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Long & Short of Markets: What could end this bull run? Why are PSU stocks getting rerated?


Déjà vu of 1994? Despite a very strong macro and business cycle, Dalal Street veteran S Naren says the current euphora reminds him of the 1993-94 cycle, where investors had forgotten the word risk and it’s very dangerous, he says. Read more on the risk for the current valuation cycle, what’s sweetening PSU stocks’ outlook and ESG plays in this week’s edition of ‘Long & Short of Markets’.

Value play

Despite frothy valuations & extreme volatility, the bullishness surrounding IRCTC stock doesn’t seem to fade away. Rahul Jain of Dolat Capital believes a lot of value has yet to be unlocked by IRCTC which makes it an attractive bet for long term investors. He says, a lot of pricing potential has not been unlocked and with a little tweak to their pricing strategy, IRCTC can boost their profit pool by 70%!
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ESG opportunities

Clean energy is the new oil. Investments in renewable energy is at an all time high but in the listed space, Indian investors have very limited opportunities. Hemang Jani of MOFSL is bullish on Tata group stocks such as Tata Motors and Tata Power, while also bullish on few chemical companies to play this theme.
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Where to look for threats?

Every bull run has to come to an end and every valuation cycle’s break comes with a trigger. So where will the threat come from this time? Market expert S Naren believes, with a strong domestic business and macro cycle, this time the threat for this valuation cycle will be a global factor.
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Sky clearing over PSU stocks

PSU stocks are in a sweet spot as multiple factors are in play leading to rerating of the pack. One of the three key factors which makes PSU stocks’ outlook so rosy is rising natural resources prices and growing supply side constraint only makes it worse, says Shiv Chanani of Elara Securities. As the PSU pack is dominated by natural resources companies, most of them are set to see good times ahead, he opines.
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Betting big on the biggies

Pankaj Tibrewal of Kotak MF is betting big on 4 themes for the medium-term and one of them is being bullish on market leaders. He says, demonetisation has accelerated formalisation of the economy and the biggest beneficiaries are market biggies who are growing bigger at the expense of the smaller players.
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