Motilal Oswal looks cheap amongst brokerage stocks

CNBC-TV18’s Executive Editor, Udayan Mukherjee - Brokerage stocks have fallen such a lot and still there is no support for these stocks. I was just looking at the numbers this morning; India Infoline has fallen 50% from its recent high, Edelweiss has fallen 60%, Motilal Oswal 62% and Religare 40%. These are substantial falls; 50-60% of their marketcaps have got wiped away since the start of this year.
 
But if one looks back at valuations even after that I think the first question which a lot of market participants will have is if volumes continues like this for the next few months then does one revisit the kind of earnings estimates one had for FY09 to begin with. If one assumes the old FY09 estimates without any downgrades or revisions downwards even then stocks after their 50-60% fall are not terribly cheap. India Infoline is trading at about 22 times expected earnings, Religare is about 20 times, Edelweiss is about 22 times these are at a premium to the market.
 
The only stock which is cheap after the fall is Motilal Oswal; what happens to earnings expectations is a different matter. But Motilal is trading at sub-10 PE multiple about nine times FY09 earnings but the rest of the stocks are more than 20 PE multiples and sentiment will not be good for these brokers unless the market mood improves.
 
So I think they have the cross of slightly high valuations despite the fall and market sentiment and market outlook which will pin them back. So they might be sporadic recoveries because they have fallen such a lot 50-60% but unless the market changes from this bearish kind of groove I would be very surprise to see tearaway out performance from this space regardless of how sharply they have fallen.