Shares of Tata Group company Tata Alexi hit an all-time high today 9,154, increased his two-day profit to 20%. Multibagger stock has gained over 215 per cent in the last one year. Tata is one of the under the radar of Alexei Edelweiss Alternative & Quantitative Research, ahead of the semi-annual re-balancing in the MSCI Standards Index, which is scheduled for review in May 2022.
“India’s weighting in the broadly tracked MSCI Emerging Markets (EM) Index increased by approx. 12.3% now from approx. 8.1% at the end of Oct-2020. Two factors have driven new inclusions and an increase in the weighting of existing Indian components: i) the new regime on foreign ownership limits (FOL) coming into effect in the November-20 review; and ii) strong performance of domestic stocks over other EM counterparts,” said Edelweiss Alternative and Quantitative Research.
According to Edelweiss Alternative and Quantitative Research, the market cap cut-off date may be between April 18 and 29, 2022 and the announcement may be made on May 13, while the re-balancing may be effective from May 31.
Other than this Tata AlexiOther stocks that are on Edelweiss radar for possible inclusion include Voltas, JSPL, Astel and Varun Beverages.
“The start of the review period is almost a month away from now and volatility in stock prices in the interim could be surprising,” Edelweiss Alternative said in a note.
Some analysts are cautious about this stock considering the rally in the stock in the last one year. Despite solid all-round perfection in Q3, HDFC Securities had recommended a short cut in the stock in January.
“Despite strong growth and excellent margin performance, we maintain our low rating on Tata Elexi due to declining margin of safety (it is trading at a premium valuation). The growth of 5.5% QoQ was in line with expectations, while margins improved was) higher than expected. EPD (embedded product design) growth was strong but IDV (industrial design and visualization) segment (15.4% QoQ) showed weakness. Margins increased from 235bps to 33.2%, driven by growth, offshoring (75 %) and improved utilization (83%); however, given the rising cost structure, EBITDA margins should stabilize at 30%. Further margin upgrades seem difficult, given supply-side challenges and rising attrition (18.2) %),” the brokerage said, ensuring that it remains positive on the company’s growth prospects and growth leadership in the engineering, research and development segment.
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