3 stocks that can be picked up in this volatile market: Siddharth Sedani

“Smallcaps are still expensive but midcaps are quite good for picking up the right stocks. There are lots of opportunities in largecaps like TCS and Divi’s Lab which is a constant compounder. In sectors like metals, there are lots of opportunities in Tata Steel, Hindalco in the non-ferrous space. One has to cherry pick to get that alpha ahead of the markets,” says Siddharth Sedani, Head - Senior VP - Equity Support & Product Sales, Anand Rathi.

No doubt that this was an anticipated move owing to the kind of global tensions we witnessed overseas but the question is whether or not we can decouple ourselves from what we are witnessing across the globe. What is your view?
It looks quite grim but I think this is a great opportunity because global markets are in turmoil because of the geopolitical tensions. This will give us an opportunity and the volatility will remain till the Fed comes out with further policy and show us what are the changes they are doing. Till then, we can see some kind of a volatility in the Indian market.

Of course on the domestic front, results are also coming but I would attribute the market conditions to global markets and this will help us with an accumulation strategy for good stocks.

What are good stocks? Are you talking about consistent earnings growth valuations?
I would be sticking out for some constant compounders like Divi’s Lab in the pharma space which posted fabulous numbers. Here valuation also fits the bill. Where there is a value proposition for the stock and those kind of midcaps in the agri space like Sharda Cropchem look very interesting.

Let us not forget that the results are very good and some of the special situations are need of the hour. As you rightly pointed out, TCS is one stock which is in green in the entire market because of its special situation trade. TCS has buyback in front of us at Rs 4,500 and the record date is on February 23. This kind of strong history speaks on the buyback because we have been seeing 100% buyback in the last three instances and this time there being a big buyback of Rs 18,000 crore, we are expecting a strong defense in the TCS space. TCS is also one special situation trade which we are recommending to our investors.

Given the kind of moves that we are seeing in the markets, would it be more prudent to stick to largecaps because midcaps and small caps have been underperforming in 2022?
In these conditions, largecap is a no-brainer, but if somebody wants to really cherrypick, good quality midcaps where the valuations are a comfort can be picked out. One year back, the midcap valuations as a sector was around 65-70 times and that has come down to 43-44 times in terms of price to earnings.

Smallcaps are still expensive but midcaps are quite good for picking up the right stocks. There are lots of opportunities in largecaps like TCS and Divi’s Lab which is a constant compounder. In sectors like metals, there are lots of opportunities in Tata Steel, Hindalco in the non-ferrous space. One has to cherry pick to get that alpha ahead of the markets.