says Hemang Jani Equity Strategist & Senior Group VP, MOFSL.
What do you make of the price action coming back into some of these two digit and single digit stocks? I do not remember when was the last time I saw stock like BHEL see volumes and cash market volumes of about 96 million shares only on the National stock exchange.
The way we are seeing some of the midcaps and the smallcaps moving up is that it is a function of more participation by the HNIs and retail investors in the market. We have seen already that the index has done well from the lows and few sectors are actually contributing to it. Typically after a certain move in the index, you also see certain midcaps and smallcap companies doing well and one has to reckon that these PSU names had gone down big time over the last many years.
So the floating stock there is also limited and it is easy to pull it up when you see a certain amount of interest in the market. Fundamentally things are not very clear in terms of what can really take these stocks up in terms of data points but I think it is largely a technical adjustment. I would call it that and the lower floating stock could be actually helping the stocks move up 15-20-25%
Lot of fundraising news continues to come in; after M&M Finance and Shriram Transport, JM Financial also added to that list. They are looking at a QIP for fundraising and it seems that the space continues to be incredibly active?
In the last one month, I think Rs 1.25 lakh crore has been raised and surprisingly during this period, the basket too has really gone up. But typically what you see is that when so much liquidity gets sucked out, it puts some near term pressure on the market. Given that there is so much appetite, a lot of people would try to raise money. However, I am not too sure whether it would be the case across the quality of the companies or the marketcaps per se because the appetite in this kind of a scenario is only for the largecap funds. So wherever the companies are able to raise money, it would definitely provide some sort of a comfort. So companies like Mahindra & Mahindra Finance which have gone through so much pain would definitely be good but I am not too sure how many companies incrementally will be able to raise money at this point of time.
You have got the annual report from HUL. They said there are near term ambiguities but they are very confident on the medium and long term for the prospects of the sector as a whole. What is your reading of the lockdown impact on FMCG in the long run?
Clearly if you look at the HUL annual report analysis, one thing is coming out very clearly. It is that across categories, there has been a very strong growth and one has to also keep in mind that there is a scope for a lot of premiumisation across some of these products. So whether you look at HUL or Britannia or MaricoNSE -0.15 % with few exceptions, what is coming out very clearly is that despite lockdown these companies are able to report very strong healthy growth and there has also been so some amount of cost saving. So overall, we feel that from next six to 12 months’ perspective, some of these companies when things normalise would report much better growth and better margins. We continue to have a lot of positive bias towards these names; HUL, Marico and also to some extent companies like Britannia.
here is nothing wrong with the SBI numbers. If at all, their moratorium was better than the best of the private sector banks. Yet, post results whatever excitement SBI saw did not last even for one full day. It went to Rs 195-196 and Monday the stock came tumbling down?
Yes, absolutely. What people are right now focussing on is not only this quarterly numbers but how the shape of things is going to be in terms of moratorium and incremental slippages because at the end of the day what really matters is the confidence that one has in say few quarters in terms of asset quality and the visibility part. People want to be extra careful about the quality and probably that is where SBI falters. Also, we have the Supreme Court hearing on 12 June on this interest rate waiver on moratorium. So those are the factors that are definitely there in the minds of investors. I think in terms of valuation in the numbers per se, SBI definitely looks okay but it will take some time for people to get too aggressive on such names when things are not very clear.
Let us talk about telecom and Vodafone. Would you take a risk and get into Vodafone at the kind of single digit numbers it is trading at right now. Could it emerge as a dark horse while everyone is still focusing on Bharti and Jio?
You are asking if it could emerge as a dark horse. Yes, it can emerge as a dark horse. It has been one of the best performing stocks. But I think the way we look at this whole telecom sector is that the probability of Vodafone getting back on track in terms of the debt and balance sheet in business is very low despite the sector doing so well. Whereas the key beneficiaries of this entire ARPU growth and the way the subscriber will upgrade themselves to 4G would come to Bharti and Reliance Jio. So for the HNIs or the big investors who really want to play and put a large amount of money in the quality stock where there is liquidity and there is visibility; on those parameters, Vodafone is definitely not fitting in. But to a retail investor who is looking for a quick movement and the fact that the sector itself is doing so well, it might provide some opportunities. But from an investment point of view, we have Bharti and Reliance as our preferred picks.
How are you looking at the entire midcap IT space? Where within midcap IT are you finding opportunity?
Among Midcap IT stocks, one should look at each company in terms of what the triggers are and in what space they are operating in. So companies like MindTree, L&T Infotech, Persistent Systems are extremely niche in terms of their offering. MindTree in particular is the best way to play the entire tech story across US markets because a large part of the rally that we are seeing in the US is driven by the top tech companies and companies like MindTree are the ones which are getting 40% of the revenue from there. Or Persistent System, which has a certain cloud-based product offering could benefit. But we have to be very careful about what company because it is not as simple as just buying certain stock at a certain PE and hoping that things are going to revive because the market is becoming extremely complex in terms of which companies will survive and where there is a better growth visibility. So these are the companies that we think are much better placed in the midcap IT space.
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