Yesterday saw the return of Reliance and the IT big boys like TCS, Infosys, Wipro as well as PSU banks. Is this an investment worthy proposition or should one ignore the trading bouts?
The recent run in Reliance was after the underperformance of almost one month where Nifty was at 12,300-12,400 and is now at 13,400-13,500. That underperformance is likely to cope up but otherwise also, fundamentally the company is not in a soup and we have seen only price correction. The value remains there in terms of Jio platforms, Reliance Retail and the oil and gas sector which is not performing right now. Overall it seems that telecommunication, retail business is here for a longer timeframe and longer horizon. It is just a temporary pause and between Rs 1800 and Rs 1900, there should be a good opportunity to accumulate it as a portfolio stock.
As for the PSU banks, till now, the market was tracing growth from 11,000 onwards but now everything is a little pricey, leaving very little headroom for any kind of boost in valuation front. People may be switching from growth-oriented companies or booking profits there and getting into value propositions where the intrinsic value and the growth may not be there but from a longer term price to book or lower PE multiple view, stocks are getting attention right now.
Where do you stand on pharma? Should one buy on dips?
We have seen underperformance in pharma from 2015-16 onwards for two, three, four years. But once this Covid situation came, the pharmaceutical companies are back in the limelight due to the better business prospect and outlook and the earnings trajectory. That has allowed them a U-turn.
The overall runup is still there in case of Dr Reddy’s and even in terms of Sun Pharma to a certain extent where a larger move is now starting. Overall it seems Dr Reddy’s, Sun Pharma and in terms of API business, Laurus Labs are very promising. These are the few names where one can look to buy on dips.
Within the PSU banks, where you would see value, if at all?
On the priority side, it would be SBI with subsidiary companies and SOTP valuations. There is further headroom on the valuation front because it still is 1.4-1.5 times price to book on the forward basis. The second one will be Bank of Baroda and third one would be Canara Bank.
What about the cement basket and would you prefer ACC and Ambuja?
Cement companies are now poised for at least 6-8% volume growth for the next financial year and this financial year also they have given a strong surprise. Capacity expansion is the key for UltraTech Cement. We have seen the management commentary a few days back and the stock is still on an all-time high right now.
On the Shree Cement side, the management is quite confident of having the same volume pace as of last year. ACC and Ambuja are laggards right now only because of the agreement with Lafarge which is due in December. That is giving a pause to this but it is just a technical break. Whatever the outcome may be, it will be a good opportunity because ACC is quoting at almost 30-35 discount to peer valuation right now. It will be a good opportunity to get ACC at Rs 1630-1640. There is a good headroom for the share price to show 15-20% upside from the current juncture. I do not much like Ambuja but ACC is a better name and UltraTech remains the choice.
#Stocks #buy #pharma #stocks #bought #dips