The popular view for today is that the market will open a gap and stay there for the rest of the session. The rally will likely be fueled by foreign portfolio investors covering their short positions in index futures and retail investors loading up on stocks for fear of missing out. Domestic funds flush with money have anyway been buyers and if the market stays higher, foreign institutional investors will have no choice but to turn bullish on India.

The trouble with this theory is far too many people are talking about it. Also, smart money is not keen to buy into the frenzy as valuations are already expensive and the market had, to a large extent, discounted the NDA returning to power. Also, a strong verdict for the NDA coalition in itself may not be a trigger for FIIs to turn bullish because their concern remains valuation and not political stability or policies. If the market does move up sharply on Monday, then there is little room for upside on Tuesday even if the results match the exit polls forecast, because the prices would have already adjusted for that. If anything, the risk of disappointment is higher on Tuesday.

Within the next couple of sessions, the election results will be forgotten and the market will move on to guessing the next events: cabinet formation and the upcoming Budget. Before that, a record high for Nifty is very much on the cards.

Generative AI

BofA Research sees India at the heart of the world’s transition towards AI given its vast army of coders. On balance generative AI could be net additive to the IT services marketplace, BofA analysts say.

From the report:

“We also see Indian developers coming with local AI stack to address the needs of 1bn non-English-speaking population at affordable price-points. Even the government is looking to scale a public infrastructure aimed at providing translation AI services.”

Iron Ore

Iron ore prices are likely to stay weak despite China’s measures to revive its struggling property sector, writes Reuters columnist Clyde Russel. That is because it will take several months for new construction to boost demand. The other two drivers for iron ore prices are manufacturing and infra, and growth has been patchy in both.

Tata Steel (Rs 167.4, 2%)

Morgan Stanley raised the target price for the stock following a decent Q4 performance.

Bull argument: The Indian business has posted a decent performance, and domestic demand momentum is expected to continue, analysts at MOSL said. The company also aims to expand its capacity further.

Bear argument: The company reported a 64.59?cline YoY in net profit. Weak Asia steel prices and imports from China continue to be a challenge.

Apollo Hospitals (Rs 5,839.20, 1.3%)

The stock rebounded from a near five-month low on heavy volumes.

Bull argument: New doctor hiring, network and product expansion, key near-term growth drivers. Long-term growth drivers are the pharmacy arm Apollo 24/7 turning profitable and rising occupancy at hospitals.

Bear case: Missed guidance for 70% occupancy in FY24. Operationalizing four new hospitals in 2025-26 would limit occupancy growth further. Apollo 24/7 is still 6-8 quarters away from turning the corner.

Muthoot Finance (Rs 1,682, 0.5%)

The gold loan firm reported strong numbers for the March quarter.

Bull argument: Rally in gold prices and the RBI ban on IIFL Finance for gold loans to benefit Muthoot. Loan growth is likely to be in the high teens this year, after a 20 percent growth in FY24, say analysts.

Bear argument: The Rs 20,000 RBI cap on cash disbursements for loans and the resulting migration to digital lending may hurt near-term earnings. Funding costs staying high could put pressure on margins.

NOCIL (Rs 253, -2.4%)

The stock fell after tepid numbers for Q4. Net profit got a bump up from other income

Bull argument: Long-term growth story positive, led by tire players expanding capacity & investing to the tune of Rs200-250bn over FY24-26E leading to an increased usage of rubber chemicals, says a report by SMIFs.

Bear argument: Imports from China to persist near term, some new rubber chemical supplies globally are coming up in H2FY25E which will further heighten competitive intensity globally, says SMIFs.