Dipan Mehta, director of Elixir Equities, spoke to CNBC-TV18 about the fundamental side of the market as well as specific stocks and sectors.

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On State Bank of India (SBI), which has seen a derating and the stock is down about 12 percent, Mehta said, “SBI results were generally in line, but the credit quality deterioration was not taken well by the market. From an investor perspective SBI and others PSU banks have been a bit of disappointment in the sense that we expected much more in terms of lower credit cost and therefore the boost to the bottom line but that did not come through. In PSU banks like SBI and others, there is a great deal of volatility in their earnings and there is no real earnings visibility as well. So that is what is keeping these stocks underperforming for some more time. Our view on SBI would be negative.”

“A lot of private sector banks are available at attractive valuations and you have entire spectrum depending upon the risk appetite. You have a choice as far as private sector banks are concerned. It is better to go with the private sector banks.”

Speaking about HCL Technologies earnings, Mehta said, “Good set of numbers, best in class, but the real disappointment is on the EBITDA margin and what the management is guiding and what has come for Q1 is a good 1.50 percent lower. Needs to be seen whether they can come to that EBITDA margin. This is a trend we have seen across all software companies where the margins have been under pressure. On the whole HCL Tech appears to be a good investment considering its valuations, it is amongst the cheapest amongst the top 3-4 software companies.”

On Tata Steel, he said, “The less spoken the better, the company has just not able to get its act in order and with no solution for their European business they are facing pressure and in the domestic business as well now that prices have come off and volumes also have tapered off so from an investment perspective given the sort of situation which is there globally it is best to avoid commodities. It is a time to buy consumers of a commodity rather than stocks like Tata Steel. Unless we have some resolution for their various acquisitions which they have done in the past which have not worked out for them investors should give Tata Steel a pass at this point of time.”

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First Published:Aug 8, 2019 9:48 AM IST