Deven Choksey: By and large, the market was not expecting BJP to win the Assembly polls in J&K and Haryana. I do not think that is going to be a cause for any disappointment. On the contrary, a higher amount of vote share for BJP could be a better surprise for the market as a whole. But on the other side, I want to put across a viewpoint here, that the market was factoring in too many negatives – be it on a war front, be it on election front, be it on valuation front and that’s why there was a continuous slide in some of the good quality stocks.
I would like to keep an eye on some of the good quality stocks which are fundamentally strong. They are having reasonably good amounts of visibility of earnings and are not far too expensive in the marketplace when they are quoted. In my viewpoint, it is time to start looking at some of the good quality stocks for the portfolio because the overall environment is looking quite promising from the corporate earnings point of view and except in some cases where the valuations are high, and maybe the market will correct on the price and the time front. Otherwise, the market looks reasonably okay to buy into at current levels or maybe in a falling price at least in some select stocks on the fundamental basis.
Any three ideas that you think are worthy of a buy in the current market?
Deven Choksey: We remain distinctly comfortable buying into some of the metal space. I believe that the metal as a commodity is now heading for a structural change. One important aspect out there is the energy prices are remaining under control and on the other hand, the demand side scenario remains absolutely comfortable and upbeat. Given that the energy price are likely to come down because of use of renewables to begin with the captive consumption of power and thereafter looking subsequently the unit consumption comes out of renewables, I believe that energy cost coming down is a reality and that is where probably a strong case for going long with metal as a space.
Similarly, the consumption space continues to grow and that is where the lending business comes in. With the cost of lending coming down, I expect it to come down.
In my viewpoint, some of the NBFC companies and corporate banking companies with large balance sheets will be relatively better off from the investment point of view.
We remain distinctly comfortable with the consumption story going around. We remain distinctly comfortable with the other area of activity which is engineering R&D business which I was talking about in IT. So, we like these particular propositions from the investment point of view.Do you think it is time to completely switch out of private banks or should one have some exposure in these stocks in expectation of FIIs coming back?,
Deven Choksey: On one side, the demand for money is increasing because of the economic activity which is there. So, companies with sizeable large balance sheets are definitely not having much of a problem in expanding the loan book and that would include the likes of HDFC and ICICI to Axis to others within the portfolio. They would continue to have the expansion as far as the loan book is concerned. The most interesting part for ICICI Bank and Bajaj Finance would be that the retail credit part is growing very systematically and that is where these two banks are predominantly relatively placed, more because of their ability to lend money in quicker times using their fintech platforms.
They both are relatively stronger players in this particular space, so vis-à-vis the corporate lending book we find ourselves more comfortable investing into the companies which are on to the retail side of lending because over there the loan growth is reasonably higher including in Bajaj Finance last month AUM growth has been around 29%. So, we continue to remain bullish on this particular aspect.
Housing finance is another space where you are likely to see continued growth coming in. Bajaj Housing Finance though expensively traded, I think whenever it comes down it is a good buy opportunity from an investment point of view. We will have to look at some of these companies. Fortunately, the corporate banks today are available at valuation which is probably effective enough to buy into the portfolio, downside risk remain relatively less at this point of time.
What is your view on consumption? You talked about it as one of those key sectors you are still positive about. Looking at the updates that we got from GCPL, it looks like it is in line with expectations. But D-Mart clearly had disappointed, perhaps because of that entire quick commerce war. How exactly do you see it panning out for some of these FMCG companies?
Deven Choksey: It is going to be a very interesting position which Reliance is taking. On one side they have got on-ground stores, on the other side, they have got digital stores. They have a complete omni channel presence across. They are with JioMart and into quick commerce which is registering a higher amount of growth.
On the other hand, Reliance Retail has its own brands, which are giving them a power to generate margins compared to the other players in the marketplace. So, it is end-to-end play which this company is now operating with, which is going to see a major amount of shakeout in the marketplace among the quick commerce players included.
That is where this company is positioning. They are relatively slow to enter into the market, but once they enter into the market, they can create the maximum amount of penetration in the market and that is where I would like to remain a little bit more watchful about the entire gameplay which a company like Reliance Retail is operating with on FMCG side.
Similarly, the situation is emerging very strongly from the product portfolio point of perspective for ITC. Their FMCG play is becoming stronger day by day. So, these two companies within the FMCG basket remain relatively more sure as bets as far as the outlook on the earning growth side is concerned.
