Navigating Volatile Markets: Focus on Large Cap Stocks
Introduction
Hi friends! At the time of recording this video, the markets are extremely volatile. There are days when the Sensex tanks by almost 500 points, followed by days when it shows significant recovery. Overall, the market feels uncertain, and during such times, I believe it’s essential to focus on the large-cap space. Large-cap stocks provide stability to our portfolios. In this post, I’ll share insights on five popular large-cap stocks. Please note, these are not buy or sell recommendations but rather my perspective to help you make informed investment decisions.
1. Bajaj Finance Limited
Bajaj Finance has shown an interesting trend over the past year, with returns of -15%. In comparison, the Nifty 50 has declined by around 25%.
Key Insights
Despite the stock’s decline, the fundamentals remain strong:
- Sales Growth: 31% in the trailing 12 months.
- Profit Growth: 21% in the trailing 12 months.
The P/E ratio has been relatively attractive at 28-29, down from a median of 42 over the last five years.
Reasons for Underperformance
- Regulatory Challenges: Two of their lending products were banned by the RBI, causing temporary sentiment issues.
- Competitive Pressure: The entry of Geo Finance has raised concerns about Bajaj Finance’s growth.
- Rising Costs: The cost of funds has increased, impacting net interest margins.
Outlook
The stock is currently trading around 6,899 with strong support at 6,428. If it drops to this level, it might present an opportunity, considering potential upside to previous highs of 8,100.
2. Avenue Supermarkets Limited (DMart)
Avenue Supermarkets has experienced a 25% drop over the last five trading sessions, despite a 32% gain in the last five months.
Valuation Analysis
Currently, the stock’s P/E is around 100, lower than its five-year median of 123. The P/B ratio is also more favorable, trading around 13-14 compared to a five-year median of 18.
Core Concerns
The key issue lies in the Q2 results:
- Revenue Growth: 40.2% increase, but like-for-like revenue growth for stores over 2 years fell to 5.5%.
Outlook
While I don’t see it as a long-term stock, short-term swings may be possible. A support level at 3,600 could provide trading opportunities.
3. Bajaj Auto Limited
Bajaj Auto has seen a 21% decline recently, correcting from a remarkable 150% gain over the past year.
Market Sentiment
The stock fell following conservative sales outlooks for the upcoming festive season.
Valuation Perspective
The current P/E is around 44-45, compared to a five-year median of 20. The P/B ratio stands above 10, suggesting overvaluation.
Support Levels
Technical support is noted at 9,300, with a secondary level around 8,700.
4. Reliance Industries Limited
Reliance Industries is a notable mention due to an upcoming bonus share announcement.
Price Adjustment
If you hold 10 Reliance shares before October 28th, you’ll receive an additional 10 shares. However, the market price will adjust post-announcement.
Recent Performance
The stock has corrected by about 15% due to disappointing Q2 results, with profits declining over three quarters.
Analyst Ratings
Most analysts maintain a buy rating, with target prices ranging from 3,400 to higher levels.
5. Tata Consultancy Services Limited (TCS)
TCS has corrected by nearly 10%, falling from highs of 4,600 to around 4,100.
Performance Overview
Although revenues grew by 6.4%, the market remains unimpressed due to a sluggish North American segment.
Future Outlook
The growth of TCS is closely tied to the Fed’s repo rate decisions, expected to improve by 2025-2026. Currently, the stock is fairly valued with strong support at 3,800.
Conclusion
In this analysis, we’ve seen that all five stocks have faced corrections, a reminder that it’s often wise to wait for price drops before buying. These insights may help you make sound investment decisions. Remember, always do your research before acting. Until next time, keep investing wisely!