Street Signs: Bank Nifty interestingly poised, 3.4x upside in IRB, and more

Bank Nifty interestingly poised

The Bank Nifty Index jumped 1.8 per cent on Friday to finish at 39,306. It outperformed the Nifty, which rose 1 per cent. Analysts say a significant degree of call writing has been seen in the Bank Nifty Index between 39,500 and 40,000 levels. Should the index extend its winning streak, it may trap the call writers, leading to short covering. This could take the index to 41,500-42,000 levels, says Kunal Shah, senior technical and derivatives analyst at LKP Securities. In case of weakness in the market, the Bank Nifty Index has support at around 38,400, which, “if breached, may open the gates for further downside”, adds Shah.

3.4x upside in road developer IRB

Debt reduction, renewed government focus on build–operate–transfer projects, attractive valuations, and strong revenue growth forecasts are expected to lead to a rerating of IRB Infrastructure Developers (IRB). Ventura Securities expects the stock of the highway construction company to jump 3.4x over the next 30 months. The brokerage says the company has managed to deleverage its balance sheet through capital raise and infrastructure investment trusts, where it has collaborated with GIC Affiliates. Ventura expects IRB’s revenue and profit to grow at an annualised rate 14.7 per cent and 64 per cent, respectively, over 2021-22 through 2024-25. It says the stock is currently available at less than 10x its 2023-24 earnings estimate. The projections, however, hinge on faster-than-expected growth in road traffic.

Capex, margin boost for capital goods stocks

Engineering and capital goods companies are likely to see revenue growth momentum, led by robust order backlog and pick-up in execution. The recent thaw in commodity prices, along with price hikes announced earlier, may see marginal improvement in the operating margin during the quarter. However, the full benefit of lower commodity prices is likely to be seen from the third quarter of 2022-23. Moreover, the rise in government and private capital expenditure is likely to augur well for these companies. Larsen & Toubro, Siemens, KEC International, Bharat Heavy Electricals, and Techno Electric & Engineering Company are likely to gain.