Short Call | Buy the dips chatter turns louder; Angel One, Bharat Dynamics, Prestige Estates, Amber, MGL in focus

It's time to buy on dips.

“Growth stock investing may be more a philosophy of buying what is popular. Value investing is more a philosophy of buying what is out of favour.” - Chris Browne

The mood on the Street is better than what it was a couple of weeks back. Liquidity tightness due to year-end factors is set to ease over the next few days. As for retail and HNIs, the question is whether smallcaps and midcaps will rally with the same vigour as they had been till February. Some players are again making a case for buy-the-dips strategy, saying that March has traditionally seen sharp corrections because of some negative development coinciding with advance tax-related liquidity crunch. But others are pointing to expensive valuations and advising that a safety-first approach would not be a bad idea till the general elections results are out of the way.

Emkay strategist Seshadri Sen is in the buy-on-dips camp, but with a caveat: "Stay away from expensive mid and small cap stocks."

As to the triggers that can take the market higher, Sen lists an expected NDA victory, a reform oriented Budget and monetary easing by the Fed and RBI in the coming months.

Bharat Dynamics (Rs 1686, +1.45%)

The company's board approved a sub-division of its equity shares and declared an interim dividend for FY23-24.

Bull argument: Order book of a little over Rs 20,000 crore is nearly nine times annual revenues. According to Antique, earnings visibility looks equally strong from the next two-three-year horizon, with large-ticket orders like Astra MK II, QRSAM, and MRSAM expected to be finalised.

Bear argument: The stock split is likely to give a temporary boost. But the market may have already factored in the positives. The stock doubled

between October and February and has been consolidating the gains since then. The company has a poor sales growth of 9 percent CAGR in the last 10 years. ICICI Securities says key risks for the company could be delay in receiving components and parts due to ongoing Israel – Palestine war.

Angel One (Rs 2661, + 1.7%)

The company has signed a sponsorship deal with IPL for five years

Bull argument: The company has a dominant market share among online brokers and has been able to grow its client base quarter after quarter. Through its super app, it is trying to reduce dependence on earnings from brokerage commissions and diversify revenue streams.

Bear argument: The stock looks weak on the charts after a 31 percent drop from record highs. The company’s decision to raise funds has not gone down well with a section of the market, as the company is cash rich. Some players are worried about poor allocation of capital, which could depress returns on capital employed.

Mahanagar Gas (Rs 1,342, +1.53%)

The stock has fallen nearly 11 percent in the last one month.

Bull argument: MGL trades at 9.9 times FY25(estimated) and 9.7 times FY26(estimated) earnings, which is a steep discount to peers. The current correction provides an attractive opportunity to enter the stock, ICICI Securities said. While petrol/diesel prices have been reduced, the recent price cuts taken by the company will help maintain competitiveness.

Bear argument: According to the management, the shrinking APM allocation is a concern and will imply higher HP/HT gas procurement going ahead. ICICI Securities sees some moderation in margins over the next two to three years.

Amber Enterprises (Rs 3,555, +4.36%)

The stock surged after CLSA rated the stock a ‘buy’ rating citing that the recent fall made valuations attractive.

Bull argument: CLSA says the recent weakness is due to broader market correction and there is medium term opportunities in non-RAC (refrigeration and air conditioning) segment. The brokerage also said if non-RAC segment doesn’t pick up other segments will contribute to the topline.

Bear argument: Returns have been flat for nearly three years now. Valuations are expensive at 83 times trailing earnings. Competitive pressure in the cooling segment remain intense, with even market leader Voltas struggling to maintain margins.

Prestige Estates (Rs 1,100,  +5%)

The stock surged after the company acquired 62.5 acres of land in Indirapuram Extension, NCR.

Bull argument: According to analysts at Geojit, the company is planning aggressive expansion in its annuity portfolio and is seeing a steady increase in pre-sale volumes.

Bear argument: Third-quarter revenue fell short of market expectations, also, there are concerns about some projects getting delayed.

With inputs from Srushti, Yash, Ananthu and Anishaa