Tips for Trade: Underweight on SBI, infra; Buy Maruti, private bank stocks
On our show Tips for Tomorrow, Dipan Mehta, Member of BSE and NSE and Sudip Bandyopadhyay, MD and CEO of Destimoney Securities discussed Nifty's 5500 barrier, SBI's asset quality woes, infrastructure sector outlook and Tata motors Q3 expectation.
The Indian equity benchmarks ended flat after a range-bound session on Monday. The broader NSE Nifty closed at 5,390, up by a marginal 0.16 per cent, while the BSE Sensex index ended at 17,772, up 0.14 per cent.
Metal and auto stocks led the momentum while capital goods and teck stocks were among the top losers. Bank Nifty held steady despite weak SBI earnings.
Fertilizer stocks Rashtriya Chemicals, Zuari Cements and Deepak Fertilizers zoomed along with Indiabulls Finance, NCC, Monsanto India, and Amara Raja Batteries while Lovable Lingerie, GATI, Hathway Cable, and Suzlon were among the big losers.
On our show Tips for Tomorrow, Dipan Mehta, Member of BSE and NSE and Sudip Bandyopadhyay, MD and CEO of Destimoney Securities discussed the market performance.
On Nifty crossing 5,500 mark
According to Dipan Mehta, underlying momentum in the market remains strong. He also said that there has been a dramatic shift seen in investor sentiment.
“Supportive budget, RBI rate cuts and election outcome may push stocks higher,” Mehta added.
Meanwhile, Sudip Bandyopadhyay said reasoned that positive global cues and liquidity is driving the markets currently. Dipan Mehta too said that there has been a liquidity push from domestic funds and Foreign Institutional Investors (FII’s).
“We expect momentum to remain strong going ahead,” Bandyopadhyay said, adding that Nifty is most likely to break above the 5,500 mark shortly.
SBI Asset Quality Woes
SBI announced its Q3 results today which saw its asset quality worsening. The experts, therefore, remained bearish on SBI.
Dipan Mehta felt that the Bank will see continued asset quality issues and hence, remains underweight on SBI.
Bandyopadhyay, too added that he would not recommend investors to increase exposure to the largest state-owned bank. “Balance sheet issues would likely continue,” he explained.
However, Bandyopadhyay said that SBI remains a value pick on a long term basis.
Overall on banking sector stocks, Dipan Mehta said that he was bullish on mid-cap private sector bank stocks.
Infra Sector Outlook - Will Momentum Pick Up?
In Dipan Mehta’s opinion, there is not any likely pick up in infra earnings as execution and debt issues haunt the infra pack. He, therefore, remains underweight on infra stocks.
Sandip Bandyopadhyay too agreed that Q3 earnings results by Infrastructure companies may remain tepid on account of problems in execution and debt. He too advised investors to avoid infra stocks at current levels.
On Tata Motors Q3:
Tata Motors is expected to announce its Q3 results on Tuesday. It is expected that sales would go up 43.7 per cent to Rs 42,691 cr as against Rs 31,685 cr in the same period last year. Profit, meanwhile, is likely to climb 11.2 per cent to Rs 2,733 cr from Rs 2,457 cr on year on year basis. EBIDTA margins are seen to be down at 13.2 per cent from 15.2 per cent.
Dipan Mehta expects the company to report strong earnings on the back of JLR sales growth and strong volume growth. “JLR may help support margins at Tata Motors,” he said.
Sandip Bandyopadhyay too agreed that earnings may be driven by JLR sales and expects margins to improve on year on year basis.
Mehta also said that he is cautiously optimistic on auto sector. Bandyopadhyay, meanwhile, picked Maruti stocks as his top choice in the four-wheeler space.