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    Despite recent rally, these stocks are still up to 300% away from Pre-Covid highs!

    Synopsis

    One way to pick the right stocks would be to search for businesses that are scalable.

    Rise---7---istockiStock
    “We continue to like Indian Bank in the midcap PSB space, but believe its merger (with Allahabad Bank) will remain an overhang in the near term," said Emkay Global.
    NEW DELHI: Benchmark equity indices might have recovered much of their lost ground since March lows, but one of every five BSE500 stocks – mostly midcaps and smallcaps – still need 100-300 per cent rise to revisit their 52-week highs.

    Nearly half of the top 500 stocks require a 50 per cent rally to reclaim their respective one-year highs, suggesting that there is still money to be made for investors who missed the bus in this rally.

    Analysts, however, have asked investors to pick stocks wisely, as the Covid-19 disruption could lead to derating of many smallcap and midcap stocks. There would be only a few winners, they warned.

    "In the last five or 10 years, very few midcaps have actually graduated to becoming a largecaps or successful companies. That challenge has only got worse now. A lot of midcaps are unable to compete on things like cost of capital, scale or technology. One has to be very discerning in that space. They are going to be very few winners. This is happening globally, not just in India,” Shiv Puri of TVF Capital Advisors told ETNow.

    Data compiled from AceEquity database showed 89 stocks need to rise 100-325 per cent while 231 require at least 50 per cent bump-up to reach their pre-Covid highs.

    Essel’s Dish TV, which traded at Rs 8.15 on Friday, needs a 325 per cent rise to revisit its July, 2019 high of Rs 34.80. YES Bank last month acquired 24.19 per cent stake in India’s largest domestic direct-to-home (DTH) company through invocation of 44.53 crore pledged shares. The stock has one ‘buy’, two ‘outperform’ and three ‘hold’ ratings on the publicly available Reuters Eikon database.

    PSU lender India Bank, which traded at Rs 64.90 this morning, is 301 per cent away from its one-year high of Rs 263.30. This bank reported a Rs 218 crore loss for March quarter.

    “We continue to like Indian Bank in the midcap PSB space, but believe its merger (with Allahabad Bank) will remain an overhang in the near term," said Emkay Global.

    Somany Ceramics will need a 281 per cent leap to hit its 52-week high of Rs 662.45 from current level. The stock has fallen in apprehension of a drop in construction activity in the near future.

    “Though the near-term outlook remains challenging, the correction in the stock in last six months factors in these concerns,” Emkay Global said in note.

    RBL Bank (281 per cent), PNB Housing (268 per cent), Future Retail (257 per cent), Indiabulls Housing (238 per cent), NCC (232 per cent) and Century Textiles (230 per cent) are among other stocks that need a lot of steam to revisit their recent peaks. The broader BSE500 needs a 40 per cent rise from current level to revisit its one-year high.

    HDFC Institutional Equities said RBL Bank faces challenges on potential stress from its exposure large unsecured loans and a weak deposit franchise. It has a ‘reduce’ rating on the stock.

    In the case of PNB Housing, Motilal Oswal Securities said the HFC has been facing tight liquidity condition, which has translated into flat AUM. “Moreover, the moratorium number reported by the company was meaningfully higher than some of large banks and HDFC,” it said, and maintained a ‘neutral’ rating on the stock.

    Shares of Future Retail have of late recovered on hope of a possible stake sale to potential investors, including Reliance Industries. “I would not be too comfortable commenting on something that the company has not put out officially, but Future Retail does have a significant brand recall. As Reliance continues to ramp up its store presence and continue to sort of develop its offline-to-online retail model, the addition of 1,600-odd stores could definitely be welcomed,” Probal Sen of Centrum Broking told ETNOW in a recent interview.

    Arvind Fashions, VA Tech Wabag, Sterling and Wilson Solar, IndusInd Bank, DCB Bank, The Jammu & Kashmir Bank, Repco Home Finance, Spicejet, Raymond, Shoppers Stop, Edelweiss Financial Services and Lemon Tree Hotels are some of the other midcap and smallcap stocks from the BSE500 pack that are still miles away from their recent highs.

    One way to pick the right stocks would be to search for businesses that are scalable, said Anupam Tiwari of Axis AMC.

    “We do not want to buy a stock just because the opportunity size is large. We look for capabilities, a demonstrated track record in companies to create a right to win for themselves. Also, look for a good balance sheets, good RoC, cash flows and so on," he told ETNOW.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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