RIL, HDFC Bank shares: Expert sees scope for outperformance as valuations turn attractive

Reliance Industries Ltd (RIL) and HDFC Bank Ltd are among the large-cap stocks that Nilesh Shah, MD & CEO of Envision Capital, remains positive on, citing improving earnings trends and relatively attractive valuations.

Speaking to Business Today, the market expert said the two stocks had underperformed over the past year, but recent earnings trends and a correction in their valuations have made them more attractive from an investment perspective.

"We saw the recent quarter itself where these companies and some of the other companies in the large-cap space have done remarkably well or have started to go on an uptick path," Shah stated.

He pointed out that valuations of these companies had declined to multi-year lows in terms of price-to-earnings (P/E) and price-to-book (P/B) multiples.

"These are some of the names that we have been liking, and we are starting to like even more, given the kind of price correction that has happened," he said.

Shah said RIL and HDFC Bank could potentially deliver positive returns and relatively better performance over the next year, provided earnings growth improves further and valuations recover.

He, however, cautioned that these companies may not grow at the pace they had in the past. Nevertheless, even moderate growth, along with a potential mean reversion in valuations, could support their performance, the expert added.

On the earnings front, RIL reported a 40.64 per cent year-on-year (YoY) rise in consolidated net profit to Rs 25,548 crore in the second quarter (Q2 FY27), compared with Rs 18,165 crore in the corresponding quarter last year.

The Mukesh Ambani-led company's revenue from operations increased 28.57 per cent YoY to Rs 3,32,861 crore in Q2 FY27, from Rs 2,58,898 crore in Q2 FY26.

Meanwhile, HDFC Bank reported a 4.7 per cent YoY increase in profit after tax (PAT) to Rs 19,510 crore in Q2 FY27, including treasury trading gains. Excluding these gains, the private sector lender's bottom line grew 12.6 per cent YoY.

The bank's treasury trading gains declined to Rs 780 crore during the quarter, compared with Rs 2,390 crore in the corresponding quarter last year. Meanwhile, miscellaneous income, which includes recoveries and dividends, stood at Rs 1,810 crore, against Rs 1,530 crore a year ago.