caution and domestic optimism, positioning Indian markets for potential growth amid ongoing volatility.

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Swiggy Set to Make a Splash: $1.4 Billion IPO Filing Expected This Weekend

Swiggy, the leading food and grocery delivery startup, is on the brink of filing its draft red herring prospectus (DRHP) this weekend, raising its IPO size from an expected $1.25 billion to a significant $1.4 billion. This adjustment reflects the intensifying competition in the online grocery delivery sector, where Swiggy's Instamart faces rivals like Zomato-owned Blinkit, Zepto, and Tata-owned BigBasket.

Regulatory Approval and Upcoming Roadshows
Sources indicate that the company's confidential filing with the Securities and Exchange Board of India (SEBI) is nearing approval, paving the way for the DRHP submission. Following the filing, Swiggy's management plans to embark on investor roadshows in India, the US, and Singapore, aiming to generate substantial interest ahead of the IPO.

Growing Market Dynamics
India's food delivery market is projected to reach ₹2 lakh crore by 2030, dominated by a duopoly between Swiggy and Zomato, which collectively command over 90% of the market. With Zomato already listed since 2021, Swiggy is poised to join the public market soon.

Increased Funding and Strategic Moves
The decision to upsize the IPO will allow Swiggy to issue fresh shares worth ₹5,000 crore (about $600 million), an increase from the initial plan of ₹3,750 crore ($450 million). This strategic move is crucial as Swiggy prepares for a highly competitive environment, with no changes planned for the offer-for-sale (OFS) component, which remains capped at ₹6,664 crore (about $800 million).

Valuation Prospects
Swiggy was last valued at $10.7 billion during its fundraising round in January 2022. Current market sentiment suggests the company could achieve a market capitalization of around $10-13 billion upon listing. Key investors in Swiggy include Prosus (32%), SoftBank (8%), and Accel (6%), among others.

Conclusion: A Highly Anticipated IPO
As Swiggy gears up for its IPO, it stands at the forefront of an evolving market landscape, with significant backing and a robust business model. This IPO is one of the most awaited events in the startup space, and investors will be keenly watching its developments in the coming weeks.

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Sensex and Nifty Continue Their Uptrend with Auto Stocks Leading the Charge

On September 17, 2024, both the Sensex and Nifty extended their gains for a second consecutive day, fueled by strong performances in the auto, telecom, and construction sectors. The market momentum built up ahead of the US Federal Reserve's anticipated 25-basis-point interest rate cut. The Sensex closed at 83,068 points, up by 80 points or 0.1%, while the Nifty added 34 points to close at 25,418.50.

Market breadth was mixed, with 1,616 stocks advancing, 2,176 declining, and 99 remaining unchanged. While large-cap stocks saw a buying trend, the BSE Midcap and Smallcap indices dipped by up to 0.1%. India VIX, a key indicator of market volatility, edged up by 1% to close at 12.6.

Key Movers

• Top Gainer: Hero Motocorp surged by 3.14% to ₹5,961.20.
• Top Loser: Tata Motors fell by 1.36%, closing at ₹974.95.
• Best Sector: Nifty Infra rose by 0.34%.
• Worst Sector: Nifty PSU Bank dropped by 0.58%.

Expert Views

Vinod Nair, Head of Research at Geojit Financial Services, remarked that market sentiment was positive due to expectations of an easing rate cycle by the US Fed. Although a 25-basis-point cut is anticipated, investors remain focused on the Fed's guidance on future rate cuts. The market's uptrend was also supported by continued institutional flows and buying interest in sectors such as IT, FMCG, and private banking.

Ajit Mishra, SVP of Research at Religare Broking, noted that while the broader market remained subdued, realty and auto stocks saw gains. Profit booking in midcap and smallcap segments contributed to weaker overall market breadth.

Shrikant Chouhan, Head of Equity Research at Kotak Securities, commented that the market's range-bound activity reflected consolidation. He emphasized that as long as the Nifty trades above 25,350, the bullish trend is likely to continue, with the possibility of moving higher towards 25,550-25,650.

Outlook

Experts recommend a "buy on dips" strategy, as selective sectors such as banking, financials, realty, and IT offer attractive stock-specific opportunities. However, market participants remain cautious ahead of the US Fed's monetary policy announcement.

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