Indices may be sluggish. Quality mid-cap stocks will sparkle
Gautam Shah pointed out that the global markets have bottomed after the steep correction and have resumed their upward trajectory. Inflation has been tamed as is seen from the flat CPI rates and the risk of further interest rate hikes is remote. The geopolitical tensions relating to the USA-China and Israel-Gaza are also discounted and unlikely to worsen further.
However, the Indices such as the Nifty and the Bank Nifty are unlikely to show much action until and unless the key resistance levels of 19800 and 44500 are decisively taken out by the Bulls. Even the large-cap stocks like Reliance, HDFC Bank, L&T etc are looking tired.
The action is going to seen in the midcap space which is witnessing a spectacular Bull run. Quality midcap stocks are likely to sparkle, he opined.
PSU stocks are the leaders of this Bull market
Gautam Shah rightly pointed out that PSU stocks had been wrongly neglected by the stock market pundits for a long time and were languishing. However, that has changed decisively now. They are now much in demand. The PSU Index is at its’ life-time highs and is heavily outperforming the broader Indices.
“It is a structural story which will last a couple of years more,” he opined.
It should be noted that a similar view has been expressed by Ramesh Damani a few days ago.
“I am of the firm belief that this time, the leadership is with the Public Sector stocks,” Damani confidently said (see Ramesh Damani recommends buy of PSU Stocks. He says PSU stocks will be the leaders of the post-election Bull market).
Madhu Kela and Vikas Khemani are of the same view.
“HAL has broken the myth that you can’t make money in public-sector companies,” Kela stated. See HAL is up 65% YoY but is still not expensive. It has a lot of room for appreciation: Madhu Kela, Vikas Khemani).
Power Sector will do very well. NTPC is the leader of the sector. It has 30-40% more upside potential
The entire Power sector is sparkling due to the structural reforms being implemented by the Government. NTPC, the venerable blue-chip PSU company with a dividend yield of 3%, has done very well on the Bourses with a 50% YoY return.
Gautam Shah advised that we can buy NTPC without much hesitation. It has another 30% to 40% upside potential, he said.
Tata Power is also an evergreen blue-chip that does not require much thinking for buying, he added.
Avoid BSE because it is overheated. CDSL should be bought at any price for a 3-5 year investment. MCX is also a great buy
BSE has been an incredible performer with a YoY return of 250% due to the popularity of its derivatives business. Some experts have recommended a buy of BSE even now for a gain of 22% (see The BSE stock has rallied ~2.5x in the last six months led by market share gains. It is still a good buy for 22% upside: HDFC Sec)
However, Gautam Shah suggested that the stock is overheated and the potential for more gain is low. Also, the risk-reward ratio is not in favour of making an investment.
However, CDSL is still quoting at reasonable valuations and is an excellent buy at the CMP and on declines, he advised. Investors will be richly rewarded in the next few years by CDSL, he added.
MCX was in the doldrums recently owing to allegations of price gouging by 63 Moons, its software vendor. However, all of that is in the past now. The new trading platform designed by TCS is now operational (see MCX stages a smart recovery and gains 75% due to resolution of new TCS trading platform).
Company in its concall has mentioned that it doesn’t has to pay to TCS in the 1st year pic.twitter.com/Oh659OXTzK
— CNBC-TV18 (@CNBCTV18Live) November 10, 2023
Stay with defensive sectors like Pharma & IT. Avoid Banks, Infra & capital goods
Gautam Shah disclosed that he had advised his clients to buy Ajanta Pharma as it offers good risk-reward. Alkem Labs is also a good buy. He stated that Pharma and I. T. are safe sectors to invest in because they have not shown much action in the recent past and valuuations are reasonable. We can steer clear of Banks, Infra & capital goods stocks, he suggested.