Short Call | Where to find value in a pricey market? PNC Infra, Avenue Supermarts in focus

Short Call

The Indian benchmarks are down 6 percent from their lifetime highs, and valuation concerns still loom large. But even in a pricey market, opportunities can shine through the cracks. In this landscape of elevated valuations, brokerages like Motilal Oswal and JM Financial throw light on some potential wins, albeit with their own twists.

Motilal Oswal in its report titled 'Creating Wealth Through Bruised Blue Chips,' zeroes in on the potential of blue-chip stocks that have taken significant hits from their highs. These companies, known for their resilience and profitability, offer rare buying opportunities when their stock prices dip significantly, provided there's no structural damage to their fundamentals.

While the currently elevated valuations in the Indian market limit the pool of bruised blue chips, there are still some options. Adani Enterprises, SBI Cards, Tata Elxsi, Avenue Supermarts, and Asian Paints to name a few are on Motilal's watchlist, currently trading 30-80 percent below their five-year highs.

JM Financial in its strategy report on bottom-up stock picks for 2025, curated a list of 12 stocks worth keeping an eye on. The lineup included names like Maruti Suzuki, Axis Bank, Havells, and BHEL, and was assessed through the lens of 'growth at a relatively reasonable price' (GARRP). Why "relatively" reasonable? Because the brokerage believes that the broader market would need to drop by 20-25 percent to provide a safer entry point for investors.

Well, whether it's Motilal Oswal's hunt for bruised blue chips or JM Financial's GARRP strategy, both underline the need for timing. For investors, the message is that even in a pricey market, opportunities exist—but only for those willing to dig deep and wait for the right moment to strike.

The key, according to Motilal, is to identify stocks that have been bruised, understand why they fell, watch for recovery triggers, and buy when valuations become attractive.

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PNC Infratech (Rs 346.25, +11.8%)

Shares surged after the completed a highway project touted by the NHAI before its completion date, earning a Rs 4.4 crore bonus.

Bull Case: The company's order book remains robust as it has already surpassed its FY24 order value in just the first half of FY25. In addition, a pick in government capex spending in the second half of FY25 may further aid its growth trajectory.

Bear Case: The company was disqualified by the Ministry of Roads, Transport and Highways from participating in any new tender process of the ministry for a year due to a bribery case filed by the CBI involving four employees of the company.The uncertainty from the disqualification looms large, not just spooking investors away but also reducing growth prospects.

Avenue Supermarts (Rs 3,718; -2.6%)

Goldman Sachs cut its target price on DMart to Rs 3,425 per share, down from Rs 4,000 earlier, reiterating its sell call.

Bear Case: In an attempt to maintain its competitive advantage, DMart has been increasing its price discounts. The price discounts offered by DMart for a basket of grocery produce have increased to 25 percent over MRP in December, up from a range of 15 percent over MRP in July this year, impacting profits and margins. GS added that DMart does not have any competitive advantage in fresh food categories in urban settings, and large sections of India's grocery market are not addressable by DMart.

Bull Case: However, Hong Kong-based brokerage CLSA is bullish on DMart as the firm is making an appropriate pivot to private labels, which will place it well to meet future competition. Private labels are brands which are owned and sold solely by the owner of the retail store. As a result, CLSA maintained its 'outperform' rating on DMart.

Awfis Space Solutions (Rs 784.50, +9.4%)

Shares gained after 85.3 lakh shares changed hands.

Bull Case: The management is bullish on demand for flexible office spaces in India and expects the penetration of flexible offices in the leasing segment to rise to 20 percent by FY28 from 10 percent at present. Demand will be driven by a greater preference for fully managed spaces and decentralisation by large corporates. The management intends to expand its presence in Tier II cities. In the last 12 months, its footprint has risen to 20 centres across nine cities from 14 at present.

Bear Case: Company sees supply constraints in a few key markets which will keep prices and occupancy levels elevated in the near term

(With inputs from Vaibhavi Ranjan, Zoya Springwala, and Veer Sharma)