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Indian Markets looking attractive? Dominos selling pizzas like hotcakes and other Market Notes - 13th February
Read the full blogpost here: [https://sabiduriacapital.substack.com/p/indian-markets-looking-attractive](https://sabiduriacapital.substack.com/p/indian-markets-looking-attractive) Indian markets had a bit of a rollercoaster ride today! After a promising start, the Sensex and Nifty decided to take a breather, ending the day pretty much where they started. It's like they ran a marathon only to finish right back at the starting line! The **Sensex closed at 76,139, down a mere 32 points**, while the **Nifty settled at 23,031, shedding about 14 points**. It's the seventh straight day of declines. The market breadth was as divided as a hung parliament. Out of over 4,000 stocks, about **2,089 declined while 1,858 advanced**. It's like a slightly depressing game of red light, green light. Looking ahead, market gurus are predicting a consolidation phase. It's like the market is taking a power nap before deciding its next big move. **Keep your eyes on the 22,800-23,400 range for the Nifty.** https://preview.redd.it/w85n6c71fwie1.png?width=1455&format=png&auto=webp&s=c79f1bd090e14c70717302b8a7cc6286c6c556bc **Kotak Bank** was the talk of the town today! The Bank made headlines today as RBI **lifted restrictions it had imposed on the bank in April 2024**. The RBI's decision **allows Kotak to resume onboarding new customers through digital channels and issue fresh credit cards**, ending a 10-month embargo. This move comes after the bank implemented corrective measures to **address supervisory concerns and conducted an external audit to validate compliance**. The news sparked a rally in Kotak's stock price, with shares hitting a 52-week high as analysts expect this development to boost the bank's growth prospects and potentially lead to a valuation re-rating. **IT stocks turned out to be the biggest laggards** owing to the higher than expected inflation print in the U.S. last night. The US consumer inflation for January came in higher than expected, reducing the likelihood of multiple interest rate cuts by the Federal Reserve in the near future. This development dampened sentiment for Indian IT companies, which derive a **significant portion of their revenue from US clients.** https://preview.redd.it/t5x7fpf2fwie1.png?width=1456&format=png&auto=webp&s=1b8629ee7957ddd382467f37b3b359eda467466c Pharma, Health and Metal Stocks showed the most strength in today’s market. **Results That Matter:** **Jubilant Foodworks:** Jubilant FoodWorks delivered a mixed bag in its Q3 FY25 results—strong top-line growth but some pressure on profitability. # Financial Highlights: * **Revenue Surge:** Consolidated revenue jumped **56.1% YoY** to **₹2,151 crore**, driven by strong demand. * **EBITDA Growth, but Margin Dip:** EBITDA rose **43.5%** to **₹402 crore**, though margins compressed to **18.7%**. * **Profit Decline:** Net profit dropped **35%** to **₹42.9 crore**, reflecting higher costs and margin pressures. https://preview.redd.it/yb4899v6fwie1.png?width=1272&format=png&auto=webp&s=148532ffb1adef1775d3fe34a921e13169a2dbf3 # Operational Performance: * **Domino’s India Delivered:** Same-store sales grew **12.5%**, showing healthy customer traction. * **Delivery Boom:** Revenue from deliveries surged **29.7%**, now making up **71.4%** of total sales. https://preview.redd.it/8rlva5l8fwie1.png?width=1263&format=png&auto=webp&s=80abf8e1579014bc627de4ab684828450ae67783 * **Expansion Continues:** The company added **60 new Domino’s outlets**, bringing the total to **2,139 stores across 466 cities.** https://preview.redd.it/6retwwnbfwie1.png?width=1263&format=png&auto=webp&s=7bef79f29c57e1c66e6b36f3c0ab48b8f2826062 * **Digital Strength:** The Domino’s India app now boasts **13.7 million monthly active users**, up **30.5% YoY**. * **International Growth:** DP Eurasia’s revenue climbed **9.5% QoQ**, while Sri Lanka saw a staggering **65.4% YoY** surge. **Key Management Statements and Guidance** The management team highlighted that Q3 FY25 was a "defining quarter" for the company. They emphasized their strategic framework built on strengthening Domino's and accelerating the path to profitability for emerging brands. **Domino's Strategy** Multiple initiatives have been taken to strengthen Domino's business. These include transitioning from four to seven regions, revitalizing the brand with the "It happens only with pizza" campaign, redefining the delivery experience with the launch of 20-minute delivery and delivery saver, and accelerating the pace of product innovation. They believe that with these measures in place, the are achieving new peaks and delivering great growth momentum to the business in Turkey Domino's continues to gain fair and expand Network. https://preview.redd.it/oqhk48kffwie1.png?width=408&format=png&auto=webp&s=820f4aa42df58998e0af12ce11816e9d22368025 **Emerging Brands** Coffy is on its way to becoming a top five Cafe brand in Turkey, surpassing the 150 store mark. For coffy, they expanded the network and are focused on reaching the desired unit economics and payback periods. https://preview.redd.it/bltdxsthfwie1.png?width=1273&format=png&auto=webp&s=eb72890689df0097de4eaef7bce0562bc3593257 **Broader Developments to Watch Out For:** * **Prime Minister Modi's US visit**: Investors are closely monitoring Prime Minister Narendra Modi's two-day diplomatic visit to the United States, which is expected to address crucial strategic matters. * **Global cues**: Mixed global cues, including developments in US-China trade relations and potential peace talks between Russia and Ukraine, may influence Indian markets. **Expert Talks:** Rajiv Batra, who leads India, ASEAN, Asia (ex-China and Japan), and now even Emerging Markets strategy at J.P. Morgan highlighted the recent volatility in emerging markets and the continued selling pressure from foreign institutional investors (FIIs). While **India's valuations have moderated from their previously expensive levels**, FIIs remain **cautious** due to concerns about slowing growth. # Earnings Growth Concerns India enjoyed strong earnings growth over the past four years, but the last three quarters have seen a significant slowdown. With India’s PE ratio at 19 and earnings growth at just 6%, FIIs are **reassessing whether to stay invested in India** or allocate capital to cheaper markets offering similar or better growth prospects. # Broader Emerging Market Selloff The recent FII selling is **not just about India** but part of a **broader trend affecting emerging markets**. Since November, $40 billion has exited EM equities, reminiscent of the early COVID-19 selloff. Markets that saw strong inflows in recent years—such as India, Brazil, Mexico, Taiwan, and Indonesia—are now experiencing heavy outflows. # Long-Term Investor Interest Despite short-term concerns, **long-term investors like pension funds and insurance firms are beginning to see value in Indian equities**, particularly at the sector and stock level. While the broader index may not reflect this shift yet, Rajiv expects FII inflows to return in the coming weeks or months. # Key Triggers for Market Recovery Two critical factors will determine the timing of FII re-entry: liquidity and high-frequency economic indicators. A liquidity crunch—driven by foreign outflows and upcoming domestic tax payments—is adding pressure. If liquidity improves and key economic indicators (such as GST collections and cement consumption) show positive trends, confidence in the market could return. # Policy Support and Economic Transition Rajiv pointed out that **both fiscal and monetary policy in India are transitioning from tightening to easing**. This shift should support economic growth, but investors will likely wait for a few months of consistent positive data before making significant allocations. # Sector Preferences J.P. Morgan has adjusted its sector outlook: * **Overweight**: Financials, consumer staples, healthcare, real estate, and discretionary consumption (excluding passenger vehicles). * **Downgraded**: Industrials. * **Underweight**: Commodities and auto stocks, particularly passenger vehicles. Urban consumption is improving but remains focused on low-ticket discretionary items, benefiting two-wheeler sales rather than high-end cars. # Impact of US Dollar Strength A strong US dollar reduces the attractiveness of emerging markets, as investors can earn high returns in US money markets with minimal risk. However, India’s relative currency stability and strong local returns have been key FII attractions. If the currency remains stable and economic growth improves, foreign investors will likely return. # Market Outlook and Investment Strategy Rajiv remains overweight on India, expecting that as the market transitions from late-cycle to early-cycle growth, sentiment will improve, and FIIs will recognize the opportunity. While short-term price momentum is driving decisions now, he believes that in the coming quarters, investors will return to India’s core sectors like financials, IT, and consumer stocks. # Conclusion: Long-Term Growth Story Remains Intact Despite short-term headwinds from liquidity concerns and global market trends, India’s long-term investment story remains strong. If liquidity eases and growth indicators improve, FII inflows could return, bringing renewed momentum to the market. Watch the full interview here: [https://youtu.be/RZrL\_iD4jxk](https://youtu.be/RZrL_iD4jxk)4
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