Stock Portfolio: 5 stocks that can be added to your portfolio now: Rajat Sharma

“A few names that we’ve looked at are Forbes and Burger King. So those are two stocks that we’ve started coverage for and want to add. That’s another stock that you can buy after the recent fall and consider adding because inventory has gone down,” says Rajat SharmaFounder and CEO,
Sana Securities.

What do you hope to hear from AGM? Have you made anything based on management’s comments yet?
I haven’t really heard anything so far, but what I would hope to hear is what their NPAs and provisions look like, because in a low interest rate environment like the one we’ve been through, NPAs will look manageable. I just heard the chairman talking about 3% NPAs. Taking the standard measure of banking, 3% is a very manageable level of NPAs, bearing in mind that these NPAs were 5%, 6% overall and about 10% for PSU banks. Now we are down to about 5.5% in the PSU basket.

Personally, I believe that if interest rates continue to rise, there will be pain in the next two, three, four quarters. So my opinion of PSU banks is as negative as it was. I won’t be buying into these stocks unless many of these banks can actually cut NPAs and have higher provisions, because I’m convinced that a lot of money in the future will go bad.

What about metals, because there are so many concerns. There is the risk of a global slowdown in growth, continued higher inflation and the fact that we have seen the US Fed take a very aggressive stance when it comes to controlling inflation. None of that works in favor of metals and it really plays out.
Yes absolutely and look at stocks like not to mention the higher government rates. The government has imposed higher export tariffs on metals, which is somewhat opportunistic in this scenario, as China is currently not supplying the world, but the high inflation is causing the price of ferrous metals to rise.

Also otherwise capex is not really where it was before Covid levels. I don’t see how and I’ve made this many times that somehow I always get asked about metals on your show and may be the reason I really liked it

as a stock before Covid. The environment has now completely changed with higher inflation, high rates and what is happening in the capex for most of these government projects. I don’t see where the impetus or impetus can come for increased demand for the metals sector as a whole. There’s nothing there at all.

Back to recommendation stories

The whole PSU basket is buzzing in trade. Would you mind looking at one of the counters?
I like a lot of the stock in the PSU basket, is one, ONGC is the other. Only thing is I really liked ONGC around Rs 100-110. But given the way the stock rose following news of the Ukraine-Russia war and higher crude oil prices, I’d expect the stock to fall a little more. I do believe that this company will do very well in the future as the margin for this will increase if crude oil prices remain high as they have been. Definitely ONGC is a stock that you could buy after the recent fall and add to it as the stock is currently down to around Rs 154-155. At this price, it once again has an attractive dividend yield. One can look at adding this now.

A few names that I would talk about and that we looked at include Eureka Forbes and Burger King. So these are two stocks that we’ve set coverage for and want to add. Eureka Forbes received fresh private equity money. There has been a management change, the stock looks very attractive because it fits well into my schedule of investing.

It has a pure monopoly on water purifiers and air purifiers and they are adding a whole host of offerings to their portfolio. So that stock and Burger King too. We started with the cover. Those are two stocks to look forward to in the future. To answer your question about PSU stocks, a lot of them look really attractive. In fact even

NTPC, ONGC can be added to your portfolio.

In a market like this would it be advisable to stick with some of the defense mechanisms? Is that a strategy you would agree with, maybe take a look at select IT and pharma?
Defensive yes, but I wouldn’t consider IT a defensive industry purely because IT generally trades at very high valuations. When interest rates rise, that is an industry that suffers the most.

in particular has a 13% weight in the Nifty and so if a basket is sold or if Nifty starts to fall and there are a lot of ETFs and a lot of index based selling there is no way this stock can do well.

so IT. For good or bad, stocks like

, will all suffer the same and with the higher interest rates, their valuations will fall. There will be less cash flow on their books to carry out many of their projects. Most interestingly, this is an industry that has no debt on its books and is affected by rising interest rates, not because the cost of capital is going up, but because valuations are starting to fall and that’s something I’m personally most afraid of – high value.

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