The Indian markets saw a superb up move on Friday, with the Sensex ending higher by 292 points at 29,152 and the Nifty up 80 points to close at 8,672. State Bank of India declared its Q1FY17 results amid concerns of growing NPAs, but despite this, SBI share price sparkled and went up by nearly 10% to close at Rs 243 on the bourses. The bank’s asset quality slipped during the quarter with the NPA standing at 6.94% to Rs 101,541 crore as against 6.50% at Rs 98,173 crore for the same quarter of last year. Apart from banking stocks going up, the main reason for the markets to climb higher was due to short covering by traders. Positive results from heavyweight companies have offset the negativity shown by other frontline corporate results. The Supreme Court has lifted the ban in Delhi-NCR on the registration of diesel vehicles of 2000 cc and above. Now they will be allowed to register on a payment of 1% environment cess on ex showroom prices. This is good news for vehicle manufacturers and hence we feel that stocks like Maruti Suzuki and Mahindra & Mahindra could witness a significant upward movement in their share prices next week.
We had recommended the Talwalkars Fitness stock last week in our column and now advise investors to partly book profit as the share price has gone up by nearly 10% in just seven days.
Larsen & Toubro Infotech’s public offer hit the market last month at an offer price of Rs 710 per share. It debuted on the exchanges on 22 July after a highly successful public offer, which was oversubscribed by nearly 12 times. It is the seventh largest IT services company in the country and draws major revenue from banking, financial services and insurance. Being the IT arm of parent L&T, it has a strong management background, established brand and strong growth statistics and return profile. Moreover, the parent provides the company a competitive edge in attracting clients and exploring new business opportunities. Analysts are bullish on the counter as the price equity comes at a 13 times trailing FY16 EPS, which is at a 25% discount to peers like Mindtree and Hexaware. The company is 24% and 80% larger than the above two companies in term of revenues and earns substantially higher returns on equity. Weak guidance from the technology sector is one of the reasons for low investor appetite for this stock, as large Indian IT companies have posted lower than expected June quarter numbers and also issued muted sales outlook. Even though some analysts are worried that any appreciation of the rupee against foreign currencies may have an impact on IT companies, the positive factor is that L&T Infotech has a negligible exposure to the UK, keeping it immune from the Brexit issue. As per data available from the exchanges, Kotak Mahindra International has bought 1,335,000 shares of the company at Rs 700 from the secondary market in July. The stock, currently quoting at Rs 685, is below the offer price and merits a value buy for a 12% price appreciation in three months’ time on the back of good second quarter FY17 results. The management is also quite hopeful of beating the industry growth target for FY17.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.