Top stocks to sell: Coronavirus pandemic to drag these five large-cap stocks down

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August 6, 2020 3:49 PM

From the March lows, headline indices BSE Sensex and Nifty 50 have climbed up to 48 per cent amid high volatility

tcs, yes bank, pnb, abb india, pidilite industriesResearch and brokerage firm Emkay Global Financial Services has a high-conviction sell call on five large-cap stocks

Indian share market witnessed a sharp recovery of around 7 per cent from the end of June. From the March lows, headline indices BSE Sensex and Nifty 50 have climbed up to 48 per cent amid high volatility. The 30-share Sensex ended over 350 points up and reclaimed the crucial 38,000-mark, while the broader Nifty 50 index settled just above the psychological level of 11,200. Research and brokerage firm Emkay Global Financial Services has a high-conviction sell call on five large-cap stocks. The list includes names such as Tata Consultancy, Punjab National Bank, ABB India, Pidilite Industries and Yes Bank, as the companies grapple with COVID-19 pandemic.

ABB India: The stock of this large-cap company is over 35 per cent off from its 52-week high. In today’s trade, ABB India shares were trading 1.44 per cent down at Rs 891.70 apiece, as compared to a 0.71 per cent rise in Sensex. The brokerage firm believes that the deteriorating macro environment and Covid-19 related disruptions will impact recovery in the Industrial Automation and Motion segments. “We also expect disappointment on the irrational cost rationalization hopes that the Street has for the company after the demerger,” it added.

Pidilite Industries: Pidilite Industries share price has gained 11 per cent from March lows. The stock price is 23 per cent away from its 52-week high of Rs 1,710 apiece. The brokerage firm has a ‘sell’ rating to the stock. According to Emkay Global, the slowdown in real estate and construction activity was already hurting growth for adhesives, which will see further deterioration post the Covid-19 disruption. “Given downsides risks to earnings from the disruption and delayed recovery, valuations look unreasonable,” it said.

Punjab National Bank: The brokerage firm recommends to sell PNB stocks as it believes that the recent merger with weak United Bank and OBC, with PNB itself being in a weak position, will keep the stock under pressure for a prolonged period. “The bank’s internal controls remain weak, leading to regular frauds, weighing on its profitability and business growth,” Emkay Global said in a report.

TCS: Even as Tata Consultancy Services shares staged a smart recovery of over 56 per cent from March lows, research and brokerage firm maintained an ‘underweight’ rating to the stock. According to the brokerage, the valuations remain quite punchy.

Yes Bank: Emkay Global iterates a ‘sell’ rating to the cash-strapped private lender. The stock, in March this year, fell to Rs 5.55 from its 52-week high of Rs 92.40, after the Reserve Bank of India placed under a moratorium. Last month, the private lender launched a Rs 15,000 crore follow-on public offer. “We believe that the bank may have to regularly raise capital particularly given the pending recognition of corporate stress/incoming asset quality risk post Covid-19 and also release capital via balance sheet contraction,” the brokerage firm said.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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