How are you looking at the entire PSU theme?
We look at stocks on the basis of business fundamentals and not on the basis of whether it is public or private sector. Secondly, the divestment theme does not work in the investment portfolio from a two year-three year perspective. There is too much news flow on that and prices keep fluctuating. If we like a company and we feel that there is a huge potential there, then we will continue with . As of now, these companies like BPCL,
etc. are not in our coverage and we have not recommended them in any of our portfolios. The petroleum companies have a lot of intra balance on the policy side and no clarity how it is going to be done over a period of time.
On Concor we have not taken a call yet. We will wait for the right time to come because as the economy is picking up, containerisation is going up and all those fundamentals are in favour, but I would wait for the overhang of divestment etc. to go away. As of now, there is no recommendation on any of these stocks.
Why is going the other way in such a raging bull market?
They have moved too fast in the last few months and many people have booked profit at Rs 2,300. It is a big elephant just lying dormant. I do not see any major reason why it should remain like this but I guess people are going to wait for some more time to see if a higher price can be justified. The oil GRMs are not coming up, they have not added too many subscribers in their telecom business. Airtel is in the first place in telecom. Then there is the ongoing farmer protest and destruction of Reliance towers in Punjab and some people are linking all of this. To me, all of that is just noise. In fact, we are bullish and have Reliance in a couple of portfolios and with good weightage also. At Rs 1,930, we have recommended adding Reliance. So we are positive and feel that it is just a time-wise correction. Whenever it moves, it will again give good returns. Fundamentally, there is no reason to stay out of Reliance.
Is State Bank of India now fully priced? It has seen a 40% up move and clearly it is not cheap now?
It is not cheap any more. What should have been done in 12-18 months, was done in one week. They have given a very positive commentary. But the market has already factored in all the positives in one week’s price. A lot of value is there in the subsidiaries but that will take its own time to unlock.
Secondly, we are going with the assumption that the economy is totally recovering and
is saying Rs 60,000-crore gross NPA will be managed. Any kind of slippage on that will again result in a sharp selloff and that is a very big risk.
Unfortunately, many times they have said these kinds of things and have not lived up to them so the track record is not very strong. There will be some scepticism and any small slippage will result in a big cut. If somebody has bought it at a reasonable price or one week back, he can book some profit here and keep the rest for riding the bull run. But from here onwards, I would not suggest adding to SBI.
What do you make of some of the realty names like DLF, and Godrej Properties? They have been going up.
Realty is a sector which has surprised almost everyone. In fact, not only in India, even in the US, the sector has surprised all. Some part of it is to do with what the governments have done with stamp duty cuts etc but some part of it is also because there was no other alternative.
In terms of stock investors, the first round of up move has happened and from here onwards it will not be sensible to buy at these levels. If somebody had bought at earlier levels, he has made a good profit. In fact, for him it is time to take some money out.
For the second round to start, real demand has to come in for which we will have to wait for some more time. For that we will have to see how the overall economic recovery happens. There is a lot of euphoria right now being built on growth in terms of government expenditure etc. Whether all that percolates down to people getting richer, getting better salaries, high salary hikes etc all will play out over a period of time. We are not buying any real estate stocks. However, we are playing the theme through housing finance companies like HDFC, LIC Housing Finance which have done well and are likely to continue to do well. So instead of playing directly to the real estate player, we will go through the housing finance route, but before getting into real estate stocks, wait and let these prices cool off.
