Short Call | The case for booking profits, realty takes a tumble, Havells, Cipla, Kotak Bank in focus

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“You must always be prepared for the unexpected, including sudden, sharp downward swings in markets and the economy. Whatever adverse scenario you can contemplate, reality can be far worse.” - Seth Klarman

The third one-percent-plus intraday fall over the last month is giving investors a pause for thought. Yes, the long-term story looks good. But should I take some money off the table for now? That could make sense for two reasons. One, as the popular stock market saying that no one ever goes broke taking profits. Two, if the market corrects further, then the profits could be used to buy into some of the quality stocks.

Havells (Rs 1,317, -4.19%)

The stock fell ahead of the Q3 results. After market hours, the company reported a decline in margins, and a 1.5 percent rise in net profit.

Bull argument: Strong brands. Sales growth has improved over the past few years. Durables under Llyods expected to drive growth.

Bear argument: After the Polycab issue, investors are sceptical of wires and cables companies. Gross operating margin of 10 percent is below pre-Covid levels of 13 percent.

Oberoi Realty (Rs 1369.75, -9%)

The stock was among the big sellers during the sell-off in real estate stocks on January 23.

Bull argument: Outlook on the real estate sector continues to remain

positive. Oberoi among the companies with better standards of corporate government, and a good track record of execution.

Bear argument: In the event of the market correcting further, real estate stocks in general could take a beating they have risen sharply since April and investors would be tempted to take profits. Oberoi itself has risen over 70 percent. Most positives already are reflecting in the stock.

Coforge (Rs 6223, -0.96%)

The third quarter numbers have been in line with market expectations.

Bull argument: Gross margins have been on an uptick. IT stocks in general have done well despite the pessimism surrounding the sector.

Bear argument: Overall demand environment continues to be challenging, according to IDBI Capital. Dollar revenue growth during the quarter was lower than guidance. Stock has run up more than 50 percent in the last 10 months.

Cipla (Rs 1,407.95, +6.97)

The third quarter numbers lived up to market expectations.

Bull argument: Growth in US business continues to be strong, driven by respiratory medicines. When market outlook on pharma sector turns positive, Cipla being the market leader stands to benefit the most.

Bear argument: If the US FDA gives an import alert to Cipla’s Indore plant it could prove detrimental to the company given the plant contributes 30 percent to the US sales.

Kotak Mahindra Bank (Rs 1,783.85, -1.27%)

The stock fell nearly 1.3 percent despite the bank reporting healthy third quarter numbers

Bull argument: Analysts positive on the stock due to the bank’s healthy growth in credit as well as deposits.

Bear argument: Stock has underperformed for a long time despite reasonable valuations. Institutional investors are not too hot on the stock. A strong candidate for re-rating but there is no saying when it will happen.

VST Industries  (Rs 3499.85, -3.86%)

VST Industries' third quarter net profit tanked 32 percent year-on-year.

Bull argument: Valuations are cheaper compared to ITC. In January, Radhakishan Damani bought additional 2.22 lakh shares in VST Industries, taking his stake to over 30 percent. The company is almost debt free.

Bear argument: Sales growth has been tepid over the years, 6 percent compounded for the last five years and 7 percent for the last 10.