Titan misses Q4 profit view on discounts, high gold rates Stocks pip bonds but bumpy ride ahead of 4 June At a low level
Titan reported fourthquarter profit below estimates on Friday, as the jeweller offered big discounts on its products to attract customers amid high gold prices.
Analysts and traders said increased gold prices could dull demand during the wedding season in India, the world’s second-biggest gold consumer, forcing many retailers to offer large offers to lure customers.
In an earnings presentation, Titan said that a soft demand environment due to “volatile and elevated gold prices” necessitated promotions to drive customer acquisition.
The discounts helped Titan attract more buyers to its stores and report a 19% increase in revenue in its jewellery business, which houses brands like Tanishq and CaratLane and makes up nearly 90% of revenue. However, growth still fell short of the 23% growth it reported in the same period last year.
Overall revenue, including its smaller watches and eyewear businesses, increased 17%, while its expenses rose 18% due in part to higher gold prices. Gold prices rose 8.2% in the reporting quarter. That, coupled with bigger discounts, led to its earnings before interest and tax margin contracting to 11.1% from 12%.
Titan reported a profit of ₹786 crore ($94.2 million) in the quarter ended 31 March, up 7.1% from last year, but missed analysts’ expectation of ₹799 crore.
As India’s benchmark equity indices flirt with record highs, investors are turning cautious about valuations becoming too lofty. They have many other reasons to be wary as well: the outcome of the general election, geopolitical tensions, soaring crude oil prices, mounting inflation, and delayed rate cuts in the US.
Little wonder then that several investors are shifting their focus to the debt market.
Equities have been in a bull phase for over four years now, with the Nifty 50 index skyrocketing 198% from its alltime low of 7,610.25 points on 23 March 2020.
The market has been riding on better earnings prospects, public capital expenditure, a pick-up in private capex as well, demand revival, lower interest rates, and a likelihood
Foreign ownership of government bonds
India 1.9 9.8 9.6 7.8 of policy continuity if the BJPled National Democratic Alliance returns to power.
On 30 April, the Nifty 50 registered an all-time high of 22,783.35 points.
But for investors, the unrelenting bull run could mean a time for pause.
“Despite India’s robust mac15.6 15.4 15 25 24 35.9 roeconomic indicators, the current market valuations are not cheap, as they continue to trade above long-term averages,” said S. Naren, ED and CIO at ICICI Prudential AMC.
The Nifty 50 is currently trading at a price-to-earnings multiple of 19.7 times on a oneyear forward basis, compared with its 15-year average of 18.7 times, shows Bloomberg data.
Given the elevated valuations, investors should be cognizant of risks, Naren said.
Further, the near-term outlook for bonds seems more favourable than equities, said market experts.
“As things stand, the narrative suggests moderating inflation and a possible pivot in (the third and fourth quarters of 2024) for the interest rate cycle,” said Jiten Doshi, co-founder and CIO at Enam AMC, and that equities are a long-term hedge for inflation.
Souvik Saha, investment strategist at DSP MF, too, said increasing allocation to debt would be smarter at the moment, although he’s of the view that long-term prospects of equities remain appealing.
Equities are already facing some competition in attracting investor attention.
“The fixed income markets have attracted record inflows from (foreign institutional investors and foreign portfolio investors) in FY 2023-24 on the back of inclusion in global fixed income indices and relatively elevated yields compared to global peers,” said Farhad Gadiwalla, head of products at UTI AMC.
India’s bonds will be included in the JPMorgan Government Bond IndexEmerging Markets (GBI-EM) in June.
All said, an effective asset allocation strategy could involve a mix of multi-asset allocation funds, balanced advantage funds, and equity savings funds.
Investors are turning cautious about valuations becoming lofty, with many shifting focus to debt market