Quite a bit of chop and churn. Capital protection should be the mantra for all investors until a clear mandate comes out in the US elections.
Yes, but there is no need to panic. We have enjoyed the almost one-way ride from March lows with very little correction or consolidation till recently. We should be ready not only for this kind of small correction we saw yesterday but also for a bigger correction. If that happens, there will be a lot more space for new money to come in. The new money that wants to come in will have far more comfort in terms of balance between financials, fundamentals and valuations to come in and that will be positive for the medium and long term. I do not see any reason to feel nervous about this kind of correction. I want more corrections to come in.
Where would you be a buyer if we see more corrections?
We would build a balanced portfolio between high betas and low betas. Right now here we are talking of buying if at all the correction comes. There will be higher weightage towards high beta stocks because those are the ones which correct more in a falling market and rise more in a rising market. That will restrict the shopping list to mainly two sectors — that is the BFSI and automobiles. I think these two sectors will correct more.
The BFSI sector has not participated much in the rally from March onwards except in the recent past after the Supreme Court judgement. After moratorium stoppage by RBI a month ago, there has been some participation and after the decent results for the September quarter but otherwise this is one of the sectors which has lagged behind compared to sectors like pharma and IT which have moved beyond the pre-Covid highs. These two sectors will be on the buying list. High beta would have corrected more by then and would see higher participants in the subsequent recovery.
Where within auto, do you see value opportunities?
The ‘value’ word scares me and so I would not want to use that. As for value opportunities, even without waiting for a correction, right now there is an optimum combination of good quality valuation and further growth expectations. My list would remain restricted to two-wheelers and within that Hero Motors and in case of passenger vehicles, it will be Maruti. In tractors, I would prefer much more correction because the valuations are much higher and the rise in the share prices has also been much higher. So for the time being my choice will remain restricted to Hero Motors and Maruti on any correction.
There was some scare in the two-wheeler stocks the day before yesterday when the numbers of the Navaratri sales that came in apparently were lower than last year’s. But this surprisingly was not reflected in passenger vehicles sales. These kinds of contradictions are difficult to predict. It is also difficult to analyse why lower priced vehicles have not sold as much as they should have and higher priced four-wheelers, the entry level passenger cars have sold. That makes it difficult to understand in a relatively lower economic strata country like ours.
Bharti Airtel is one stock that stood out yesterday. Would you recommend a further buy into Bharti at this stage?
The Bharti numbers have come really good and these have been followed by the Q1 numbers also which were good on any parameters, top line growth, EBITDA growth, on ARPU, on subscriber addition and any other parameter. The numbers are there for all of us to see and that is where we have seen the interest coming in. There were some news and rumours in the morning and as a result the stock had a very sharp recovery and then it came down. I do not know if there was mischief behind it. But coming back to the fundamentals, the company has been doing well in line with expectation. We all know that after the Covid pandemic and increasing work from home and digitisation, growth should start coming in for the sector.
There has been growth in both the quarters in almost all the three companies and specifically in case of Bharti. In between, the stock had corrected sharply. It still has not gone up too much. To me, for the medium term, it certainly looks good. For the short-term, other than traders, if there is any further correction either because of market fall or simply in the stock for any reason, that would be a safer entry price. But I am quite positive about the company after the September quarter numbers.