reports numbers this week. How do you position yourself in front of the IT figures?
Things have gone bad in the Indian markets and we have seen sector-by-sector selling happening. First it was banking, followed by pharmacy, consumer goods and now it’s IT. My feeling is that the devaluation of the rupee due to the stronger dollar obviously helps IT. This quarter, management’s forward-looking commentary might be important to note from here, as it will paint a picture of how it’s going to play out going forward.
In the last quarter, after the TCS commentary being a little soft, we saw a selloff from most IT companies, but I think the correction was very strong. Ratings look very comfortable from here. Current valuations relative to the five-year average of most IT companies are still discounted. My feeling is that we have to consider building it, but obviously the earnings season is here and it starts with the TCS. We should wait a few days and watch the results and comments and then buy another 4-5% in case other numbers look good rather than trading or investing right now. I waited for the numbers, then I took a call on all IT stocks.
What is your opinion on the real estate basket? Is there still an investment opportunity or are better avenues available?
I wouldn’t get into any of the real estate stocks just yet. The way the markets have been, we’re getting a lot of large caps to play on rather than getting into one of the real estate stocks. I would avoid any real estate inventory at this point. I prefer to play real estate through housing finance companies. Monthly numbers for most real estate stocks have been quite strong.
What about the entire discretionary basket? What’s going on with aviation, theater stocks and also some buzzers in terms of and Metro Brands. Do you like any of the names in the discretionary basket?
The entire discretionary basket looks selectively correct. We can look at maybe one or two hotel stocks. Indian hotels seem interesting. Second, IndiGo, I would avoid.
“ Back to recommendation stories
Indian hotels have to be looked at because at this price the rating seems comfortable and the channel checks we have done show booking rates have been very good for many places. One has to look at hotel stocks and there the top of mind is Indian hotels.
So what’s your take on that after the government decided to tax windfall gains and the export of diesel? After the recent drop, are all the negatives in the price or will it continue for a while?
In Reliance definitely post the sale. As the government has already mentioned they will be reviewing it fortnightly and I have a feeling for Reliance there should be some outstanding GRMs for this quarter and we are all aware of that and obviously the others companies are also very robust.
So my feeling is that this correction makes sense to invest in Reliance as it is going to be temporary in nature. I think the numbers should stay strong for Reliance so I would be a Reliance buyer at this point.
Industrials have been a space that a lot of pundits are now talking about positively. Is this a space that could generate alpha or is it still going to be one of those slow movers?
I think industrials definitely. Overall, the markets have been bad. So I don’t think only manufacturers will outperform. It is more important to look at FII flows where sectors look promising. But I think the flows are negative. I don’t think these will survive and there might be lower levels.
This is the case of industrialists. I don’t think that in the short term, anything will happen in the industrial sector. A sector that seems to me to be a clear winner, finance. I think financials are a safer investment right now than investing in other stocks.