Caution stock market investors! Avoid panic selling or buying of stocks amid high volatility Indian stock market benchmarks Sensex and Nifty have been reeling under pressure in the wake of the rising number of coronavirus (COVID-19) infected persons and deaths. Many countries including India, around the world have announced a lockdown in order to prevent the novel coronavirus. The 30-share index Sensex has tumbled 23 per cent so far in March while the broader Nifty50 index plunged 24 per cent from the opening levels of March 2. While Sensex and Nifty50 gained 8 per cent and 10 per cent, respectively, so far this week. Amid high volatility, investors need to be extremely cautious while making trading decisions and avoid any panic selling or buying of stocks, Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd told Surbhi Jain of Financial Express Online in an interview. Jyoti Roy further recommended investors to stick to quality stocks at this point of time. Edited excerpts: 2. What should be investors’ strategy while trading in the market?We advise investors to be extremely cautious while making trading decisions during such volatility times and avoid any panic selling or buying of stocks. We recommend investors to stick to quality stocks at this point of time. We believe FMCG and select Pharma stocks will out-perform during these tough times and investors can look into gradually buying into these sectors. 3. Which sector seems to be well-positioned from a long-term investment perspective?We believe that the current correction would provide a great opportunity to buy into quality names in the consumption space and retail focused private sector banks. We believe that these sectors will be amongst the first to bounce back. 4. Which five stocks you believe will benefit from the Coronavirus outbreak?There has been a lot of panic selling at the market but there are few companies in the pharmaceutical market that are holding up well like IPCA Laboratories Ltd. To be honest, we don’t see any particular stock that is benefitting from this outbreak; however FMCG and healthcare companies will see relative out performance during these tough times. 5. What are the top sectors to watch and avoid amid volatility?The stock market has been going through an absolute turmoil as the COVID-19 pandemic has slowed down economic activities significantly. Every day the situation is rapidly changing and there is very little that we can say with certainty at this point. But investors can keep a close watch on stocks in the FMCG, pharmaceutical, retail focused private sector banks and specialty chemicals sectors considering the current scenario. Investors can look to gradually buy into these sectors on every dip.
Services miss estimates; Software better than expected: Services business grew 0.6% q-o-q cc and missed HCLT’s Q3FY23 guidance, mainly due to a 3.8% q-o-q cc decline in the ER&D segment. Growth in the IT&BS segment moderated slightly to 1.6% q-o-qcc but was in line with estimates. BFSI and Life Sciences were the key growth drivers, while communications were the drag among verticals. Growth was led by the Americas region, while Europe and ROW posted declines.
Decline in bookings reflects delays in decision-making: HCLT won 10 large deals in services and three large deals in Software with net-new deal TCV of $2.1bn, down 8% y-o-y. Deal wins were driven by the services portfolio, were centered on cost optimisation and vendor consolidation and came mainly from BFSI, manufacturing and Life Sciences verticals. Management highlighted a ramp-down in discretionary spending in Hitech and communications verticals but pointed to a strong deal pipeline.
FY24 guidance in line with expectations: HCLT has guided for 6-8% y-o-y growth for overall business and 6.5-8.5% y-o-y cc growth in services segment and 18-19% margins in FY24—all in line with our assumptions. We maintain our FY24-25 cc revenue growth and margin estimates and expect HCLT to deliver 6.5% cc revenue growth and 18.4% margins in FY24. However, we lower our earnings forecasts by 2% to factor the higher tax rate indicated by the management.
Also read: MSME listing: How to migrate from NSE SME platform to main board? Check revised criteria
Raise PT: HCLT has fared better in Q4, particularly in North America and BFSI, unlike its peers. However, rising demand uncertainty as a US recession nears remains a concern. HCLT’s stock at CMP trades at 17x PE and offers a 5% yield, which in our view should limit downsides and derating. Hence, we raise our target PE to 17x (16x earlier) and raise our PT to Rs 1,125, offering 8% potential upside.