We have added 2E Networks in July, exited UPL; prefer HDFC and Axis among private banks: Pramod Amthe

Time of India

2 days ago

Pramod Amthe
, Head Of Institutional Equity Research,
InCred Capital
,
says they are adjusting their portfolio. They are exiting more stocks than adding. E2E Networks is a new addition for July. The firm is exiting
UPL
to book profit. They prefer
HDFC Bank
and
Axis Bank
. Among PSUs, they downgraded
Bank of Baroda
. The firm prefers largecaps like
SBI
and
Canara Bank
. These changes reflect their current investment strategy.
We are going nowhere. Currently at 24,600, but for the past four to six weeks, we are just swinging between the 24,500 mark and 25,300. Do you think this consolidation phase will continue for longer than anticipated?
Pramod Amthe:
We have been broadly indicating that the market will remain in a consolidation phase, especially where the earnings trajectory has been relatively tepid and no change is seen even in the large part of the results which have come in in the first quarter. On top of that, based on the flows we have seen some excitement coming through, predominantly driven by flows and with the recent overhang of the tariff, especially where India seems to be sidelined as compared to the earlier expectation that we should sail through. It has incrementally added a new dimension and put pressure on the consolidation phase. We stay put with our broader index target where we see a low single digit return for this calendar year and that seems to be prevailing for the last couple of months.
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I agree that
volatility
is prevalent at present and one should practice caution but at the same time, there is a lot of sectoral churning these days. We started the earnings trajectory with the IT numbers. After the Q1 numbers from the major IT companies, the sector was in a downturn, but now it is witnessing some sort of momentum. If we talk about the sector specific approaches, which are the sectors on your radar at present?
Pramod Amthe:
You are right. What we have selectively done in the recent result season is clearly pre-results or in the last couple of weeks, the extent of valuation correction that has happened is much steeper than the analysts' EPS consensus cuts. Just to give you some numbers, EPS cuts in the last six months have been in the region of around 8% and versus that, the index has corrected at nearly twice that pace.
We clearly see some selective opportunity on a tactical basis where we have upgraded Wipro and L&T Tech Services and that seems to be more tactical because there is still an overhang about the global growth and especially how the US will shape up post the tariff tantrum. So that is the one which we have seen. In the recent weeks, where we have seen some stability is in the FMCG. The index has seen stability and is making a comeback. We have upgraded HUL to an Add. They are getting the portfolio more towards premium and green shoots are visible in terms of the volume growth. So those are the couple of select plays which we are looking at on the tactical front.
What are your high conviction stock bets? There is a Nifty outperformer in Thyrocare which is still there on your list. What are the other high conviction bets that you have taken currently?
Pramod Amthe:
Within the high conviction, we are still exiting more stocks than adding. Last month, we added the largecap
NTPC
versus the four stocks which we exited. For the month of July, we are looking at the recent initiation of E2E Networks which is a proxy play for India EAI spend and there we have started with the add rating and with the new parent L&T is coming in to pivot the business as a more B2B than a B2C. We feel the runway for growth is going to be drastic for E2E, and that is a new addition which we are making for July. Against that, we are exiting
UPL
in the high conviction list of 22, 23 stocks of our total 200 stocks coverage.
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The reason to exit UPL is we got the bottom right. The sign of cyclical reversal is clearly visible in UPL, but the results have been a dampener, and so we would like to book our profit in UPL on the short-term basis.
You are overweight on financial services overall. If you talk about PSU and private banks, do you see some kind of distinction coming in as far as this quarter is concerned? The interest rate trajectory is quite visible with the 50 basis point cut that was announced in the last policy. In the monetary policy due tomorrow, the expectation is that a 25 basis point cut may be there. So, how should one approach PSU and private banks particularly?
Pramod Amthe:
We are more inclined towards the private banks where the central bank policy towards reviving the credit growth, even though the signs are still not completely visible, should play out in favour of the private banks wherein our high conviction is on HDFC Bank for the quality and Axis Bank for playing on revival of credit growth. So those are the high conviction ideas. Among PSUs, we are selective and have downgraded
Bank of Baroda
. So, the preference is more towards largecaps like SBI and also towards Canara Bank versus the other PSU banks.