Reliance: Should you buy Reliance or stay with ICICI Bank?

What is a better trade? Reliance or ICICI Bank?

The safer answer is to buy both. Having said that, if we are talking of short-term trade, one has to trade with the risk in mind and with the stop losses are largely backed by technical support. We know how ferocious the stock movement — especially in case of Reliance — can be and to that extent, it becomes very difficult to predict since in the short term, it does not remain related to any significant fundamental or news-oriented development.

It will be a very difficult call but a sensible approach suggests that whenever a stock or market moves up continuously, the risk return ratio shifts in favour of risk and vice versa. Now in the case of Reliance, we have seen almost 15 odd percent correction in the last few days, leaving aside Tuesday’s recovery that has happened. So with that kind of correction, the risk return ratio shifted in favour of return and to that extent it came into the buying zone. But as I said, these calls are always difficult calls and the safer strategy is to buy 50-50 of Reliance as well as ICICI, which is down 4% again after moving almost 10% after it posted good results on Saturday.

On Sun Pharma

Two things – one, we are continuing to remain positive towards the higher end of the market. Of course, till last week, we saw the Nifty correct 4% odd from 12,000 plus high to 11,600. From there, we are up again. That is being led by sectoral rotation. While on Monday, we saw the banking sector lead the rally, on Tuesday, the sectors and stocks changed. On Tuesday, pharma and IT were back in action. The previous week, IT was underperforming.

Sun Pharma results were a pleasant surprise for the market especially at the bottom line level. Top line level growth has been okay, not great but in line with expectation, but the bottom line level is where the company has done very well. Now together with the fact that the stock was an underperformer, the market was waiting for some triggers to react to the stock prices going up or down. Now with bottom line results having come in better than expected, the market has reacted positively and is trying to bring the stock in line with the overall pharma sector performance. It looks like things should continue to remain positive for now.

On revival in banking & financial space
Largely almost all the largecap banks have come out with results. If we try to extrapolate some trends from the overall banking results that have come now, there has indeed been a positive surprise. We have clearly seen growth in multiple terms coming in banks, including the growth in the disbursements or advances and that too on the retail side. So, that has been positive.

The expectation was that no banks will go slow. The demand will also probably remain slow but nothing of that sort seems to have happened. Of course, things have been supported by the fact that the RBI did not extend moratorium after August 31 and that was a bit of comfort for the sector as a whole.

Secondly, in the Supreme Court case, the government said that the interest on interest part will be taken care of and that dealt with a second uncertainty for the banking sector. These two uncertainties along with good results and the fact that there has been an underperformance of the sector as the whole post-Covid recovery that was visible in the pharma, IT and auto sectors did not pan out in the banking sector.