Buy SKS Microfinance, Arvind Ltd, Says Nirmal Bang's Girish Pai

Girish Pai, head of research and IT services analyst at Nirmal Bang Institutional Equities, describes the domestic scenario as a "correction in bull market". He expects domestic and global growth to be sluggish, but says a meltdown like the one seen in 2009 is unlikely to happen.

Stock Talk: (Watch full interview)

Buy SKS Microfinance: AUM (assets under management) can grow upwards of 40 per cent over the next three years. The return on assets could be between 4.5-5 per cent and return of equity could be in the region of 25 per cent. Capital adequacy is very good, so maybe if they grow at 50 per cent, somewhere 12-18 months down the road they would probably have to look at fund raising.

Buy Arvind Ltd: On FY17 basis, the stock is trading at somewhere close to 7 times the Ebitda (earnings before depreciation, taxes and amortisation), which is kind of a commodity play multiple - this is the kind of multiple you would give to a cement company. Its ROCE (return on capital employed) can move up fairly dramatically when its brands have reached a certain critical mass. We believe that the brand and retail story which delivered about 5.2 per cent Ebidta margin in FY15 will probably go up to 8.5-9 per cent in the next 2-3 years.