Expert Bullish on RIL, HDFC Bank for Potential Outperformance
Nilesh Shah, Managing Director and CEO of Envision Capital, is maintaining a positive outlook on large-cap stocks like Reliance Industries Ltd (RIL) and HDFC Bank Ltd. Shah points to improving earnings trends and significantly more attractive valuations as key drivers for potential outperformance over the next year.
Valuations and Earnings Drive Optimism
Speaking to Business Today, Shah noted that both RIL and HDFC Bank have experienced underperformance over the past year. However, recent earnings reports indicate a positive shift, with both companies and others in the large-cap sector showing an uptick in performance.
A critical factor, according to Shah, is that the valuations for these companies, measured by price-to-earnings (P/E) and price-to-book (P/B) multiples, have dipped to multi-year lows. This correction, combined with strengthening earnings, makes them compelling investment prospects. While acknowledging that these companies may not replicate their historical growth rates, Shah suggests that even moderate growth, alongside a potential mean reversion in valuations, could significantly bolster their stock performance.
Strong Q2 FY27 Results Highlight Performance
The expert's optimism is supported by recent financial disclosures. Reliance Industries (RIL) reported a substantial 40.64% year-on-year (YoY) rise in consolidated net profit, reaching Rs 25,548 crore in the second quarter of FY27. The Mukesh Ambani-led conglomerate also saw its revenue from operations climb by 28.57% YoY to Rs 3,32,861 crore for the same period.
Meanwhile, HDFC Bank posted a 4.7% YoY increase in profit after tax (PAT) to Rs 19,510 crore for Q2 FY27, which includes treasury trading gains. Excluding these gains, the private sector lender's bottom line grew by a more robust 12.6% YoY. The bank's treasury trading gains stood at Rs 780 crore, a decrease from Rs 2,390 crore in the prior year's corresponding quarter, while miscellaneous income, encompassing recoveries and dividends, rose to Rs 1,810 crore from Rs 1,530 crore a year ago.