On Vedanta
What Mr Agarwal has sensed is that in the failed delisting bid, a large number of shareholders excluding LIC were willing to accept around Rs 160 and he has used that to take some more stake. Given that the creeping acquisition norms for this year may be around 10%, he can go a little more and then we have to see how much more can be done because post March again there may be a window of opportunity for him to add some more stake.
Given the fact that the commodity cycle has turned so strong, he might have some kind of plan to take things forward. Minority shareholders can take comfort from the fact that when the promoter is buying around this level, there could be some kind of a base formation and depending upon the commodity cycle, some further up move can be expected.
On banks, both private and PSU
Banking is a high beta space and given the fact that we are seeing funds flowing into the country, the overall revival is strong and people might have to allocate a larger component of their investments into this space, The top private banks like HDFC, Kotak have kind of run up and reached a certain level. There is an appetite in people to go for either PSU banks like State Bank of India or some of the beaten down ones like IndusInd, Federal Bank, Axis Bank and ICICI Bank which are little more attractive in terms of valuations compared to the larger one.
Banking being a high beta play, positive data point on the economy and the fact that the recent RBI report suggests that the actual pain in terms of NPLs, is far less than what was feared earlier, we continue to be extremely positive on the banking sector. Apart from the large top private banks, we are extremely bullish on State Bank of India. Also ICICI Bank, Federal Bank can give decent amounts of upside from current levels.
On good strategy for bank stocks
One important thing from an investment point of view would be allocation. As an investor you would have to take a call on how much allocation you want to give to HDFC Bank, Kotak, ICICI and Axis and among midcaps how much would you like to allocate to which bank — Bandhan Bank or AU Bank or a Federal Bank. We have to understand that whenever we have seen a big volatility and economic slowdown, these banks can give you lot of pain but at the same time, in a bull market because of the kind of beating that they have gone through, IndusInd Bank, AU Bank, Bandhan Bank can show a very solid up move also and that could be a trader’s delight.
So, depending upon what kind of investor or a trader you are, you can make your own choices. But as an investor, we think you should definitely go with the larger corpus or larger names likes HDFC Bank, Kotak Bank because it is not about all-time high or certain valuations. It is about… whatever point you buy into these names, what kind of growth are we really looking at and with a very small pain, whenever there is a volatility in the market, that gives you a lot of comfort. We would definitely have the same strategy even at this point of time.
On Sterlite Tech
We do not cover Sterlite Tech but when there is a bull market and a fancy for midcap and small cap names, these stocks keep coming back in the news. The last 2-3 years of track record in terms of the actual delivery or the performance, is far from satisfactory. People like to play high beta names and there is momentum, but I would urge people to be a little more selective about what they are getting into. We are not too excited by these names.
