Small and midcap stocks will continue to outperform as they are trading at attractive valuations in terms of PE and P/BV multiples, Rajeev Srivastava, Chief Business Officer at Reliance Securities, says in an interview to Moneycontrol’s Kshitij Anand. Edited excerpts:
Q) Both the Sensex and the Nifty rallied by more than 3 percent each for the week ended October 1. What led to the price action on D-Street?
A) The Nifty50 has bounced from the long-term 200-Days Moving average placed at 10,800 levels and expectations of domestic and global stimulus led to a sharp upmove across sectors and stocks for the week.
The midcaps and smallcaps gained by around 3.6 percent each. Interest rate-sensitive sectors like auto gained momentum on the back of strong monthly sales and the banking sector gained building a positive outlook with amid Unlock 5.0.
Q) Small and midcaps also rallied by over 3 percent to each during the week. Is it the liquidity wave that is carrying all boats higher or investors are building something positive amid Unlock 5.0?
A) The sharp correction in the preceding two weeks has enabled good corrective action and valuations turned in favour of the long-term averages.
We believe it (broader market) will continue to outperform as they are trading attractive in PE and P/BV multiples.
The Make in India initiative and large global companies making India a manufacturing hub will improve order books for various sectors and lower interest rates will aid margins in the next few years.
Q) In terms of sectors, banking led from the front followed by consumer durables and auto—what led to the price action?
A) The banking sector was the largest gainer, up by 6 percent led by private banks and NBFCs during the week. Consumer durables and auto, too, led the positive momentum on higher sales expected during the coming festival season and pent-up demand due to lockdown over the past two quarters.
Q) From the September quarter, the IT Index rallied by over 30 percent followed by pharma and energy. What led to the price action?
A) COVID-19 has changed many demographics for the world and investment themes to adapt to the new norm of life. These sectors possess new dimensions with work from home, thereby reducing the operating costs for the IT sector aiding margins and new large deals following the sharp upmove in the sector.
Pharma has been a strong performer since the start of the rally from Apr 20 with new drug launches, API business moving from China to India, and earnings multiple expansion after a gap of 4 years.
Q) Any short-term trading ideas for the next three-four weeks?
A) Here is a list of short-term trading ideas:
HDFC AMC: Buy| LTP: Rs 2,273| Target: Rs 2,660| Stop Loss: Rs 1,990| Upside 17%
The stock has bounced from its long-term support zone and has witnessed positive pullbacks over the past few days.
The RSI has also turned positive on the weekly charts that indicates limited weakness in the stock which could give an upward breakout.
This could bring the stock to test the long-term moving average as the potential target over the next few months.
Sun Pharma: Buy| LTP: Rs 507| Target: Rs 585| Stop Loss: Rs 475| Upside 15%
The stock has retraced from its long-term averages after a correction from the highs of Rs 565 in the last one month.
We believe it has completed its price and time-wise correction and we now expect it to outperform over the next few weeks.
For trade, a long position can be initiated for a target of Rs 585 with a stop loss of Rs 475 Tata Motors: Buy| LTP: Rs 133| Target: Rs 154| Stop Loss: Rs 123| Upside 15%
The stock has bounced from its 200-days average and has retraced almost 50 percent of the current up move of (100-50) levels near 125.
The sector is in positive momentum and the RSI crossing upwards from its average line confirms a strong move.
On the higher side, we expect the stock to test the recent highs of Rs 155 levels and recover the prior damages over the next few weeks.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
