“You will be right, over the course of many transactions, if your hypotheses are correct, your facts are correct, and your reasoning is correct.” - Warren Buffett
Buy on dips or sell on rise? That’s the question traders and investors are asking themselves since Wednesday’s bruising fall. Over the last year, the market has managed to shrug off corrections and resume its upward march. The only thing different this time is that the market has not fallen so sharply in a single session for a while now. Besides, valuations are expensive and there are signs of exuberance. It makes sense to book profits in flavour-of-the-season stocks. But if too many people decided to do that at the same time, it could spark off a ‘sell’-fulfilling prophecy.
On a more positive note, here is Emkay’s head of research Seshadri Sen on why he feels the bull run could continue, with small and midcaps outperforming.
“We believe the Fed would cut in 3QCY24 and RBI would follow suit almost immediately. This would drive a re-rating in the markets which would be visible more in SMIDs than the Nifty. A BJP win in the April-May elections is almost a done deal and focus is on the FY25 budget, with manufacturing and infrastructure the key themes. We also see possibility of a recovery in mass spending,” Sen said.
Cochin Shipyard (Rs 849.10, +7.23%)
The stock gained on the launch of a new dry dock and international ship repair facility (ISRF).
Bull case: Good dividend-paying stock. Healthy orderbook. Can continue to ride the defence and PSU theme.
Bear case: Topline and bottomline growth over the past three years has not been inspiring. FII and DII stake decreasing. Government OFS a key overhang
Asian Paints (Rs 3249.7, -1.43)
Market unimpressed with Q3 numbers.
Bull case: Double-digit volume growth across urban and rural areas with
rural areas showing signs of recovery. Its decorative business has sustained a 14 percent volume growth over the last four years.
Bear case: The company has to cut prices by 1.3 percent, indicating heightened competition. The management expects volume and value growth difference of 3-4 percent to persist for a while. Stock valuations expensive.
L&T Technology Services (Rs 5,538.05, 4 %)
The market cheered the company’s third-quarter numbers.
Bull case: Management commentary gave confidence to analysts despite results being below estimates. The stock has also outperformed over the last one year.
Bear case: Brokerages downgraded the stock on earnings below estimates; unless the company is able to grow its order book faster than peers, the valuations may not sustain.
Federal Bank (Rs 145.9, -2.54%)
The stock fell after the bank reported its Q3FY4 results.
Bull case: Bank expects overall asset quality to be under control. Stock among the preferred names in second tier private banks.
Bear case: Mortgage growth remains weak and retail gold loan growth continues to drag. Margins unlikely to improve in a big way because of rising cost pressures.
ICICI Lombard (Rs 1452, +5.66%)
Market cheered better-than-expected third quarter numbers from the insurer.
Bull case: ICICI Lombard was able to fare better on the loss ratio front as compared to its peers. It is investing in innovation and technology like developing the ILTakeCare app.
Bear case: The general insurance industry is facing challenges like tighter regulatory norms, and stiff competition. Plus the company has a lower claim ratio.
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