Tech Mahindra gave very disappointing set of numbers, would recommend selling the stock as IT sector might see weaker quarters ahead.
After the recent rally, we are advising clients to book some profits and wait for a better point to enter again. Also, we would continue to stick with large, quality names, Sumit Bilgaiyan, Founder of Equity99 said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q) Do you expect the market rally to continue in May? Also is it a bear rally?
A) This was just a bear market rally which we witnessed in April. In May, we can expect the index to head lower towards March lows.
Q) After a 32 percent rally from March lows, are you still advising clients to continue buying quality stocks?
A) After this recent rally, we are advising clients to book some profits and wait for a better point to enter again. Also, we would continue to stick with large, quality names.
Q) What are the major factors to watch out for in May on domestic as well as global front?
A) Factors to watch out for going forward should be how COVID-19 cases shape up in India and globally, fiscal stimulus measures to be taken in India if any, how does demand pan out in green zones which shall start operations along with crude market movements.
Q) How do you read Tech Mahindra, Reliance Industries and HUL quarterly results, what is your suggestion (buy, sell or hold)? What could be the opening price of RIL and what are triggers and risks to look for?
A) Tech Mahindra gave a very disappointing set of numbers, would recommend selling the stock as the IT sector might see weaker quarters ahead.
Reliance Industries too gave disappointing numbers with an unexpected loss. Investors can book partial profits in Reliance Industries.
Hindustan Unilever results were certainly weak. We would recommend adding on dips as these are defensives and essential products, demand of which might not be impacted in the downturn.
Q) Have you seen any change in investor/trader behaviour in the last four months?
A) What's surprising is the level of activity has increased by traders and investors. Generally in such falls volumes dry and investors lose hope. But that hasn't been seen yet this time.
Q) Do you think US-China trade tensions will resurface again, especially after COVID-19 impact seen on the United States? Do you think Europe will act in a similar way?
A) With upcoming elections in the US, it would be natural for the ruling party to put the blame of COVID-19 disruption on China. And hence, there could be trade tensions in terms of retaliation. We can expect a few European nations to act in a similar way.
Q) What are your top three stocks to buy?
A) Apollo Micro Systems: It is a pioneer in design, development and assembly of custom-built electronics and electro-mechanical solutions. The company mainly caters to defence, space and homeland security for the Ministry of Defence, government-controlled public sector undertakings and private companies. Apart from the defence sector, the company is aiming to enter emerging projects such as Smart City projects, projects related to the protection of strategic and critical infrastructure projects by utilising its existing infrastructure and technical capabilities. Its PAT has grown at 42.80 percent and income has grown 20.30 percent CAGR over the last 4 years. Stock is looking highly undervalued at CMP. We are recommending a buy in a staggered manner for medium to long term.
Rallis India: Rallis is known for its deep understanding of Indian agriculture, sustained contact with farmers, quality agrochemicals, branding & marketing expertise along with its strong product portfolio. Rallis is also known for its manufacturing capabilities and ability to develop new processes and formulations, hence is considered as a preferred partner for contract manufacturing by leading global corporations. Agro related industry is looking attractive during the current scenario and Rallis India is the best pick from this sector. We are recommending a buy in a staggered manner for medium to long term.
L&T Technology Services (LTTS): It is a listed subsidiary of Larsen & Toubro Limited focused on Engineering and R&D (ER&D) services. LTTS has an equity capital of just Rs 21 crore supported by reserves of Rs 2,614 crore. It paid 1,050 percent dividend for FY19 and paid 375 percent interim dividend for FY20. At the CMP of Rs 1,235, the stock trades at a P/E of just 16x. We are recommending a buy in a staggered manner for medium to long term.
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