Talking stock: Avoid buying NBCC, Trent and Praj Industries

Answers by G Chokkalingam Founder, Equinomics Research & Advisory

I have invested in Bharat Forge at Rs 1,124, Ashok Leland at Rs 90 and Munjal Showa at Rs 196. Please advise. - MANJUNATH

Sell Bharat Forge and Ashok Leyland if you get back your principals as valuations are fair at your purchase prices. However, hold Munjal Showa with a target price of around Rs 225 as it is available at an attractive valuation of around 12 PE on FY2018E earnings.

I want to buy shares of Praj Industries, Greaves Cotton, Trent, NBCC and Bharati Airtel for about a year.What should I buy? - BHARAT BHATT

Avoid Praj Industries, NBCC and Trent as their valuations are quite stretched at current prices. In NBCC, further dilution of equity by the government is possible which could hammer the stock price down.Trent, trading at over 32 times FY18 earnings, will see pressure on its business due to a significant growth in portalbased trading, making its investments in physical stores quite a burden in the long run.

Avoid Bharti Airtel, as it is unlikely to grow its profits significantly due to a stiff competition emerging in this oligopolistic industry. You may buy Greaves Cotton for a possible nominal return of around 10% to 15% in a year's time, though in the last 5 years, its annual revenues almost stagnated.

I recently bought 100 shares of Kotak Mahindra Bank at Rs 711. I intend to hold it for 1-3 years in expectation of moderate returns of about 15% per annum. Is this achievable? - NAVENDU SHARMA

Yes, you may hold it beyond 1 year as it is likely to give, in a normal market conditions, minimum 10% to 15% per annum in the next 3 years.Thanks to steep fall in interest rates, in the next 2 to 3 years, banking credit growth is likely to pick up in a big way.

I purchased PNB Gilt at Rs 47. What is future of this scrip in the present scenario of downward interest rate. Can I hold it for a year? - RAJ VARDE

It is a perfect play on interest rate cycle and as you have mentioned, and the interest rate may fall further. Hence, you may hold till you see any sign of turnaround in interest rate cycle or the price moves up in the range of Rs 55-60.