Daily Voice | This market strategist says downside risk to HDFC Bank limited

Post the sharp correction, HDFC Bank is trading at 2.1x its FY2024 book value, which is already at a steep discount to its average valuation multiples in the past five years. Hence, the stock has reached attractive levels fundamentally.

However, the sentiment has turned weak and there are no short term triggers as of now. Hence, it could languish for sometime. Technically also, the stock is close to strong support levels. Thus, the downside risk could be limited from here and the stock could slip into a consolidation phase.

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Is this a good time to pick stake in banking and financial services? 

Banking and financials is a vast space and we would prefer to be selective here. For investors, we still find lot of value in public sector banks, especially larger banks like Bank of India, Punjab National Bank and SBI.

On the other hand, we prefer ICICI Bank and IndusInd Bank in the private sector space. The valuations in the MFI (micro finance institution) and NBFC space seem to be stretched and investors can wait for better entry point rather than chase momentum.

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Reports say SEBI is set on impose tighter ultimate beneficial ownership norms for overseas investors from February 1. Is it a major reason for sell-off in equity markets?

After a very strong rally, the markets had moved in overbought situation and needed an excuse to pullback a bit. The volatility in global markets and the post results correction in some heavyweights in banking sector seem to have provided the required trigger for the correction. The media reports related to FPI norms seem to have only added to weakness in sentiments.

What is you reading on the corporate earnings so far?

It has been a mixed bag. Initially, the management commentary and earnings from the large IT services companies was quite encouraging. Even the mid-cap companies like Persistent Systems and Coforge have surprised positively.

On the other hand, banking heavyweights like HDFC Bank and Kotak Mahindra Bank have disappointed in terms of growth outlook and are a drag on the markets. The quarterly results have reconfirmed our conviction on better times for IT services and pharma sectors in 2024, as stated in our yearly market outlook report released in the mid December.

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What is your take on the Zee Entertainment?

Zee Entertainment is hit by the negative development of its proposed merger with Sony. The proposal had hit many hurdles earlier also but the management was confident of pulling it through successfully.

However, the deal has fallen through and the stock is correcting to it pre-deal valuation multiples of 10-12x one year forward earnings. That is where it should stabilise once the knee jerk reaction to the news gets absorbed and sanity returns.

Do you expect the Nifty to break the 20,000 mark in the coming weeks?

It is not unusual to have 10-12 percent kind of correction from the peak temporarily. It happens almost every year and most of the times turns out to be an opportunity to buy into quality stocks.

Moreover, the broader market looked overheated and the correction would help wipe out the speculative forth in the market.

Which are the sectors to pick if there is a major correction?

In terms of sector preference, we believe that IT services, PSU banks and pharma sectors should outperform in 2024. However, we continue to focus on our key investment themes of capex, capital and consumer to play the multi-year upcycle in Indian economy and equity markets.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.