Buy Shree Renuka, PFC, sell NHPC: Mukadam

In CNBC-TV18's popular show Bull's Eye, Shahina Mukadam, Fairwealth Securities shares trading strategy of the day.

Buy Shree Renuka Sugars with a target of Rs 27.50 and a stop-loss of Rs 23.90. This company will of course benefit with the sugar decontrol that was announced yesterday. Being present in Maharashtra and Karnataka is an additional advantage for the company. Company specific the merger with its overseas subsidiary in the last couple of months is a positive. The balance sheet size is increasing by 40 percent. Being a debt-free company, it is going to improve the overall debt equity ratios of the company.
Buy Power Finance Corporation (PFC) with a target of Rs 195 and a stop loss at Rs 181. It is a good entry into the infrastructure sector. Good exposure for an investor. It will benefit from the power sector reforms that are being undertaken aggressively as of now. In addition, the company’s problems were mainly the huge interest burden that it has seen over the last couple of months. With interest rate softening going forward, it should be a good beneficiary.
Sell Union Bank. The rest of the banking sector has collected a lot. I believe Union Bank still has some way to go down. Basically, the valuations are quite expensive. At 1.5 times price to book, it is expensive especially given that its asset quality has deteriorated substantially in the last couple of months. The gross non-performing assets (NPAs) is almost close to 3.3 percent.
Sell National Hydroelectric Power Corporation (NHPC) with a target of Rs 20.10 and a stop-loss of Rs 21.80. The stock has corrected a lot last month. These last couple of days, we have seen the stock stabilise but I believe the upside from hereon even if the market improves is capped, valuations are extremely expensive and at about 10 crore per megawatt (MW), I believe it is on the upper side of its valuation band. One can look to short the stock at current levels.