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Avoid RBL Bank, stock can drift down further; hold Colgate: Pankaj Jain

Pankaj Jain of SW Capital says that one can avoid RBL Bank at the current level.

June 09, 2017 / 04:17 PM IST

Pankaj Jain of SW Capital told CNBC-TV18, "Recently RBL Bank was added in the F&O list and thereafter we have seen a sharp correction in the stock from levels somewhere closer to Rs 600 to levels closer to Rs 530-540 now. I think the valuations are pretty rich. Even if we compare to the best of private sector banks, say something like a Kotak Mahindra Bank, Yes Bank or IndusInd Bank, it is one of the costliest banks. Market is taking into consideration that bank will grow at about 35-40 percent; it is not all that easy with the kind of serious competition from all these private sector banks."

"So, if we look at the valuations, P/E, price to book, return on asset, I think it is richly priced. So, it is better to avoid RBL Bank at current valuations. It does not mean that the stock is not good, but I think the stock could drift down further. On any given good day, I would rather shed my position in RBL, rather than add my position at levels closer to Rs 540-545," he said.

"I think in this momentum kind of market, stocks which are doing well, sectors which are doing well, there is no compelling reason to come out of those stocks and Colgate Palmolive I think off late has done pretty well. It has been one of the key beneficiaries of goods and services tax (GST) from taxation of about 24-25 percent earlier to 18 percent. So, that has been one of the triggers."

"Apart from that, though last two quarters have not been all that exciting, I think the performance coming forward should be better. We have seen that FMCG stocks, something like Hindustan Unilever (HUL) or something like a Godrej Consumer, Colgate, they have been doing well and with expected good monsoons, I think the momentum should continue. They have been trying to tackle this Patanjali menace by coming into this Ayurveda category."

"So, all-in-all, technicals as well fundamentals still favour Colgate to be a hold or I would still suggest on any bad day to be a buy rather than trying to sell out of Colgate. So, it is a hold or a buy on dips kind of strategy for Colgate, nothing compelling to come out of the stock right away."
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