But it does not look it is going to be that happy Diwali at least at the moment for the markets and earnings have not been that great, I mean barring ICICI Bank which has reported as stellar set, if you look at an IDFC First Bank that has been a bit of a disappointment. What is your view on the bank earnings so far?
Sandip Sabharwal: So, banks and financials if you combine them together, the results have been mixed. So, on one side for banks or financials who were more focused on the MFI unsecured side of the business, there we are seeing stress. On the secured side of the business, there does not seem to be any significant stress at this stage. So, ICICI Bank results were quite good. HDFC Bank results were decent. Axis results were pretty good. So, I think the leaders of the banking space have been reporting decent results. So, there have been some MFI stresses well known and it has been there in the news flow for some time and the banks who have been exposed to that have had to take write-offs.
But overall, if you look at the financial sector, the stress on the financial sector at a time when there is some stress at the lower level of the pyramid is much-much lower than historical levels. So, we got all used to what happened over the last two-three years and that was actually a very golden period for NPA equation, etc, which is not the base case. The base case is that obviously there will be some loans which will go bad, etc. So, the space is decently poised I would think at this point of time.So, if you were to put fresh money to work within banks, specifically what is the pecking order looking like because even PSBs are looking quite cheap right now?
Sandip Sabharwal: Although I largely do not buy PSU banks, but Bank of Baroda results on most parameters seem to be quite strong and very well placed. So, the core holdings will still remain ICICI and Axis Bank for us. On the satellite side, we did took a contrarian bet on Kotak Bank, although small exposure, but that bank is not performing at this point of time. So, once the RBI restrictions go over the next few months, we could see that that could come back. I am looking at IDFC Bank interestingly because that is one bank stock which has fallen 35% from the top and when we look at the results on the core business of advances or deposits or the core NPA levels ex of the few extraordinary write-offs which they have done this quarter, it does not look bad.
The stock corrected 35% from the top. So, if it corrects another 5-7% today, 40% down, so at Rs 60 I think that should be an interesting stock to have a look at.
Do you think a few of these crude oil beneficiaries will be in focus today and the likes of IndiGo might be able to sail through with a weak set because of this positive news?
Sandip Sabharwal: Crude oil prices will fluctuate on a day-to-day basis, so we cannot take a significant bet on daily price movements. However, I think InterGlobe is very well placed in the Indian context over the next few years given their domination of the Indian sky, the fact that air travel is only going to grow and rapidly in India and on top of that we will have some of the extraordinary losses due to the grounded planes and the high cost because of that also moderate over the next two years.
I think it is a company which should be sort of a core holding in the portfolios which we have from much lower levels. So, if due to some reason because of markets or any other factor there is a significant correction, I would like to add more rather than try to sell on one quarter’s poor earnings.
Who is winning this MMR realty battle because now it seems to be quite a deeply penetrated one. You have got all DLF, Prestige, all of them coming to Mumbai clearly because of the profit margins here.
Sandip Sabharwal: Yes, but the space will be dominated by players who have been largely in the Mumbai market. Many of these players early also tried to get into the Mumbai market. They were not successful. But I think now they have a more longer-term plan. Now, in real estate, the stocks have done well. Companies are reporting decent numbers. But if you correlate what is happening on the consumer side in terms of the slowdown and sort of slightly worsening consumer sentiment, whether this real estate momentum the way it is going for such high value purchasing to continue or not is something we need to see. So, most of the positives are in the price of real estate stocks.
We should be careful on most of them, despite decent reported quarterly numbers, because we know this sector outlook can suddenly turn. So, I would be cautious on real estate, not looking to buy any of the stocks in the real estate side at this stage.
