“A large advance in the stock market is basically a sign for caution and not a reason for confidence.” - Benjamin Graham
HDFC Bank has seemingly woken up from a slumber with the stock surging almost 16 percent in the past one month. Given its weightage in the index, the stock moved the Nifty to new heights in the December 27 trading session. Consensus sentiment around HDFC Bank and the entire BFSI pack remains positive, somewhat different from what it was at the beginning of the year. The fear was that margin compression will keep the stocks depressed and that has played out. Now, as pockets like power, defence and railways have rallied, the love for BFSI stocks makes a comeback. Good asset quality, healthy credit cycle - what's not to like about them? But, well, there's always a but, is the Street brushing aside the RBI caution on unsecured loans? Will the consensus bullishness and over-ownership lead to underperformance?
Larsen & Toubro (Rs 3,544.00, +1.5%)
The shares gained on a major order win in Saudi Arabia to set up systems related to renewable energy generation and utilities.
Bull case: Strong orderbook and the stock remains a top pick for investors on back of capex growth in India. Export orders, which fetch better margins,
are also gaining traction. The FII stake has increased 3 percentage points over the past one year.
Bear case: Ongoing geopolitical conflict could prove to be a challenge for the company. Margin pressure in the infra segment persists. Topline and bottomline has compounded in single digit over the past decade, so, execution of orders holds the key.
Godrej Consumer Products (Rs 1103.45, +0.95%)
ICICI Securities upgraded Godrej Consumer to ‘buy’, raising the target price to Rs 1,260 from Rs 1,050.
Bull case: Better volume growth than the overall FMCG market. The Raymond portfolio is fully integrated now. Indonesia and Africa business continue to perform well.
Bear case: No major institutional interest over the past few quarters. Margins yet to recover to pre-Covid levels. The household insecticides segment is going slow and risk from small unorganised players remain.
UltraTech Cement (Rs 1040.36, +4%)
The stock gained on higher trading volumes from the one-month average and the market cap crossed Rs 3 lakh crore.
Bull case: Consolidation in the cement industry is under full swing and big players like UltraTech stand to benefit. Demand expected to remain strong due to government spending on infrastructure, low-cost housing schemes, and growing real estate sector.
Bear case: While demand remains strong, cement prices might not see much of an uptick, fear analysts, due to increased competition in the space. Domestic institutional investors have been trimming stake. Margin recovery still some way to go.
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