Rahul Arora, CEO of Nirmal Bang Institutional Equities, talks about a whole host of stocks. In the banking and financials space, he likes Federal Bank and says except for the Rs 140 crore that it has on one account in metals, which was a bit of an aberration, the bank did well. He sees 15-16 percent return on equities (ROEs) by FY17. Valuations are not too bad and NII is expected to improve going ahead, he adds. Among PSU banks, he likes State Bank of India.
He also talks about SKS Microfinance. The company reported a stellar set of numbers in the quarter ended June. The stock had a phenomenal run too. He says the temptation to book profit is high. But it is still a buy call, he adds.
Among midcaps, he is bullish on CCL Products. Arora expects current margins to sustain going ahead on better product mix. Nirmal Bang initiated coverage on the stock at Rs 70 and it is now at close to Rs 225. It is still potentially a two-bagger, he says. It is giving about 25 percent return ratio at 15 times PE.
Arora is largely neutral to underweight on IT sector. Infosys was a forced upgrade because of its numbers. But dynamics of the sector hasn't changed much, he adds.
According to him, digitisation is a big risk to revenue growth going ahead because these companies now have to bid for contract sizes much smaller while holding margins, which means that the 12-14 percent Nasscom growth rate will not come.
But the question is who is best placed to capture this. His top pick in the sector is HCL Tech on a relative basis. TCS is the the biggest disappointment, he adds. He has a neutral call on Wipro. Tech Mahindra is a sell call for him, though he doesn't think there is much incremental downside to the stock.
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