The coming week is going to be a lot about the big earnings, Nifty stocks with 22 per cent combined weightage are coming out with their earnings such as HUL and RIL. While that is going to be the big focus, what about the continuing trends? IT for example, how do you see IT stock panning out in the new week?
We have been bullish on the IT sector for almost over a year and we continue to maintain our bullish view. We believe that probably about 30 per cent to 40 per cent of the upside in IT is already behind us. But that also means that 60-70 per cent of the upside is still ahead of us. I have mentioned time and again that we are witnessing a multi-year re-rating or repositioning of the Indian technology sector and it has begun. We are about 30-40 per cent done but the remaining runway is still left. So we will continue to believe and remain focussed on IT, Indian IT in particular. One quarter’s result here and there will not change that view.
Digital, cloud, platforms are the way forward, and Indian IT is stealing a march over many others in that area. What could have happened over a period of five to ten years is happening in a very short time span and yes, Covid has done that for Indian IT. So if I have to pick up one IT stock, I will probably go for HCL Tech because they have been at it for a very very long time and it is also available at a relatively cheaper price compared to other IT majors, and of course, midcap IT companies. So in spite of any result, I think I will go for HCL Tech as my first pick in the IT sector.
The other trend I would like to point out is that I will keenly watch HDFC Bank results. I strongly believe that PSU banks are due for a re-rating but I am not sure when that will happen. SBI has done its bit but the other banks in the public sector basket particularly PNB and BoB (Bank of Baroda) are where my hopes are. I believe there is still about 20 per cent upside from the current level in both these stocks and they can definitely be considered.
I will also be watching FMCG space. FMCG by and large should be okay. There are expectations around the sector but cost pressures are also building up. So I will be watching HUL very-very carefully and I will also be listening to the commentary about rural demand pick up which is as far as HUL is concerned.
Then RIL, of course, the telecom piece will be of great interest. The launch of a new smartphone with Google, any indication on the possible dates, or anything else in that area will be of great interest.
There is seemingly a lot of retail interest in IRCTC’s recent rally. Earlier on, we had a lot of fundamental experts talk about the pros of IRCTC, the fact that they have more or less a monopoly in the business that they operate and it looks very good in the long term, but where do you draw the line? Are you comfortable even at these levels?
I am already drawing the line to this question very very specifically. I think it has run up quite a bit. Definitely, it is a great uptick on the unlock trade. People want to travel and I think they benefit when more and more people travel. Also, the corporate action on stock splits should bring some momentum. But having said that, I am not comfortable with the valuation we are looking at now and I don’t think I will be recommending IRCTC at current levels. Definitely, please do not misunderstand me, this is a good company, it is a good business, but the valuation is not right as far as I am concerned.
What are your stock picks? what is looking attractive to you even at these levels?
As I mentioned, the public sector space. I like the public sector banks, particularly PNB and BoB. If you have a bit of patience, I would recommend just buy. We are looking at a 20 per cent to 30 per cent upside from the current levels.
As far as the other spaces are concerned, we like
Insurance quite a bit. I think in the entire insurance pack this stock is poised for big growth going forward. SBI Life is focussing apart from the bancassurance channel, they are focussing on the agency channel quite a bit and that will bring down their cost even further and the margins will definitely keep improving with the focus on agencies. I think the way the demand is shaping up, Rs 1,500 can be a clear target for SBI Life in about a year’s time.
We also like Adani Ports on the infra side. This is again a no-brainer, I think Mundra is the hub or the pivot for the entire cargo movement in north India, and with the import-export going up and the Indian economy expanding, I think they are in a very very good position. We are looking at again about 20 per cent plus upside on Adani Ports & SEZ.
