There is some auto ancillary exposure with two-three companies whose names come up again and again – be it Bharat Forge, Sona BLW, or Motherson Sumi. Even Motherson Sumi for that matter, has a lot coming from Europe. So the exposure is there but it is not that alarming for someone to really be scared of, especially as far OEMs are concerned.
How are some of these midcap IT niche plays looking to you? Let us keep the largecap lot outside of this. So what do you think of Persistent, a KPIT, a Coforge?Neeraj Dewan: I am still avoiding buying these at these levels. Maybe performance-wise, we have seen a couple of good numbers coming from midcap IT through short-term bounce backs, but they are still expensive and are not that cheap because if there is any headwind because of the US, the stocks are expensive and so some profit-taking may happen in these stocks. So, I am really not looking at buying midcap IT even at these levels.
What happens to the entire defence pack right now? I am specifically keeping railways out of the pack here because we were earlier accustomed to club defence and railways into one bunch till the correction transpired in the two segments. Do you think defence stocks will bounce back? We have seen a fair amount of order inflow coming in. We have seen sporadic outperformance from ship builders like HAL. How to treat these stocks?Neeraj Dewan: Actually defence has outperformed because earlier also, when the market had corrected, we had been recommending stocks like Mazagon Dock which had come to Rs 2100-2200 levels. HAL was available at Rs 3800-3900. So, these stocks from those levels have come up. I feel that the outperformance may continue for some more time. My targets are a little higher. So I booked some profit in Mazagon Dock, recommended some profit taking in Mazagon Dock, but still holding on to the significant chunks even in Mazagon Dock for clients and even HAL for that matter and there are small stocks also which have been doing well like Zen Technologies. They have been doing well and even they should continue doing well. There is still some outperformance. Plus, there is definitely order flow which is coming their way. For shipping specifically, further orders are expected for companies like Mazagon Dock and Garden Reach Shipping. If someone has been able to get into them at lower levels, they should hold on to them, and ride from these levels to get another upside of about 10-15%. Other than IT, what are the pockets you would avoid right now where you still think there is uncertainty either with regards to valuations or even growth given their global linkages?Neeraj Dewan: Yes, there is definitely IT. I am very stock specific now, I am not looking at sectors and looking at buying into sectors. Metals is one space which has global linkages and there you have seen something like a Tata Steel correcting a lot, we have seen good corrections happening even after that 200-day import duty announcement.After that, you did not see any up move happening in metal. So, metal especially the ferrous ones there is still some headwind, there is still not clarity. So, even though the stocks have corrected there I am not looking at buying into those names. The non-ferrous space was still looking at some opportunities, so there it was again the stocks had corrected and they have not been able to bounce back smartly like other sectors would have bounced back from lower levels. So, this can be another space where one can wait to get some clarity if one needs to buy the dips.
