8 Nifty stocks perilously close to 52-week low levels. Will buy-the-dip mantra work?

NEW DELHI: With global macro headwinds making it tough for the stock market to enter a new bull orbit amid global macro headwinds, Nifty is left swinging between the two extreme themes of buy-on-dip and sell-on-rise as investors are busy reading between the lines of Q4 earnings.

An analysis of Nifty50 stocks shows at least 8 of them are now lying dangerously close to their 52-week low levels. Topping the list is Infosys which is less than 4% away from 1-year low of Rs 1,185. Similarly, Cipla, Tech Mahindra, Tata Consumer, SBI Life and Wipro are barely 6-7% away from their 1-year lows.

India's largest company by market capitalisation and Nifty heavyweight Reliance Industries (RIL) is also lying 8.3% away from its recent nadir. IT bellwether Tata Consultancy Services (TCS) is just 8.4% away from September 2022 low of Rs 2,926.


In the above list of fallen stars, 4 of them are IT stocks which have been among the worst affected due to worsening sentiment in the US, weakness in tech spends and pressure on margins.

Infosys
India's much-storied IT company Infosys shocked investors by forecasting its slowest revenue growth in six years of 4-7% for FY24. The company's management has flagged ramp downs of client mandates amid an uncertain macro environment in its major markets of US and Europe.

Cipla
Pharma stocks have been out of favour and Cipla has eroded around 15% of investor wealth in the last 3 months. The March quarter saw promoter holding going down from 33.61% to 33.55% while FIIs also decreased holdings from 28.39% to 27.42%.

Tech Mahindra
The IT major will announce its March quarter numbers on April 27 in which analysts see revenue decline of 0.6% on sequential basis in constant currency terms. "Revenue decline will likely feed into margins. We build in an EBIT margin decline of 10 bps on sequential basis. Lack of leverage from growth is the key headwind," Kotak Securities said.

Tata Consumer
Having doubled investor wealth in the last 3 years, Tata Consumer shares have been under pressure in the last one year but the stock showed promise on Monday by ending 4.6% higher. In the last 2 years, mutual funds have reduced stake in the Nifty stock from 8.43% to 5.72%.

SBI Life
SBI Life stock would be under the lens on Wednesday when its Q4 results would be announced. Kotak expects 200 bps YoY margin expansion driven by higher share of non-par policies in the product mix. The stock has 30 buy ratings and is a consensus pick of brokerages.

Wipro
The IT major would announce its March quarter numbers on April 27 and is also expected to announce a share buyback programme which may boost stock prices in the near term.

RIL
The Mukesh Ambani-led company managed to surprise analysts in its Q4 earnings and analysts have maintained buy ratings on the stock. JP Morgan is Overweight on RIL and has put a price target of Rs 2,960 saying that the risk-to-reward ratio appears attractive now while Jefferies has a higher price target of Rs 3,125.

TCS
In the long term, TCS has been one of the top wealth creators on Dalal Street but the stock is down around 10% in the last one year. In the March quarter, mutual funds were seen raising their shareholding while FIIs pared stake.

What should investors do?
With the market throwing up many stock specific opportunities, analysts recommend picking only those counters where growth is visible and valuations are reasonable. Many IT stocks, for example, are now trading below their 5-year average PE levels but their FY24 outlook doesn't look promising enough.

Rahul Chadha, CIO, Mirae Asset Global Investments, believes that the rally is going to be led by the domestic sector and that the likes of RIL and ICICI Bank would take the market to the next level.

"I think the best way to stay put is to take a medium term view. Near term is going to be challenging but that is where you get entry points. Most of us have been saying that for a while but in markets, you do not make money every day, every month. You make money in spurts and this is what we have got to understand," he said.

(With data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)