Stocks to Sell: Jefferies and Morgan Stanley warn of downside in 3 major Indian stocks—Time to book profit?

Foreign brokerages have turned wary on a few well-known Indian companies, cautioning that near-term risks could weigh on performance despite their strong fundamentals. Jefferies, Morgan Stanley, Citi, and Bernstein reports have mentioned cautious to negative views on three heavyweight counters, pointing to slowing growth, weaker demand trends, and rising credit risks.

Jefferies, Citi cut targets for Petronet LNG after weak Q2 show

Jefferies and Citi have downgraded their outlooks on Petronet LNG following a weaker-than-expected September-quarter performance. Jefferies has reiterated its ‘underperform’ rating and reduced its target price to Rs 245 from Rs 265, while Citi maintained a ‘sell’ call, trimming its target to Rs 260 from Rs 285.

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Both brokerages flagged lower throughput volumes and the impact of use-or-pay provisions as key drags on profitability. While the management remains optimistic about a recovery ahead, analysts say demand uncertainty and global LNG pricing pressures are likely to cap near-term upside.

Petronet LNG -- jointly promoted by GAIL, IOCL, BPCL, and ONGC -- remains the country’s largest LNG importer and regasification company. Analysts believe muted global demand and elevated cost provisions continue to weigh on margins.

Morgan Stanley sees valuation risk in Bajaj Auto

Morgan Stanley has retained an ‘underweight’ rating on Bajaj Auto, citing valuation concerns even as the company delivered strong Q2 results.

Net profit for the quarter rose 23.6 per cent year-on-year to Rs 2,479 crore, while revenue increased 13.7 per cent to Rs 14,922 crore. EBITDA stood at Rs 3,051.7 crore, maintaining a 20.4 per cent margin.

The brokerage raised its target price slightly -- from Rs 8,075 to Rs 8,137 -- but warned that export weakness and flat domestic demand could restrict near-term performance. Analysts added that after a sharp run-up, the stock may need a period of consolidation before long-term value becomes attractive again.

Bernstein flags asset quality concerns in Bajaj Finance

Bernstein has maintained an ‘underperform’ rating on Bajaj Finance, setting a target price of Rs 640, while the stock trades near Rs 1,085. Though AUM grew 24 per cent year-on-year and profit after tax rose 23 per cent, the brokerage highlighted emerging stress in the loan book.

Gross non-performing assets (NPAs) increased to 1.24 per cent, while net NPAs rose to 0.60 per cent. Incremental NPLs touched around 2 per cent, and loan losses widened to 205 basis points, exceeding company guidance for a second straight quarter.

Bernstein noted that MSME loan growth slowed to 18 per cent from 29 per cent YoY, with unsecured MSME disbursals down nearly 25 per cent. The firm said rising credit costs and loan quality pressure could limit margin stability going forward.