Given that we have got comforting words from the Fed Chairman, do you think FIIs and markets are likely to take heart from that?
Globally the liquidity situation remains quite strong. The only thing is in the US, bond yields are going up and in India too we have seen a bit of an inch up. That may provide for a little cool off and we have seen some correction. The broader story in terms of the liquidity situation remains strong. Commodity prices and crude prices going up is not a big negative, according to me.
For the global economy and overall flows this is definitely a positive sign. I am not reading too much into the last few days of selloff as long as the growth data points continue to be good and the global liquidity situation and bond yields are within a broad range. We continue to remain positive both on flows and on the growth parameters.
Do you think Tata Consumer has a long runway of growth?
Absolutely. It is very clear that the consumer sector will remain a dominant theme in the overall Nifty. Talking about Tata Consumer, we have seen a massive transformation and turnaround in that company. The kind of transformation, businesses and initiatives which have been taken on the consumer side via restructuring and now online presence in terms of getting Big Basket, the overall story remains far stronger. Now that it has been included in Nifty, the kind of flows that one can expect from ETF and passive funds will make it far more interesting for people to participate.
A lot of IT product companies have done well whether it is Affle or Tejas or Intellect Design. There is strong price action even in OnMobile. Which one do you like from this space? Do you think this place is getting very hot now?
Yes absolutely. The entire digital theme has done exceptionally well. Companies like IndiaMART, Affle, to some extent Info Edge and a couple of more companies have gone up 150-200% in the last six to eight months. This may be because the digital theme globally has played out well and we do not have marquee names here. People are trying to look out for companies which are not that big but which have the potential to grow big over the next three to five years.
Within those companies, we have coverage on companies like IndiaMART and also Info Edge. These are the two companies that we think are extremely well placed and over the last two quarters or so, they are doing pretty well. In case of Info Edge, though the core business is slowing down, there is an IPO plan for Zomato and the incremental valuation that they are getting can re-rate the company further. IndiaMART has seen a stellar move over the last one, one-and-a-half years. This theme could see a bigger upside over the next two to three years.
Tata Steel was up 7% yesterday. What is your take when it comes to the commodities bucket?
The overall momentum when it comes to pricing continues to be very strong — be it copper, aluminium or steel. Our preferred one in the metal pack is because in the recent analyst meet also we felt the focus on growth and increasing shareholder return and debt reduction. We have upgraded as part of our metal basket and other than that, Jindal Steel and Power is something that we have been liking for a long time.
Given the balance sheet, given the fact that the pricing environment is so much better, that is one company that will stand to benefit a lot. So Jindal Steel and Power, SAIL and Hindalco are the names that we like within the metal space.
Privatisation is going to be a priority for the government going forward. How important is it going to be to get your picks right within the financial space?
In terms of the earnings growth for this year as well as next year, financials would be one important sector in terms of the incremental growth. So, we must have a fairly large allocation to this particular space to benefit from the growth cycle that we are going to see over the next let us say two years or so.
Within that, basically it boils down to the larger allocation and the smaller allocations. We have been liking ICICI Bank, Axis Bank and State Bank for larger allocation. These are the three names where incremental growth is looking much better. Valuation comfort is also much better compared to HDFC Bank, Kotak Mahindra Bank etc.
Within the smaller banks, AU Small Finance Bank, Federal Bank are when one can have a smaller allocation as a big rerating can be expected over the next year or so. They are essentially high beta and so sometimes the fluctuations can be very wide.
