There is a lot of excitement around the 5G policy rollout. Both Jio and have made clear about their 5G rollout plans and we could see traction on Friday along with the rest of the market recovery playing out. Where or rather who is better placed to cash in on this opportunity?
I think a short answer from my side would be no one because this is just more expense added to the books of these telecom players both Bharti
and Reliance. Of course, in the case of Reliance, it is difficult to understand because their Jio operations still get hidden under all the other businesses that they are doing. But Jio stand alone is yet to deliver the kind of promise it made when it started operations and at that time it was purported to be far more advanced in terms of its technology and reach.
I do not see how Jio can keep winning market share from Airtel. Personally, as a consumer, I like Airtel more but talking from a purely balance sheet perspective, 5G rollout and the additional money that they are going to pay for this, there is going to be more strain on telecom players.
I will give you one disclaimer. I have never really invested in the telecom sector in India and that is unlikely to change. The reason is that there is such cut-throat competition that any slight increase in price or tariff results in a pricing war even now. So consumers will definitely benefit but as shareholders, I do not see how margins can improve and additional revenue can be added going forward.
What is your outlook on the entire auto space? We are watching out for rural demand denting the two-wheeler sentiment but by and large, the festive demand being quite a positive trigger for passenger vehicles, what are you pencilling in for autos?
So, two things here. I will give a disclaimer first. I have Hero Moto in my portfolio and personally I have been very bullish on two-wheeler stocks, purely because they have not moved as much as they should have in the last two-three years. The stock price has not moved in line with the growth and demand.
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When it comes to four-wheelers, is a stock I have had for a long time. It has outperformed in the last two-three years. It is a leader in passenger vehicles. In the overall commercial vehicle segment in India, they have a 46-47% market share even now. In the EV segment, they are the clear winners because they have got 87% market share.
It may take a year or two years or three years, but the EV segment is going to expand. They will clearly have an advantage going forward. If you have been trying to invest in the stock and can stay invested for five-years, definitely it is an add.
But having said that, the way the stock has run up, I would not be surprised if it falls in line with the overall market because it is a part of many indices. When there is a longer one selling pressure of the market, the stock will also fall. But overall I am positive on the sector and Tata Motors again is clearly my favourite in the sector.
Your thoughts on the entire pharma basket?
I like it and the reason is that companies which do not have too much debts on their books will anyways do well. In pharma and FMCG segments, there are a lot of companies which do not have a lot of debt. So interest rates going up will not really impact them that much.
Pharma had its big run in 2015-2016. Since then, the pharma companies have not really rallied the way overall markets have rallied and have been laggards in that sense. At some point, I hope this anomaly will clear out and these stocks will outperform.
The other reason why I am positive on both pharma and FMCG is that they are not impacted by interest rate hikes and if inflation gets under control, which is clearly the mandate and the will of RBI. I like companies which are consumption-oriented like
, Burger King and because if inflation comes under control, then a lot of the products that they make will come within the reach for their end consumers. The demand anyway has not been impacted, whether it is pharma or FMCG and so these are two spaces which in this overvalued market, are still available really cheap. I am definitely suggesting adding stocks in both these sectors.
Today the market has made quite a bit of bounce back and the technical experts believe that some sort of catchup is quite possible. Which stocks and companies do you think are likely to outperform from the entire financial space?
Given the overvaluation of the market, I am broadly negative on financial services. In fact, this is where I still see maximum overvaluation. Having said that, the one stock that I was looking at which I really like was actually a PSU bank. It is something I have never really recommended or bought before and the stock is Bank of Maharashtra.
The reason was among all the other PSU banks, this stock has the lowest NPAs within the PSU pack. It has the highest growth in net profit, both on a quarterly and yearly basis. At Rs 18, that sentiment of all the other PSU bank stocks has rubbed on to this small bank, Bank of Maharashtra.
But overall, outside of State Bank of India or Bank of Baroda, if you go down the list, I am actually a little positive on the smaller PSU banks. If you want to buy something from the PSU banking space, Bank of Maharashtra amongst the smaller banks is definitely something one can add because amongst PSU banks, this has probably the cleanest asset profile, very little NPAs and very strong growth in its net profits.
The other bank which I have in my portfolio is
. I really like their loan book. They have got a lot of gold loan assets, they are in south India and that is a stock which I have recommended and so these two stocks would be top picks for me.
Any particular commentary that you are hoping to hear from the IT majors?
If the fear of recession and what is happening in the US is true, then these stocks will suffer purely because when money dries up the order flow for a lot of IT companies suffer. Overall,
is one of my favourite stocks and it is one of the largest holdings in my portfolio.
At this time, I am still not recommending people to add more of Infosys in their portfolio unless it is for incremental money. Overall, instead of predicting what the commentary would be like, what growth projections and what revenue guidance they give it is better to wait and watch even after the guidance how the landscape develops in the US.
If further flows slow down – which, going by the aggressive way the US Fed has been increasing interest rates – these companies will find it hard to gain fresh orders and sustain its current pipeline.
What about the entire auto space? For most part of the year, we have seen leadership coming from M&M, but do you think that is likely to change in favour of Tata Motors now because the Street is quite bullish about the latest launch coming in terms of Tata Tiago EV and the price point is attractive at Rs 8.5 lakh;m, do you think this could be one of those disruptors in the entire EV space?
It could be. It may take some time. Tata Motors as a company, still has a lot of debt issues and do not forget that even now the biggest portion of their revenue is Jaguar Land Rover. Until the operations overseas and if there is going to be a slowdown all over the world I do not think EV segment which is barely in its infancy yet to develop could probably swell the revenues so much that the stock will start outperforming.
Fortunately or unfortunately, much as you like EV as a space and much as you like the new upcoming theme, for Tata Motors stock price to perform well their Jaguar Land Rover operations have to do well and right now they are struggling and they will probably continue to struggle.
Having said that, the domestic market is making a lot of gains and going forward I think they will emerge as the winner in the EV segment.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)