Stocks to buy: Why Raamdeo Agrawal is in love with ‘bruised blue chip’ stocks – Times of India

Raamdeo Agrawalchairman of Motilal Oswal Financial Services recommends investing in ‘bruised blue chipsHe highlighted that Motilal Oswal Financial Services’ wealth creation examine this yr focuses on turnaround stocksnotably analyzing worthwhile alternatives in briefly troubled blue-chip firms.
In an interview with ET, Raamdeo Agrawal mentioned that the present market is supreme for inventory choice due to valuations and earnings decline. Corporate earnings might get well in This autumn of the present fiscal yr, he mentioned.
Asked about ‘bruised blue chips’ Raamdeo Agrawal cited Asian Paints and D Mart as examples of real blue chips dealing with present challenges.
How to determine ‘bruised blue chips’
Agrawal defined Motilal Oswal Financial Services’ standards: bruised blue chips are people who present a decline exceeding 50% from their peak values. Their definition of blue chips consists of the highest 50 Nifty corporations plus firms inside the prime 250 that maintained a 20% ROE common over ten years.
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Currently, 107 firms inside the prime 250 qualify as blue chips. Historical examples embrace Mahindra and Mahindra and Bharti Airtel, he mentioned.
Present-day ‘bruised blue chips’ embrace roughly 10-11 firms exhibiting over 30% decline from their peaks. These embrace a number of Adani firms, Asian Paint (down 30-33%), Avenue Supermarket (down 30-33%), Tata Elxsi (down 40-45%), and Berger Paints (down 37-38%), Agrawal defined.
“For us, a fall of 50% is very important. Right now, except for a few Adani companies, none of the other companies have crossed 50%. Now, what is the importance of 50% or 70%? This is the asymmetric payoff. When 100 becomes 50 and my blue chip goes back to 100, it’s a doubler for me. So, if it happens two years after my purchase, it’s a 40% return. If it happens in three years, it’s a 25% return and in four years, it is 18%. But the beauty is that I am buying an option into future prosperity,” he mentioned.
He additionally mentioned that traders ought to alter their expectations for decreased returns transferring ahead. “A lot of people understand that they have got excessive returns and that future returns are going to be very low. But nobody is bothering about that. I look at only one thing: Earnings growth. If there are earnings, everything is fine. If there are no earnings, everything is wrong. Given that, we should be in for further correction but the domestic flows are so strong that the market is holding up,” he mentioned.