Corporate banks, select pharma should continue to do well: Rahul Shah, MOFS

Corporate banks, select pharma should continue to do well: Rahul Shah, MOFS


Defensives and corporate banks have been frontrunners this far and we have seen that outperformance in the recent rally as well, Rahul Shah of Motilal Oswal Financial Services said. Excerpts from an interview with ETNOW.
How are you assessing the markets fundamental especially now that the earnings season is officially started, TCS and Infosys delivered their numbers. Next week, we are expecting big boy Reliance, HUL, Zee Entertainment, etc. So, what is it that you are expecting?


Two, three trends have been very clear in the market. The market is just focussed on the few stocks and it is more concerned about those stocks’ numbers. So starting with TCS and Infosys, the numbers are slightly better than what the Street was estimating, For IndusInd Bank, again, the numbers were good enough.

So, going forward, there are certain things one needs to look at in the financial space. Kotak Mahindra Bank, HDFC Bank and Bajaj Finance are the other names which you would like to see. In last six to eight months, we have seen corporate banks doing quite well, be it Axis or ICICI Bank. So I feel this is the focus list for next week.

There was a lot of negative news flow in the week gone by—Glenmark Pharma, Aurobindo Pharma, Cipla as well on Friday. Can you help us understand how this US FDA’s negative news flow is likely to shape up going forward?


If you look at it, there are observation issues since last two, two-and-a-half years and we have been seeing the entire pharma space underperforming. Till the time the issues are not resolved, I do not think the stocks will outperform. We have seen latgecaps like Lupin, Sun Pharma underperforming in a big way. Then we saw Aurobindo and Glenmark last week hitting their 52-week lows. So, I think this will continue for a while.

Till the times earnings come up, till the time these issues are not sorted, they will still underperform, while a few others will outperform. Biocon looks interesting from here in terms of valuations and in beaten down space in the large cap name I think Sun Pharma looks attractive with the valuations what it trades at. So, I think the downside in both these two stocks looks limited. So, there could be some decent upside in both the stocks from current levels.

Reliance Industries is likely to come out next week. There is HUL as well which is one of the biggest names from the consumption space. What can we expect this time around as far as the Nifty Q2 performance is concerned?

It looks like the numbers will be good. I think they have been doing quite well in the last two quarters. They are bang on their targets and slightly above what their own commentary. So I think instead of results, more important thing is the guidance, what people would be looking for is the prospective. Secondly, for HUL, the volume growth is the most important thing. Somewhere, we have seen the stock has appreciated quite well in the last few sessions and valuations obviously are expensive. But I think if you look at the consumer names like Unilever, Nestle—we have seen PE multiples have always been revalued and they have gone higher and higher.

For Reliance, the most important thing is how the Jio is going to be in the new regime of the costing structure in the telecom space.

Which stocks would you like to talk about, which are the ones you are tracking closely?

I think defensives and corporate banks are in the front seat and we have seen that outperformance in recent rally as well. So, among defensive stocks, I like HDFC Life and HUL are at the top of my mind. So, I think these two stocks look quite interesting. And, among corporate banks, I think ICICI has been the leader and has done quite well.





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