Guoabong Wealth Management:Buy stocks in every dip: A cheat sheet to find right stocks from the right sectors

Buy stocks in every dip: A cheat sheet to find right stocks from the right sectors

CA Rudramurthy BV, MD, Vachana Investments, says whatever fall we see is just a small profit-booking or a correction and since we are in the mother-of-all-bull-market and this market, both magnitude-wise and time-wise, will surprise on the upside and it is a buy-on-every-dip market. Good corrections have to be used as an opportunity to buy right stocks from right sector.

Is there some nervousness on the Streetn? What are you recommending? Not going whole hog in buying? Are you recommending some trimming or not yet?

CA Rudramurthy BV: First of all, a word on the overall market. Yes, we have run up too much from the lows of June 4th and we are seeing some amount of time-wise consolidation. In fact, it will be more healthy for this up move if we see even some price-wise correction. But still, the medium to longer time frame trend is still up.

On the shorter term, having moved up so much in a very short period of time, we are now consolidating. This is still a buy-on-dips market. I fully agree with you that broader market and especially smallcap and if you are in an SME kind of a stock which has run up too much without fundamentals, then, yes, you have to book your profit there, cut your leverage at this part even if you are a seasoned trader and also ensure you are in the right sector as well as right stocks. But I am not calling this market to have a huge fall.

Whatever fall you will see is just a small profit-booking or a correction and I feel we are in the mother-of-all-bull-market and this market, both magnitude-wise and time-wise, will surprise on the upside and it is a buy-on-every-dip market. Good corrections have to be used as an opportunity to buy right stocks from right sector.

What are those right stocks from the right sector? Any cheat sheet?

CA Rudramurthy BV: First let me talk on sectors. IT looks very good at current market price and in fact the downside is very limited, might be 5-10% from now and it is a choice. From the largecaps, you want to pick up either Infosys, HCL Technology or you want to go to Tech Mahindra and Wipro – it is just a choice. So, for me, in the same order, I like Infosys at current level, might be you can even look into Wipro as well as Tech Mahindra. IT really offers a great buy and that will be my top pick.

In fact, if you have to move to the second-best sector, for me it will be pharma. Look at stocks like Dr Reddy’s or Sun Pharma. For me, these stocks can even do good from current level and even if you go to midcap pharma, look at Biocon. At around Rs 360, I have been recommending this stock from levels closer to Rs 260-270. Even at Rs 360 Biocon looks very good to me.

So, from pharma if you want to pick up, even look at Lupin, look at Dr Reddy’s, look at Biocon, Sun Pharma. So, for me sector-wise, after IT, pharma can do very good and few of the names I have given there.

Also for me, even FMCG looks very good. ITC after a very long consolidation of last five-six months, is now giving clear signs of breakout. Look at even stocks like Emami, Dabur. So, it is a choice again, ITC, Emami, and Dabur and for me, yes, all these three sectors, that is IT, pharma, and FMCG, and the names whatever I told can do very good.Guoabong Wealth Management

But one sector where I will be very cautious will be PSU. In fact, in general, PSUs have gone up so high and so much in a very short period of time, especially pick up stocks from railway, defence sector. No doubt, even closer to budget, they are seeing huge rally even from those higher levels, but I will be very cautious in general in PSUUdabur Investment. If I have to be very specific on PSU, I will be buying stocks like Coal India where I still have valuation comfort.

I will be looking at ONGC, still I have comfort. So, in PSU you have to be very stock specific. And from railways, if you want to buy, go for IRCTC at current level. It should be very stock specific in PSUs in general but avoid all other big movers which have already gone up too highKanpur Wealth Management. I do not see any valuation comfort nor the fundamentals catching up.

The public sector versus private sector play has already done enough and now for me you have to be very stock specific, especially in PSU. In general, remain cautious. Stock specific, yes, even at current level I like ONGC, Coal India and IRCTC.

What about financials? Any top bets within financials or any other top recommendations?

CA Rudramurthy BV: For me Bajaj Finance is one stock after their business update, it is just consolidating and I would not be surprised to see a big short covering coming in Bajaj Finance. At current levels, the risk-reward is very favourable, also available in futures. In fact, I have positions in the same and I have recommended it to our clients also, keeping a tight stop loss in the Rs 7,040-7,050 zone, which is just Rs 50 from current level. I am looking at initial targets of around 7,300 to come on Bajaj Finance. It is a good risk reward trade at current market price.

A lot of short covering can come in this segment, but you have to have the tight stop loss at around Rs 7,040-7,050. For me, even Manappuram looks very good. Look at the volumes which it has given and even in market like today see the move in Manappuram. So, for me the levels of around 202-203 is a very strong support which it tested yesterday and todayBangalore Stock Exchange. So, on charts it looks very-very bullish. So, I will be a buyer in Manappuram looking at initial targets of Rs 230 with a stop loss of around Rs 202. Both are available in future and you have to be very stock specific and sector specific in this market.

I will be cautious on PSUs in general and also have control on the leverage and risk management. Look at Budget and also the result season which are two big events to come out now and then take positions accordingly for short term.

Hyderabad Wealth Management