Banks being high-beta sector still have some upside left in them. So, investors could look at banks like State Bank of India and Punjab National Bank that have still not reached their earlier peaks says Gopi Suvanam, Founder, InvestWorks in an interview with CNBC-TV18’s Latha Venkatesh and Sonia Shenoy. They could make good range bound trades thinks Suvanam.
However, he advises against investing in ICICI Bank since it is already at 52 week highs, he adds.
With regards to the capital goods stocks that have already seen 52 week highs like Larsen and Toubro, Siemens, Crompton Greaves he recommends short selling some of them, especially L&T.
According to him, market in the near-term is sure to remain volatile and there could be lot of Put and Call covering.
Also read: Sensex likely to pause; buy every dip: Altaira
He is of the view that since the Nifty has not yet reached the peak in terms of price to earnings (PE), so market could see another 2-3% upside but not more. “The PE values are - we are about 18.3 backward looking PE, whereas last year we touched 19,” says Suvanam.
The Indian growth story he says may not be dependent on only on growth of capital goods sector but there are other sectors like exports, textiles.
Below is the interview of Gopi Suvanam, Founder, InvestWorks with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: What is your take on the market?
A: Market is going to remain volatile. There will be lot of Put and Call covering.
Latha: Do you think there is more juice left?
A: I would not look at the chart of the Nifty because 6,500 is long overdue, we have been close to this six years back, so if you look at price to earnings (PE) values, we are about 18.3 backward looking PE whereas last year we have touched 19. So, we still haven’t reached the peak yet in terms of PE. If there is an upside, there is about 2-3 percent but not more than that. I think the range has shifted up but there is a cap at some point.
Latha: What about individual stocks. It has been so much of a long bank short IT kind of trade that’s happening. So, let’s start with banks. Would you still buy them, is there anywhere you will take profits?
A: Banks is a high beta sector so it will go with the market trend. So, if there is 2 percent upside, there are some pockets where people can still go and invest for example State Bank of India (SBI) is still quite low compared to the peaks that we have touched this year itself and Punjab National Bank (PNB) is at Rs 610 levels whereas Rs 650 is the peak that we have seen.
Whereas ICICI Bank has already at 52 week’s high so I would not go and invest in stocks like ICICI but some select stocks like PNB would be a good bet for some range bound trading.
Latha: What about IT itself, we have seen lot of selling happening itself even in might stocks like Tata Consultancy Services (TCS). Would you use any of the dips to buy anything midcaps, smallcaps, largecaps?
A: Two broad things. One is there has been lot of buying over the last one year so people are looking to book profits.
Second is people expect rupee to strengthen significantly which. In fact RBI should buy truck loads of dollars and keep it in its reserves. So, it should keep a floor at Rs 60.
From a slightly medium to long-term to perspective IT will do fantastically well. From valuations perspective, I would not go for TCS or Infosys but there are lots of other stocks like Hexaware Technologies Ltd, which is trading at 15 price to earning (PE), then there is Persistent Systems which is also doing fantastically well. Some of these midcap stocks are very good buy at this moment and if you look at TCS, it has both components, it has IT and it has also BPO. Even if the BPO could slow down, companies like Persistent Systems that are more focused on products could start seeing some momentum.
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