Earnings season has kicked off, it is going to be certainly busy with the rest of the IT earnings coming too and of course by Saturday we will have . Well let us begen with IT. You saw what happened with TCS including the dividend play which has taken place expectations from , HCL Tech and of course it is going to be later on to?
I think earning season is obviously going to be interesting this year. I think the most interesting sector to look at would be the BFSI space. The stocks have done quite well in last six months or so and it is going to be interesting how the commentary is going to be on that side. So I think from here we are already almost up 30% on an average in last six-seven months in most of the banking stocks. It will be important to see how it will move from here.
Secondly the most interesting thing to look at is that in the last three-four months what we have seen is hammering in the most of the IT names in the large caps to midcaps and here till date if you look at in 2022 I think most of the stocks are down 25% to 30%.
IT index is down more than 25%. So I feel that post TCS results one thing was very clear that it looks like that IT has made a bottom. I think obviously we need to look into most of the others earnings as well to get a clearer picture.
So looking at the TCS numbers what we feel is the sector may still see sideways to negative movement for three-four months.
People would still like to wait for Q4 earnings and then take a call. I feel that if you are a long term investor then I think this is the right time to pick up IT names.
What do you make of now and whether one should look at adding positions perhaps on down days considering channel checks are now indicating that cigarette volumes have seen an uptick of about almost 10% and there has also been good recovery in growth in the FMCG portfolio?
I think ITC obviously if you look at in year 2022 was one of the best performing stock in the large caps and the Nifty universe. I think from here I think the businesses look quite interesting from here. A lot of rumours about the demerger story are doing rounds and if it happens it will be good for the investors. But even if we do not look at those perspective and if we just look at the business perspective I think all the businesses have been consistent businesses for quite some time.
If I compare with the entire defensive play vis-à-vis the valuation of ITC and the kind of the size of the balance sheet, I feel that one should stay invested, limited side and if the things work well that could be a good upside story in ITC from here. What we have also started to see globally is a commodity rally. This week gold for example hit an eight month high, look what has happened with copper prices even zinc prices and back home deciding on a bond sale for the first time in a decade. The stock also reacting to that but you started to see momentum that is coming back in the metal stocks. What should be the strategy, what would be winners according to you?
The overall metal pack has been the best performer in last two years. Obviously we had a very good rally in terms of the commodity cycle. The reopening of China has become a new factor due to which we have seen the bouncing back in lot of commodity stocks.
I feel that obviously as you rightly pointed out copper trading at 9000 levels so after a long time we have been seeing all these things.
I feel that in the near term we have to look at the risk versus reward. If I have a limited downside obviously lot of stocks still underperform in terms of in commodity and after that good run up they have been corrected.
So I feel stocks like Hindalco with the steady demand can be looked at. Stocks like
, with a good yield can be looked. , in terms of valuations is very cheaply available compared to other stocks. I feel that one should definitely allocate some portion of money into the commodity play.
The FII selling is becoming from bad to worse. We are underperforming, do you think it is a matter of time when markets in a sense will cave in because last year when FIIs were selling domestic buyers were there but this year right at the top when allocation should come back we do not have inflows, we have outflows?
I think one interesting thing to be looked at is if you look at the performance of a lot of emerging markets, like just to give you a perspective about Hang Seng in the last two, two and a half months it is up 15-18%. They have done nothing in the last three, four years if you look at in terms of the performance.
So I feel that some money is obviously flowing towards those countries that is what it looks like. And I think we have seen a trend as whenever other markets and emerging markets tend to perform the money tends to flow there. Secondly I think we are trading at a fairly good valuation. So if I look at 10 year average valuations or maybe some other factors, we are priced in. So I think this year we would witness more of a stock specific action.
What about the outlook when it comes to ITC, our distributor check seemed to suggest that the cigarette portfolio has seen pretty strong volume growth of about 10%. The FMCG portfolio has grown 15 to 20% on pre Covid levels what is your sense?
I feel that ITC in 2022 has been one of the outperformer in terms of the large cap Nifty universe stocks. If you look at it obviously the valuations are very compelling. All the businesses look quite good and the main core business tobacco is also quite stable.
So if you look at what the market is chasing in the last six, eight months, it is chasing lower valuation stocks or which are undervalued.
So that is the theme which looks like to be continuing from here onwards also. I think if you ask me ITC in terms of risk is quite low, returns could be better and in terms of the markets there is nothing in the next few months.
I think the stocks also should be outperformer in the entire pack. So I feel one should definitely have ITC in the portfolio for at least a year, year and a half.
Which is that one stock which you say one day it will make me money, I am holding on to it but I am hoping that one day the stock will make money for me?
I feel the numbers which I have been looking at gives an indication that it is the right time from here for a next couple of years to invest in PSU banks.
I think smaller PSU banks offer a lot of value and if you ask me for next three-four years there are a lot of challenges for them as well . I think in the last three-four years if you look at these banks they have done nothing in terms of lending or in terms of any practically big activity.
I feel in the large PSU banks space, if I remove
I think two-three large banks remain on the cards which are , .
I think these two banks one should definitely look at for next couple of years and they should be giving good returns from here on.
Why am I getting a sense that I will get a yes in what I have just flagged off?
I feel HDFC Bank 100% is that bank definitely. One should have their allocation in the portfolio. I think that there are no two ways about it that HDFC Bank which has been an elephant will continue to be a consistent compounder.
If you ask me there are two things either way you create a wealth from here or whether you have a static return on a consistent compounder. I think HDFC Bank will be a consistant compounder. If you look at last 10 years, 15 years there hasn’t been a single case where you have seen any corporate governance which has affected the bank.
I think in all the measures if I look at in terms of discipline, in terms of corporate governance or in terms of earnings everywhere they fared 10 on 10.
I feel that from a valuation perspective the stock has done nothing.But I feel that whenever we see allocation or FIIs coming again then you will see HDFC Bank outperforming from here.
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