15 Sensex companies that have lost 20 to 35% from 52-week highs
|Company name||52-week high||Current market price||% loss from 52 week high|
Should you buy the stocks of banking and finance companies now?
The worst fall has been seen in the stocks of Bajaj Finance and Bajaj Finserv. We still believe that the two stocks are expensive. Yes, they are growing fast, but, investors cannot pay any price for a growth. The p/e multiples for these stocks is extremely high and hence is best avoided. If investors are looking at the banking and finance stocks, than they could buy the stocks of ICICI Bank and HDFC Bank. Both the stocks have fallen sharply around 22 to 25% from highs. HDFC Bank will continue to churn out growth in the range of 15 to 20% and the stock is cheap now to buy after the sharp fall. Yes, there is the hangover of merger with HDFC, however, it could be EPS accretive in the future. ICICI Bank is another stock that one should buy, after financials of the company were robust. NPAs remains under control and the net interest margins at the bank also remain impressive, which are reasons to buy the stock of ICICI Bank. Kotak Mahindra Bank we still believe is overvalued and around Rs 1500 levels could be attractive.
Buy the stock of Tata Steel and Infosys
Tata Steel is certainly a stock to buy because the price to earnings ratio of the company is 4 times, and there is a dividend of Rs 51 per share, if you buy the shares now. A fall of nearly 29% in the share price also makes the shares attractive to buy. We believe that the company would be one of the benficiaries of steel demand in Europe, and higher prices. The company also has decided on a stock split, which would make the shares affordable. Infosys too is a good stock to pick, on account of growth prospects and dividend yield. Expect yearly dividends to give a yield in excess of 2%. The company will continue to clock growth rates around that 10% mark in the next few years. Hindustan Unilever too is a good stock to buy, after the sharp fall of 23% in the stock. The only worry is rural demand and increase in input costs for the company.
Buy in small amounts and avoid large deployments
At this stage, most stocks from the Sensex are looking lucrative after the fall, we would advise investors to stay invested for the longer-term and deploy small amounts. It’s the best time to build your portfolio by buying into good quality stocks. If you are looking at a tenure of less than 3 years, it is best to avoid stocks. Also, buy into companies where there are no regulatory hurdles and no debt. For example, we like Dr Reddy’s stock, but, we do not know when US Fed warnings would come, which is why we are not recommending these stocks. Look for reasonable p/e multiples, dividend track record and good growth prospects going ahead.