Sell TCS, Bajaj Finance, other Nifty, Next 50 shares even as these benchmarks hit new 52-week highs

Indian share markets were trading firm on Thursday after a one-day blip, with NSE Nifty 50 and Nifty Next 50 indices hitting 52-week highs, surging to 14,256.25 and 34,138.75 points, respectively. Other broader market indices such as Nifty 100, Nifty 200, Nifty 500, Nifty MidCap 50 and Nifty MidCap 100 too scaled fresh 52-week highs. In the last month of the calendar year 2020, the Nifty 50 index gained over 8 per cent; it has surged nearly 2 per cent so far in January 2021.

Domestic research and brokerage firm Emkay Global Financial Services in its recent note has recommended to ‘sell’ four Nifty 50 and Nifty Next 50 stocks including Tata Consultancy Services and Punjab National Bank, among others.

TCS: On the back of expensive valuations at 35x/29x FY21/22E earnings, the brokerage firm retained its underweight rating to Tata Consultancy Services stock. It expects 10 per cent earnings CAGR over FY20-23 driven by an acceleration in digital transformation and robust deal intake. Emkay believes even as TCS has the best execution story, valuations are rich.

Punjab National Bank: PNB is in a weak position, the brokerage firm noted that its recent merger with otherwise weak United Bank and OBC will keep the stock under pressure for a prolonged period. The domestic brokerage firm has a ‘sell’ rating to the stock, as its internal controls remain weak leading to regular frauds, weighing on its profitability and business growth.

Also read: Top large-cap stocks to buy for 2021: Buy these 5 high conviction shares with strong fundamentals

Bajaj Finance: Emkay believes that Bajaj Finance stock, at 6.1x Sept’23 P/B, is inadequately pricing in growth and asset-quality risks. The Nifty 50 stock has remained risk-averse after Covid-19, hurting margins, market share and growth expectations.

Pidilite Industries: This Nifty Next 50 stock is Emkay’s high-conviction underweight stock. The brokerage firm believes that given downside risks to earnings from rising input prices and lower volume growth, valuations look unreasonable. The brokerage firm in its report said that the slowdown in real estate and construction activity has already been hurting growth for adhesives, which will see further deterioration after Covid-19-led disruption.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)