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Tuesday, January 18, 2022

Many high-flying Sensex stocks are under selling pressure. What to do?

NEW DELHI: Heavy selloff in the domestic stock market has sent many high-flying Sensex names such as

, IndusInd Bank, Bajaj Finserv, Mahindra & Mahindra and

tumbling up to 30 per cent from recent peaks, making investors wonder whether the good days are over for such stocks.

Tata Steel has fallen 30 per cent from its all-time high of Rs 1,534.60 hit on August 16, even as it is still up 297 per cent from March 2020 lows.

Analysts said domestic hot rolled coil prices in the traders’ market have slipped to Rs 65,590 per tonne, mainly due to subdued domestic demand, particularly for flat products. As a result, the export price of Indian players last week was the lowest in the region at $773 per tonne. Besides, domestic HRC prices continued to stay at a premium to the landed price of imports from South Korea/Japan, leading to concerns of a pick-up in imports, they said.

“Domestic consumption has stayed dismal, particularly for flats. In Q3FY22, we have also seen increased pressure on domestic prices as export realisation is at a discount and demand in the southeast Asia region has remained lacklustre due to the re-emergence of Covid-19 cases. That said, the recent uptick in Chinese domestic prices raises hopes of a positive rub-off on the domestic market. Among domestic ferrous stocks, we prefer Tata Steel due to sustainably better performance of Tata Steel Europe,” brokerage Edelweiss Financial said.

ICICIdirect noted that Tata Steel is targeting over $2 billion in gross debt reduction for FY22, wherein it will prioritise offshore debt repayment, which could be a trigger for the stock.

Most brokerages are positive on IndusInd Bank even as the scrip has fallen 33 per cent from its recent high.

In an interview with ET NOW, Sanjiv Bhasin of IIFL said: “There was a lot of buzz around Bharat Financial that IndusInd acquired. The company is doing some diligence and will come out with a reply in the next few weeks. But one must look at the CV cycle. IndusInd is one of the largest lenders there. LIC can increase its stake and the promoters are very keen on increasing stake in the bank. Here you have a bank that is well capitalised as far as asset quality and NIMs are concerned and is the largest CV lender. If Tata Motors and Ashok Leyland keep performing the way they are and there is a talk of re-rating, then IndusInd is giving you a once in a lifetime opportunity. I would definitely add on these declines and wait for more clarity on the Bharat Financial that has got priced in.”

In the case of Bajaj Finserv, technical charts look weak.

Mandar Jamsandekar of Precision Technical Analysis said Bajaj Finserv stock has broken supports and is trading on a weak note for the last few days. “I see more downsides to come. It is a sell with a stop loss at Rs 17,000 for a downside target of Rs 15,500,” he said on Saturday.

The stock hit a low of Rs 15,460 on Monday. Kotak Securities also has a ‘sell’ rating on the stock with a target of Rs 15,100. In the last 120 days, the scrip has seen four broker downgrades and two upgrades.

In the case of Mahindra & Mahindra, its new product portfolios will do very well, said Sandip Sabharwal, asksandipsabharwal.com, who added that the company’s subsidiaries are also creating good value. A median target of 42 analysts suggest a 30 per cent upside for the stock. Currently, this stock is down 18 per cent from its recent high.

Shares of Titan Company have fallen 18 per cent from the recent peak while Bajaj Finance is down 19 per cent. HCL Technologies,

(SBI) and Reliance Industries (RIL) have also fallen 18-19 per cent over their 52-week highs.

JM Financial said Titan is its top pick in the discretionary consumption space due to strong consumer gold demand particularly in a wedding season and higher operating leverage with no margin pressures. Analyst targets suggest a double digital potential upside for the stock.

CLSA, meanwhile, said Bajaj Finance (Bajaj) would likely undershoot investors’ expectations over the medium term. A large base, decline in customer repeat purchase ratio and rising competitive intensity in core segments pose risks to its medium-term loan growth, it said last week while suggesting a target of Rs 6,000 for the stock. In the last 120 days, the scrip has seen two broker downgrades and one upgrade.

As for HCL Tech, it is among the key IT recommendations by many brokerages. The recent upside revision in guidance by Accenture has made analysts believe that the good show for domestic IT firms, which mostly have April-March as an accounting year, may continue well into FY23. The firm, which follows the September to August fiscal year, logged a 27 per cent YoY jump in revenues at $14.97 billion, which was well ahead of the upper end of its guided range of $13.9 billion-$14.35 billion.

In the case of Reliance Industries, with key catalysts — deleveraging, tariff hikes and O2C stake sale — out of the way, analysts believe any material stock outperformance would have to wait for the next set of potential catalysts which could still be some time away. JPMorgan is ‘neutral’ on Reliance Industries with the target at Rs 2,575. It said the potential listing of Jio and Retail, stake sale in new energy biz or stake sale in any other business will be the three catalysts, playing out of any one of which may help the stock repeat the large outperformance during the calendar year 2017-2020.

SBI is a consensus buy, with a median price target suggesting a 35 per cent potential upside.

BFIA Admin
The big boss.

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