What is your take regarding the weakness in the IT pack? Is this near term pressure and opportunity to buy for a long-term investment or would you say that there will be better pricing opportunity?
The IT stocks have done quite well in last one month or so and it looks like before results, investors would like to take some profit on that. In fact, we have some profit booking in all the largecap IT stocks. My view is one should look at booking profits at these levels. However, the sector remains very positive. The earnings trajectory for the next one year should be very strong for the IT companies.
But initially, there could be some downward momentum post numbers and most important, in terms of the management commentary coming up in most IT companies. I would advise clients to book profit for the near term and maybe look for opportunities later.
What is your take regarding the defence pack? In the last two weeks we have seen a big bounce back in defence stocks like Bharat Dynamics, Hindustan Aeronautics. A CLSA note is talking about how we might be looking at a complete turnaround of the sector. Is this the right time to look at it from a long-term investment point of view?
Most of the defence companies are from the PSU pack and we are seeing re-rating in most of the PSU pack. So, one of the reasons for the bounceback is also that. If I look at companies like BEL, BDL, HAL, all have been on fire since last month or so and obviously the order inflow has supported them.
They were available at a very reasonable valuation and the spend on defence had augured well for the most of the PSU pack. I think BEL remains the top pick followed by HAL and BDL. All three remain top of my mind but in the largecap space, BEL has more potential from the current levels and is followed by HAL and BDL.
Besides the pure play realty names, do you like anything to do with infra and construction?
The focus is on real estate play rather than the pure infra play. In infra we are very selective. Our top pick is L&T, followed by a couple of midcap names like GR Infra and so on. But the real estate stocks have done quite well and they have been performers in the last two years. There is still more upside left in a couple of real estate names. The top pick here is Macrotech Developers. Godrej Properties is another stock one should look at and that is followed by companies like Sobha and Prestige. The entire pack looks very promising going forward from here.
Tobacco companies are holding out very well. ITC is not a pure play tobacco company but still more than half of their revenues come from the cigarette business, Godfrey Philips is the other stock that after a hiatus of almost seven to eight years, has finally begun its up move. What are you making of this space?
The entire cigarette play as a whole has done quite well. ITC after a long time of consolidation, has started going up. I would bet on ITC in the entire pack.
Where are you spotting value within pharma – not just largecap names but even midcap pharma?
I have been focussing on largecap plays for quite some time, Among them, Sun Pharma remains the top pick, followed by Divi’s. If one looks at the pharma update which came up for the month, we see Sun Pharma did quite well. So Sun Pharma should outperform firing from all the businesses. Near term, the stock has underperformed in the last three years.
My view is that a lot of upside can be there and Sun Pharma could be one of the best performing stocks followed by Divi’s. I think these two remain the top ideas on pharma.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)