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Last Updated : Mar 25, 2020 09:28 AM IST | Source: Moneycontrol.com

Market may see relief rally; Morgan Stanley cuts target of 3 stocks

BSE Sensex shed 37 percent from its record high of 42273.87 touched on January 20, 2020.

 
 
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After witnessing the biggest ever fall in history on March 23, the Indian indices saw some recovery and ended on a positive note ahead of some relief package likely to announce by the government.

The Finance Minister (FM) has announced some relaxation which will be beneficial for companies and the public but it doesn't have any meaningful impact on the market. However, FM has hinted that the economic package will be announced soon.

"The sustainable recovery will only materialize once Nifty closes above 8,300 zone for a few sessions. Financials have been worst hit, expect a sharp short-covering rally in this space once broader recovery happens. A larger relief rally towards 9,000 is possible," said Manav Chopra, CMT, Head Research - Equity, Indiabulls Securities.

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On March 24, the Sensex ended 692.79 points higher at 26674.03, while Nifty rose 190.80 points to close at 7801.05.

Except realty, all other sectoral indices ended in the green. BSE Midcap was up 1.5 percent, while Smallcap index ended flat.

"We may see some kind of relief rally if current lows are held well, support for Nifty is coming near 7,600-7,500 zone and resistance 8,050-8,200 zone," said Rohit Singre, Senior Technical Analyst at LKP Securities.

BSE Sensex shed 37 percent from its record high of 42,273.87 touched on January 20, 2020.

As the market sees some relief rally, here are 3 stocks for which Morgan Stanley has reduced the price target.

IDFC First Bank

Morgan Stanley has maintained underweight rating on IDFC First Bank and has cut target to Rs 15 from Rs 24 per share.

The risk aversion is hurting the valuation premium over what is warranted by RoE.

It has cut EPS estimates by 54 percent for FY21 and 41 percent for FY22 and also cut loan growth forecasts given the weaker environment.

There is likely a higher risk of delinquencies in the corporate credit book.

Ashok Leyland

Morgan Stanley has maintained overweight call, while cut the target price to Rs 64 from Rs 111 per share.

The FY20 truck sales are around FY08-09 average and the cycle is at a multi-year low. However, the company is our preferred rebound play.

The lower earnings estimates and target multiples to reflect low demand visibility.

It has cut Q4 volumes and expect a 2 percent M&HCV sales decline in FY21 and cut its FY21 and FY22 earnings by 60 percent and 30 percent, respectively.

HDFC Bank

Morgan Stanley maintained overweight rating and but target to Rs 1,285 from Rs 1,470 per share.

Post the sell-off, the valuations are below GFC lows, while pricing is in material stress on earnings.

The uncertainty to the duration of lockdown will keep stock volatile. The risk-reward is attractive given a strong balance sheet and improved profitability.

The company has high growth potential, it added.

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First Published on Mar 25, 2020 09:28 am
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