Shares of HEG Ltd., a prominent graphite electrode manufacturer, witnessed an 80.12% drop in early trade on Friday, opening at ₹511 apiece against a previous close of ₹2,570.80.

While the sharp fall initially surprised some investors, the decline was attributed to the company’s 5:1 stock split.

HEG reduced the face value of its shares from ₹10 to ₹2, adjusting the stock price accordingly.

Stock split adjusts price but maintains market value

The stock split has realigned the per-share value, with no impact on HEG’s market capitalization.

Such splits are typically implemented to enhance liquidity and make shares more accessible to retail investors by lowering individual share prices.

HEG, based in India, operates one of the largest integrated graphite electrode plants globally and processes Ultra High Power (UHP) electrodes.

The company exports more than 70% of its production to over 30 countries, making it a key player in the global graphite electrode market.

HEG’s fundamentals remain strong, says Jefferies

Global brokerage firm Jefferies had issued a ‘buy’ recommendation for HEG earlier this year, underlining the company’s solid financial position and growth potential.

According to Jefferies, HEG recently expanded its electrode capacity by 20,000 metric tonnes (mt), which became operational in November 2023, bringing the total installed capacity to 100,000 mt.

Jefferies highlighted HEG’s robust balance sheet with minimal debt and significant cash reserves, positioning the company well for future growth.

The firm valued HEG at an EV/EBITDA multiple of 7 times, slightly below the stock’s historical 10-year average.

Forecasts for graphite electrode and needle coke prices

Jefferies’ analysis projects steady demand for graphite electrodes in the coming years, with average selling prices expected to reach $4,900 per mt in FY25 and $5,500 per mt in both FY26 and FY27.

The brokerage also forecasted needle coke, a key input in electrode production, to maintain an average price of $2,000 per mt over the same period.

Jefferies anticipates HEG’s operating margins to bottom out at 14.4% in FY25 before expanding to 34.6% by FY27, reflecting the company’s potential for sustained profitability as market conditions stabilize.

HEG’s bid to increase share liquidity

Following the stock split, HEG’s adjusted price reflects the company’s strategy to increase share liquidity while maintaining strong market fundamentals.

Investors are expected to monitor the company’s performance, especially given HEG’s reliance on international markets and evolving graphite electrode demand.

Despite the price adjustment, Jefferies’ outlook remains optimistic, with the firm believing HEG is well-positioned for growth amid favorable market dynamics.

At 10:15 AM, HEG shares were trading at ₹511, reflecting stable demand for the stock post-split.

Market analysts predict that investor interest may strengthen as the adjusted share price makes HEG more accessible to retail investors.

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Warren Buffett has always warned investors on the risks of betting against America for decades. His bullishness has paid off as evidenced by the performance of Berkshire Hathaway, a company that has attained a market cap of over $1 trillion. 

More companies like Apple, Nvidia, and Microsoft are now valued at over $3 trillion, while Amazon and Google are getting close to a $2 trillion valuation. Similarly, the S&P 500 index has jumped from about $68 in 1975 to almost $6,000 today.

There are many ways to bet on America. One of them is to invest in all American stocks and the other is to focus on a subset of US companies. The Vanguard Total Stock Market ETF (VTI) and the Vanguard S&P 500 ETF (VOO) are two of the cheapest funds to bet on America.

Vanguard Total Stock Market | VTI

The Vanguard Total Stock Market ETF is one of the biggest funds in the market with over $440 billion in assets under management. 

It is a popular fund that tracks the CRSP US Total Market Index, which focuses on all American companies listed in the US. 

According to its website, it has a small expense ratio of 0.03%, and has invested in 3,654 American stocks. It has a price-to-earnings ratio of 26.5 and a price-to-book ratio of 4.3, and a return on equity of 24.

By focusing on all American companies, it means that technology is the biggest part of the fund with a 33.45 stake. The other biggest segments in the fund are consumer discretionary, industrials, health care, financials, and consumer staples.

The biggest companies in the fund are the likes of Apple, Microsoft, NVIDIA, Amazon, Meta Platforms, and Alphabet. Therefore, while the fund tracks all companies in the fund, the top ten firms accounts for 29% of the fund. 

The VTI’s average annual return is about 8.8%. Its total five-year return was 104.46%, while its return this year was 22.5%.

Vanguard S&P 500 ETF | VOO

Like the VTI, the VOO ETF is another popular cheap funds in the market. It has a 0.03% expense ratio and tracks the 500 biggest companies in the US. 

Data shows that it has over $528 billion in assets, and is one of the fastest-growing funds in the market in terms of inflows. The fund has added over $50 billion in assets this year, and is closing in on the S&P 500 ETF because of its cost advantage.

Instead of tracking all companies, it focuses on the 500 biggest companies in the US. As a result, its constituent structure is similar to that of the VTI fund. The biggest companies in the fund are in the tech sector (31.67%), followed by financials, healthcare, consumer discretionary, and communication services. 

The most notable names in the fund are Apple, Microsoft, Nvidia, Amazon, Meta Platforms, and Alphabet. Its top-ten holdings account for 34% of the entire fund. 

The VOO ETF is more expensive than the VTI, with its P/E ratio of 27.4 and price-to-book ratio of 4.8%

Read more: 4 key catalysts for the Vanguard S&P 500 ETF (VOO)

Better buy between VTI and VOO ETFs

So, which is the better ETF to buy if you are betting on America? The VOO ETF has been a better performer in the last five years as its total return was 110% compared to VTI’s 104%. As shown above, this trend has happened this year as the two have risen by 23.7% and 22.54%, respectively.

The two ETFs are highly correlated, meaning that they always have a similar performance over time. Besides, the top ten holdings account for over 25% of the entire fund. 

Stilll, the Vanguard S&P 500 ETF seems like a better fund since it focuses on fewer bigger American companies.

This also explains why the Invesco NASDAQ 100 (QQQM) ETF has been a better fund than the two. It tracks 100 companies, with 52% of them being in the technology sector. The rest companies are in the communication, consumer cyclical, and consumer defensive sectors. 

Looking ahead, the VTI and VOO ETFs will likely continue doing well in the long term, helped by several catalysts. Corporate earnings have been relatively strong in the past few weeks, the US has avoided a hard landing, and interest rates are coming downwards.

Lower rates will likely push funds that have been invested in money market funds into the stock market. Recent data shows that these funds are worth approximately $6.7 trillion. In a recent note, analysts at Goldman Sachs estimated that the S&P 500 index will rise to $6,200 by year end, saying:

“The equity market selloff is canceled, and a year-end rally is starting to resonate with clients shifting from hedging from the left-tail to the right-tail as institutional investors are getting forced into the market right now.”

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Japan’s currency officials have issued a warning as the yen has dropped beyond the critical threshold of 150 per dollar, signaling the risk of additional declines despite potential intervention measures.

Following the remarks of Atsushi Mimura, the country’s top currency official, the yen managed a slight recovery, climbing 0.2% to 149.86 per dollar.

According to a Bloomberg report, analysts monitoring the currency suggest it could depreciate further, possibly reaching 160 per dollar, influenced by robust US economic data that has led traders to temper expectations for Federal Reserve rate cuts.

Uncertainties in both Japanese and US monetary policies are contributing to fluctuations in the yen’s value.

Prime Minister Shigeru Ishiba indicated earlier this month that Japan is not prepared for additional interest rate hikes, though he later aligned his views with those of the Bank of Japan (BOJ).

Conversely, overnight indexed swaps suggest that the Fed is likely to implement at least two quarter-point rate cuts in the coming three meetings through January.

“The market is still over-pricing a rate cut from the Fed, so as we see expectations recede, I think the yen will gradually weaken,” stated Tohru Sasaki, chief strategist at Fukuoka Financial Group Inc. He added that the yen could reach the 160 mark as we head into the new year.

A further decline in the yen towards 150 or 155 could prompt the BOJ to consider earlier rate hikes than anticipated, according to Kazuo Momma, a former BOJ executive director, speaking at a Bloomberg conference last week.

He noted that the BOJ’s decision to raise rates in July was largely driven by the yen’s weakness.

Until now, officials from the finance ministry have largely refrained from commenting on the yen’s movement since October 7, when strong US jobs data triggered a selloff.

Their statements typically indicate the level of concern regarding the currency’s stability and the likelihood of intervention.

“There is a possibility that the dollar-yen will rise more, so Mimura probably made the comment to curb the yen’s further depreciation,” observed Teppei Ino, Tokyo head of global markets research at MUFG Bank Ltd.

He cautioned that the BOJ might be running out of time to intervene effectively.

Investor sentiment is also shaped by uncertainties surrounding upcoming elections in both the US and Japan.

The potential return of former President Donald Trump or the risk of Japan’s ruling Liberal Democratic Party losing its majority in the lower house adds to market volatility.

“If we break 152, I see 156 if we do not see any intervention from the Ministry of Finance,” predicted Shoki Omori, chief desk strategist at Mizuho Securities Co.

He noted that while verbal interventions may increase, the likelihood of Japan actively supporting its currency before the national election on October 27 seems low.

Market participants will closely monitor statements from central bank officials in both countries, particularly a speech by BOJ Deputy Governor Shinichi Uchida, representing Governor Kazuo Ueda.

However, some analysts believe significant movement in the currency is unlikely in the short term due to the prevailing cautious environment.

“With the Trump risk in mind, it seems that the environment will continue to make it difficult to sell the dollar in the short term,” wrote Yujiro Goto, head of foreign-exchange strategy at Nomura Securities Co. in Tokyo.

He added that while he anticipates a readjustment of the dollar-yen exchange rate toward the end of the year, it is likely to remain elevated around the 150 mark in the near term.

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China’s central bank unveiled two new funding schemes on Friday, aiming to inject as much as 800 billion yuan ($112.38 billion) into its stock market.

These initiatives, introduced by the People’s Bank of China (PBOC), are designed to promote the “steady development” of the nation’s capital markets.

Boosting market stability through new tools

The newly launched swap and relending schemes, initially proposed in late September, are part of China’s broader strategy to stabilize its financial markets.

The country’s recent stock market bull run has started to lose momentum as investor optimism over government stimulus measures has turned to caution.

Despite this, the benchmark CSI300 Index saw a positive turnaround on Friday, closing the morning session 0.8% higher.

The swap scheme, valued at 500 billion yuan, allows brokerages, fund managers, and insurers to access liquidity from the central bank by using assets as collateral to purchase stocks.

According to the PBOC, 20 companies have already been approved to participate, with initial applications surpassing 200 billion yuan.

“The swap scheme will become a market stabilizer,” Xinhua Financial reported, explaining that demand for the tool will rise when stocks are oversold, though the appetite for it will diminish as markets recover.

In addition, this facility enables institutions to secure liquidity during market downturns without needing to sell shares at a loss.

Eligible assets such as bonds, stock ETFs, and holdings in CSI300 constituents can be swapped for more liquid assets like treasury bonds and central bank bills.

Relending scheme supports share buybacks

The PBOC also launched a 300 billion yuan relending scheme, which allows financial institutions to borrow from the central bank to fund share purchases by listed companies or their major shareholders.

With a one-year interest rate set at 1.75%, 21 institutions—including policy and commercial banks—are eligible to apply for the loans at the start of each quarter.

Listed companies and their shareholders can then borrow from banks at rates of up to 2.25% for share buybacks and purchases.

This scheme is an exception to China’s usual restrictions on bank lending in the stock market.

China’s financial regulators have urged swift implementation of these expansive policies to support the economy and its capital markets.

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Shares of Polycab India fell over 5% on October 18, even though the company reported solid earnings for the second quarter of FY25.

The electrical goods company posted a 3.6% year-on-year (YoY) rise in net profit to ₹445.2 crore, with total income growing to ₹5,574.6 crore, up from ₹4,253 crore in the same period last year.

Despite achieving its highest-ever Q2 sales, driven by 28% domestic growth in its cables and wires (C&W) segment, Polycab’s shares dropped due to margin concerns.

At the time of writing, Polycab’s shares were trading 3% lower at ₹6,910.35 on the National Stock Exchange (NSE).

Robust sales, but margins face pressure

Polycab’s performance was driven primarily by its core business—wires and cables—which saw growth outpacing other segments.

However, analysts pointed out that operating profit margins were hit by increased competition and changes in the product mix.

The company also reported an 18% growth in its Fast-Moving Electrical Goods (FMEG) segment, though the segment continues to operate at a loss.

Jefferies issued a ‘buy’ rating with a target price of ₹8,315 per share, acknowledging the strong Q2 performance but noting the margin pressures as a key challenge.

Nuvama also retained its ‘buy’ call, setting a target price of ₹8,340, citing the company’s growth potential both in domestic and international markets.

Export strategy driving long-term growth

Polycab has also been expanding its footprint beyond India, with exports now accounting for 10% of C&W revenue.

Analysts believe this shift toward international markets offers higher-margin growth opportunities.

Nuvama highlighted Polycab’s shift from order-led exports to a distribution-led model, which could position the company for sustained growth in global markets.

“Once demand turns around, the revenue upturn in FMEG could lead to sharper margin improvements than the market currently expects,” Nuvama stated.

Polycab’s stock outperformance and future outlook

Despite today’s decline, Polycab shares have risen by 24% this year, outperforming the Nifty’s 15% gain.

Over the past 12 months, Polycab’s stock has increased 30%, compared to the Nifty’s 25% rise during the same period.

The company remains India’s largest manufacturer of wires and cables and is one of the fastest-growing players in the FMEG sector.

With 23 manufacturing facilities, over 15 offices, and more than 25 warehouses across India, Polycab is well-positioned for future growth.

Brokerages remain optimistic about the company’s ability to maintain its growth momentum, with a particular focus on its expanding export business and potential margin recovery in the FMEG segment.

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