Blue chip companies trading at attractive prices, should you buy? Here’s what Nilesh Shah thinks

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March 25, 2020 11:23 AM

As bears continue to beat down stocks on the Indian stock markets, several blue chip stocks are trading close to their 52-week lows. The current attractive valuation might be a once in a lifetime opportunity to invest in these stocks.

Listing out the sector that he thinks could be risky for investors Shah said that in the financial services, one sector that one has to be risk aware is microfinance.

As bears continue to beat down stocks on the Indian stock markets, several blue chip stocks are trading close to their 52-week lows. The current attractive valuation might be a once in a lifetime opportunity to invest in these stocks for long-term investors, said Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company. In an interview with CNBC TV18, Shah said, “These are times when one has to be disciplined and remain a long-term investor, this might be a once in a lifetime opportunity.” As S&P BSE Sensex continues to hob-nob between gains and losses, most of the top 5 companies have hit their 52-week lows in the recent weeks.

“Please maintain your asset allocation. My advice remains the same as it was one month ago, there are times when one has to be disciplined, remain a long-term investor,” Shah said. He, however, warned that if an investor is leveraged that this is also the time to cut leverage. Sharing an experience, Shah said that one of his old customers who had an aversion for equity due to his age too is picking up equities right now. “He bought equity during the 2008 crisis, now he finds the current prices attractive despite his aversion to equity. Blue chip companies are trading below book, undoubtedly next few months are going to be challenging but clearly companies with life cycles of 50 to 100 years or more won’t be hit in the next 3 months,” Shah added.

Listing out the sector that he thinks could be risky for investors Shah said, “In financial services, one sector that one has to be risk aware is microfinance. Clearly the collection deficiency could come under serious trouble.” Commenting on the banking sector, he said that the big banks are going to get bigger soon. “Big (is) going to become bigger during this time. There will be flight to safety now and people will look for safer banks. State Bank of India could take the cream of all banks,” he added.

S&P BSE Sensex, after opening in the green on Wednesday, pared-off gains to trade flat. Down by 60 points or 0.23 per cent, S&P BSE Sensex is at 26,613 points, while the broader NSE Nifty-50 is down 7.8 or 0.10 per cent at 7,793 points. Domestic equity benchmarks fell aggressively on Monday as S&P BSE Sensex sank 3,935 points to record its worst ever single day fall. Since the beginning of February the National Stock Exchange’s Nifty-50 index has tanked more than 33 per cent. The Fall in markets is aided by the growing concerns surrounding Coronavirus. India has entered a 21-day lockdown where most of the factories will not operate.

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