Nifty may hit 19,300 by July, Bank Nifty looks attractive: Pankaj Pandey of ICICI Direct

Sensex hit an all-time high of 63,588.31 on June 21 on the back of continued buying of local equities by FIIs and improved macroeconomic factors

After Sensex hit an all-time high on June 21, Nifty is expected to hit 19,300 by July, said Pankaj Pandey, head of research at ICICI Direct, in conversation with Moneycontrol. He believes that Bank Nifty looks attractive from current levels and on the sector front, the auto sector also looks good.

Here are the edited excerpts:

Q. Will markets consolidate from here on?

Our sense is that we may not see sort of a bigger correction, probably 300-400 points kind of a correction, which is why I feel that 18,400 is a good support for the market. Probably towards July, levels like 19,300 is on the cards.

Also Read: Sensex shoots past record 63,588 on better macros

Q. Should one look at going all in right now, or should one keep their powder dry and wait for some kind of a dip to get into the market?

We are already seeing sector rotation panning out, when you look at say within Nifty Bank, entire BFSI space, has not been doing much, because we had already seen past one and a half months kind of a rally in the Nifty Bank. So from that perspective, we are already seeing sector rotation panning out similarly, mid cap small caps are now doing very well. So our sense is that probably some of this might witness rotation. So for example, probably there could be some profit taking on the cards for midcap & small caps. I think Bank Nifty looks attractive from current levels. And our sense is that, it will help Nifty to achieve levels like 19,300.

Q. Tata Motors has seen a good rally and numbers are pretty good. The stock is now perched at seven-year highs, the sentiment when it comes to this stock has really turned positive. Should one play the auto theme via Tata Motors or is it time to look at Maruti?

We like the entire auto theme, both Tata Motors and Maruti. For Tata Motors, most of their businesses have started firing. One thing what we are sensing is that when you look at the domestic segments or CV (commercial vehicle) segment that never used to be in double digit margins, but now company is confident of achieving double digit margins, which they did in 2022, and are sustaining that. Similarly on the PV (passenger vehicle) side, margins are in high single digits and are expected to go up to double digits. I think on the JLR front, the company is talking about better margins, plus better volumes.

I think a lot looks believable when they say that they're going to tone down their debt levels. So this company after four years has made profits and after seven years they have declared a dividend. For Tata Motors, we have a target price of Rs 650 and for Maruti, our target is at about Rs 11,000. I think for Maruti, the missing piece was the EV portfolio. And I think that has started firing, we are seeing the demand for newer products, especially in the EV side.

In fact, last month sales, the UV (utility vehicles) contribution was the highest. And since we haven't seen much of a price performance from the stock for a good period of time, so our sense is, the entire auto theme looks good. And also when you sort of look at in India, interest rates appear to have peaked out.

Also Read: Five midcap gems with the highest return potential

Q. Apart from auto, are there any high conviction buys in the market? What would you bet on now?

So one sector, which hasn't really done well is the pharma pack and our sense is that last few years, the sector hasn't sort of done much, although the numbers have started to incrementally improve. So I think benefit of sector rotation will play out in pharma. And in pharma, we like the tier one names like Sun Pharma DRL. And also some of the CRAMS players like say Divi’s. So I think most of these players had a tough time in the last one and a half years and we have seen good amount of price correction there. Our sense is that valuations look reasonable, there is improvement in the horizon, especially even for companies which are exporting to the US.

The speciality portfolio for Sun Pharma has been doing well. I think Divi’s witnessed a significant drop in gross margin from 60 to 50 percent, our sense is that towards the end of this year, largely that should normalize. so I think pharma looks interesting from a sector rotation perspective and valuations are not really demanding there.

Q. Thoughts on the aviation space? Now Indigo has placed a mega order, which is the biggest in history of aviation. Do you think all this is already in the price given the fact that the stock has done pretty well this year?

When you look at it from a macro perspective, we had about 13 crore flyers. And I think this number is sort of inching up. And given the overall population size, this number is obviously looking quite attractive. But we have not been looking at these companies from a fundamental perspective, largely because I think there is a lot of volatility in margins, and then you have price caps for sector and, and also we are still not very clear whether you'll see options happening for time slots. So I think there are a number of unknown variables, according to us and which is why, despite the positive overall macros turning up we are still not changing the sector but it's an interesting opportunity.

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