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    Along with pharma and IT, allocate for banking too: Rahul Shah

    Synopsis

    ‘Among IT largecaps, HCL Tech and Infosys would be my preferred picks.’

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    A lot of bank stocks look very attractive from a medium to long term perspective like ICICI Bank, Axis Bank. In the NBFC space, a lot of companies are now less than one time book and the business models are very good, says the VP-Equity Advisory, Motilal Oswal Financial Services Ltd.

    If Tata Consumer goes and acquires the business of Café Coffee Day, the coffee vending machines in corporates, will the Street like that acquisition or would it say Tata Consumer is doing too many things suddenly?
    The stock has done fantastically well in the last four or five months and the way the management is going forward, I feel this acquisition definitely will add value to them. My sense is Tata Consumer should do well post this acquisition as well.

    There are reports that perhaps BPCL disinvestment is going to be pushed back to the next fiscal. This could really be a spoiler for the entire disinvestment or the entire PSU theme which has given a lot of good returns as well in the last six months.
    There has been a lot of news flow that BPCL could be pushed to the next financial year and that is what we have seen and the stock has underperformed. My view is this could be a negative for the entire space. That is why we have seen a selloff in BPCL, around 10-12%, in the last few days. If you compare the other two PSU stocks -- HPCL and IOC -- look comparatively cheap compared with BPCL. The other two stocks look interesting just for the valuation game and so there could be an upside with very reasonable valuations and a good dividend yield. Both IOC and HPCL look interesting for buying for the next couple of quarters.

    What is your view on Apollo Hospitals? It has been moving up for the third day running.
    The rally is fully factored into this price. I do not think any major upside in the stock is going to happen from the current levels. The valuations also look stretched from the current levels. I would avoid fresh additions in Apollo Hospital and would still look at the pharma space. There’s a lot of opportunity in that space.

    Everybody has limited capital and you have a choice to stay invested in banks where you are losing or you have a choice to buy pharma and IT which are outperforming. What should one do?
    The financials have to be played for the bounce back. We have seen a major correction this month at around 10% in the Bank Nifty and a lot of financials have corrected.

    A lot of them look very attractive from a medium to long term perspective like ICICI Bank, Axis Bank, and in the NBFC space, a lot of companies are now less than one time book and the business models are very good. So that also can be added selectively. Allocations should be made in pharma, IT and banking. I would definitely be picking up banking stocks from the current levels. Pharma and IT have outperformed reasonably and there the outlook is very clear for both the sectors.

    They will perform over the next one year better than vis-à-vis other sectors. So in uncertain times obviously they will play as a defensive but it is a good time to also add banking stocks. The recovery could be fast in terms of price movement as they have corrected almost 15% in a lot of cases. I expect banking has to be a part of the portfolio from the current levels.

    Within the IT names and given the deal buzz, given the sentiment post Accenture’s commentary as well, what would be your continued favourites?
    The large caps have done quite well and I would continue to build on Infosys as there is a lot of catchup in the valuation perspective vis-à-vis TCS. Infosys could be a good bet from the current levels. Similarly, HCL Tech, post revision of its earnings guidance, could see some more upside.

    Again, from a valuation perspective, both look very attractive and post Accenture’s commentary, there is more visibility in the entire IT pack and they should continue to do well. Among large caps, HCL Tech and Infosys would be my preferred bets among the IT pack.
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    6 Comments on this Story

    Pankaj Kalra25 days ago
    Useful insights, IT will be clear winner
    jitendra k Thakkar25 days ago
    Banking ship is at a difficult mid ocean and have risk so cautious to reach port of destination i e. profit where as IT and Pharma are in safe zone sailing smooth and no risk
    Narendra Shah26 days ago
    buy on deep
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