Largecaps and select PSUs to offer great value as markets stabilise: Sandip Sabharwal

"So, there are many stocks which are there in the largecap side also which offer value and as markets stabilise, we could actually see some comeback from PSU stocks also which have got beaten down substantially and within that also some could start moving up," says Sandip Sabharwal, asksandipsabharwal.com.

After Friday's move, it seems like the resounding comeback has led to a pretty strong gap up on the GIFT Nifty, what is it that you are anticipating in terms of market positioning? What are you advising one do?
Sandip Sabharwal: So, markets, it seemed even before the results on Thursday, the panic bottom was made. So, my guess is that we will not see those levels of the market at least in this year, calendar 2024. So, the bottom for this year should be done. From here on, we have to look at in terms of buying opportunities on the largecap side as I have been mentioning, the picks could remain similar where many of the stocks which are economy related, financials or something like Reliance or M&M where we are seeing significant brokerage upgrades coming now as was anticipated because the company itself had guided for a strong run in tractors in the second half. So, there are many stocks which are there in the largecap side also which offer value and as markets stabilise, we could actually see some comeback from PSU stocks also which have got beaten down substantially and within that also some could start moving up.



I was just going to come to that because many believe at least the brokerage notes that we have been reading since morning talking about as to how PSUs could very well make a comeback especially after the state election verdict. But what within PSU do you think is going to jump up?
Sandip Sabharwal: See, with the caveat that I do not buy PSUs much but I track the PSUs a lot. So, there are many PSUs which have got sold out significantly. So, I would still be somewhat careful on the railway PSUs because there, there should be some stalling of capex. But on defence PSUs, some of the financials, etc, or even some of the shipyards which got sold off more than 50%, we could see bounce back coming there.


What the outlook is on the entire pharma space. You have got Suven Pharma, for instance, which is in the spotlight and the company has spoken about CDMOs and how that is a big opportunity. But what else is looking good within pharma?
Sandip Sabharwal: Pharma has been a sector which has overall been doing well and at least many of the largecap companies have been reporting decent results. So, we saw strong numbers from Lupin. We saw strong numbers from Sun Pharma. Dr Reddy's performance was still lacklustre and near-term outlook seems hazy, so there we need to wait for better opportunities. And on the CDMO side also, there are many companies which have talked of opportunities. But smaller pharma, I usually do not buy, but there could be opportunities there for investors who can evaluate that opportunity.



Zomato is going to be included in the Sensex December end, about 23rd or so, but at 264 thereabouts would you be a buyer?
Sandip Sabharwal: Not at this point of time. Two, three things. One, on the quick commerce side the competition is increasing. We have seen a few couple of new players enter and we are seeing Amazon also planning to make a big foray into that, so I think that could become one area of concern and remain cash guzzling for the company and on top of that you have the QIP also. So, near-term movement could be lacklustre for the stock.

The other side of the equation is that value retail stocks because of this evolution of quick commerce, they have taken a backseat, whether it is DMart, V-Mart, lot of these so-called value retailers. Do you think the trade for 2025 could be avoid companies in quick commerce like Zomato and Swiggy, look at value retailers because if economy comes back, consumption comes back, these beaten down value retailer stocks could be the fallen angels of 2025.
Sandip Sabharwal: Yes, so V-Mart, we have actually seen V-Mart doing better and in fact, they have turned around over the last two-three years. DMart, Avenue Supermarts, I had always maintained that the valuations are so high that the earnings growth picture even before this competitive intensity of quick commerce started hurting them over the last few quarters was excessive. So, I think valuations still seem excessive to me. But given the fact that the stocks fallen more than 30% I would think or even nearly 40% from the top, there could be some stability coming in at current levels, people watching the performance and then taking a view but there is no compelling story as such in Avenue Supermarts as far as I am concerned.