[ad_1]
What would you be willing to do first, take some profits off the table for PSU banks or start buying the IT decline?
PSU Banks after a long time are back in focus. We should continue holding on to the PSU banks and the earnings cycle has revived which was visible in Q2. These should be clear winners in Q3 earnings as well.
I think there is a halt in the rally but I would definitely advise to keep on adding and continue to ride on the PSU banks. Secondly, talking about IT, we have been hearing a lot of noise since the last three, four months and stocks have just been rattling off from their highs. Most of them are 30-40% off the table and are good value picks at this juncture.
There could be pain for the next two, three months in terms of price but in terms of the earnings cycle, one should look at it after Q3 numbers start building up for the next one year or so. When there is extreme noise, one should start gathering and that is what I feel in the IT pack. If somebody wants comfort, then Infy and TCS remain the top bets. A lot of the midcaps have also been hammered relentlessly. So one should start allocating IT stocks in their portfolio.
My follow up question would be why should one allocate as these are not very cheap stocks? In the best case scenario, they will grow at 10-12% for the next two years. Most of the IT stocks, the largecap ones minus and are trading at almost 20 times. Are they really cheap?
No, they are not cheap. Markets usually discount future earnings and this is obviously what we are seeing in price correction, what we saw on the street for most of the IT companies. After Q3 numbers, I am sure people will start reverting and talking about it. and I think this is Q4 and maybe a year later, one should start looking at it. So wherever the guidance is good and wherever they feel the managements’ commentary has been good, those stocks will start moving up from here.
Which stock can see that move? What would be your top bet for 2023 – sector and stock specific?
PSU banks will continue to perform. We are just seeing the trailer of most of the banks which have delivered in the last one quarter or so. Small PSU banks as well as second rung large PSU banks also will continue to do well. So the likes of , should outperform in the larger space. Among small banks, one should look at stocks like as well as Jammu & Kashmir Bank. This theme should play out in 2023.
[ad_2]
Source link