Down 70% from life-time highs, these stocks could surge even on the hint of a bull phase

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Published: April 10, 2020 12:01:29 PM

If drawing inference from bear markets that have disrupted Dalal Street’s upward march in the past, the current 40% market correction is nothing but an opportunity that investors rarely come across.

These phoenix stocks have dived so far down, despite their strong business history and robust balance sheets, that their valuations look attractive and a bounce back seems inevitable.

If drawing inference from bear markets that have disrupted Dalal Street’s upward march in the past, the current 40% market correction is nothing but an opportunity that investors rarely come across. Markets tanked 56% from their highs in 1992, only to jump 78% in the next one year; while they slumped 64% in 2008 only to surge 75% in the next one year. With the rebirth of every bear market as a bull market, there are several phoenixes that rise from the ashes. These phoenix stocks have dived so far down, despite their strong business history and robust balance sheets, that their valuations look attractive and a bounce back seems inevitable.

“Though the near-term outlook may be hazy for such companies, the risk-reward turns extremely favourable for investors as market has already priced in extreme pessimistic scenarios,” said ICICI Securities in a research note. The brokerage and equity research firm has chalked out stocks that, according to them, are available at bargain prices despite strong fundamentals. The expectation is for these stocks to generate supernormal returns once the bull phase kicks off, as has been the case in 1992, 2000 and 2008.

Sun Pharma
Target: Rs 563

Having gained 30% in the last five days the upward movement of this pharma major could have already started. Sun Pharma has started inching towards producing more speciality drugs instead of generic ones as it started to face intense competition in that field. Leading the pharma industry in India and US, Sun Pharma seems nicely placed to gain more market share in other geographies as well. The stock still has a potential to surge 24.5% if going by estimates of ICICI Securities.

Mahindra and Mahindra

Target: Rs 410

Having fallen close to 75% from it’s all-time high of Rs 993, Mahindra and Mahindra’s recent 17% jump on the bourses back its ability to go higher. “We expect the stock to undergo basing at current juncture over a few weeks which will act as a Launchpad for the next leg of rally,” said ICICI Securities, while expecting the scrip to jump to Rs 410 subsequently. Mahindra and Mahindra is the leader in the domestic market when it comes to the tractor segment. The company’s forward looking business model that has it working on advanced levels when it comes to electric mobility will also work to benefit the auto giant.

TATA Motors

Target: Rs 98

Market share when it comes to domestic commercial vehicles is the strong point of Tata Motors, with over 40% market share. The company was the worst to suffer when coronavirus was just a supply side problem with factories closing in China. However, once things normalise Tata motors could benefit from its already functional factories in China. The current market price is expected to have factored in all the negatives that the company has to offer so far. Tata motors global sales could also help the company with China sales having finally turned around. Having jumped 10% in the last trading session, Tata Motors still holds an upside of 30%.

Federal Bank

Target: Rs 55

The private sector lender, Federal Bank has been questioned recently after it decided to pick up 30 crore shares of the troubled lender Yes Bank. Despite all the criticism towards Federal Bank, ICICI Securities thinks the stock has a potential to surge up by 41% from its current levels. Loans growth is expected to jump as things normalise, however the exposure to MSME sector does still pose a serious risk. 

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