The note, authored by Sanjeev Prasad, said that the recent market correction and stock price, due to the ongoing conflict between Iran and Israel-US and the resultant dislocations in stock prices as an opportunity to add “better” stocks, remove the “narrative” stocks, and reduce positions in expensive cement and consumer stocks.
Within its Model Portfolio, Kotak has removed its entire 220 basis points exposure to IndusInd Bank. It said that although the lender is quite “inexpensive” at current levels at 1x one-year forward price-to-book-value, it finds better opportunities elsewhere, given the sharp correction in other parts of the market.
The 220 basis points have been allocated to Bajaj Finance, whose exposure has been increased by 160 basis points to 480 basis points, and to Eternal, whose allocation has also been increased by 60 basis points to 210 basis points.
Shares of Bajaj Finance are down 11% since February 27, which is the start of the West Asia war, while Eternal is down 10% during the same period.
Kotak has a price target of ₹2,500 on Bajaj Finance, which implies an upside potential of 41%, and that of ₹375 on Eternal, which implies an upside potential of 70% over the next 12 months from current levels.
Bajaj Finance shares gave up all their gains made from February 1-23 over the last two weeks, and is back to pre-budget levels. Eternal shares have also corrected substantially from their 52-week high in excess of ₹350 and are trading close to ₹220 currently.
