Narrow rally keeps broader market weak, stay selective, says Chola Securities' Kant

About this update from Navin Fluorine International Limited

With benchmark indices at record highs but only a few stocks participating, Dharmesh Kant, Head of Research at Chola Securities, advised investors to stay selective. He said nearly 50–60% of the broader market is still below its peak, reflecting weak earnings trends. Kant highlighted that among the top 500 companies by market value, the second quarter showed “33% negative growth,” with almost half of them underperforming the market. In this environment, he sees better prospects in specific sectors such as speciality chemicals, pharmaceuticals and auto ancillaries. “I think chemicals is shaping up very well in the broader market space,” he said, naming Navin Fluorine, SRF’s speciality chemical business and PI Industries as preferred stocks. He also pointed to strong results from companies like Lupin in pharma. In metals, which he said are for “brave hearts,” Kant noted a mismatch between global demand and pricing. “Demand-wise… the demand has not picked up in the metal space, though the prices have moved up quite significantly, particularly for the copper,” he said. He attributed the rise in copper and silver to demand from renewable energy-linked industries. Kant added Hindustan Zinc to his firm’s high-conviction portfolio and sees “deep value” in Vedanta, though he warned promoter decisions may affect sentiment. JSW Steel is another name he favours and sees dips in these stocks as buying opportunities. Kant remains cautious on Lenskart despite strong growth. He projected topline expansion of 20-22% and margins of 19-22% in the coming years but questioned “long-term wealth creation” at current valuations. Even by FY30, he estimated that a ₹71,000 crore market value implies “a 70 PE multiple… that doesn’t gel well.” Kant said the stock may rise in the near term but keeps a “neutral to negative” view for three to five years. On the auto sector, Kant maintains a positive long-term stance but is waiting for November sales numbers before suggesting fresh entries. M&M, Hero MotoCorp and Eicher Motors have all performed well after GST-driven demand improvement. “Anything above 15% kind of an auto sales number growth for the month of November would be pretty fine,” he said. However, he warned that slower growth of 10-12% could trigger “serious profit-taking.” For investors already holding auto names, Kant suggests staying invested. For others, he recommends patie...

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