How are you playing the IT space?
We have been very bullish on IT. We believe there is a rerating happening in Indian IT sector. This space will probably last for the next two-three years. What we were expecting to happen over a decade is now happening over a very short span of time, predominately on the back of COVID. Digital has got a significant impetus. Work-from-home has accelerated the pace. You can play safe by going with Infosys, TCS, HCL or even Wipro. I think that is a very standard recommendation. Even now you can now buy these stocks for stable returns over the next one year. If you want to be a little aggressive and focus on digital and emerging segments like robotics, AI, machine learning, etc, my pick would be Happiest Minds Technologies. I think they have a very experienced management. By the virtue of starting late, they are focussing on the right segments. A significant part of their business is already digital and they are moving into newer and newer technologies. I will look at Happiest Minds even at current levels.
Where within banks are you finding comfort to add fresh positions?
If you are a little aggressive investor, you should look at some of the PSU banks now. There are asset quality challenges and a lot of other niggling issues regarding management, etc, but capex and loose monetary policy works in favour of public sector banks. They are grossly undervalued. I would like to point out two leading PSU banks – PNB and Bank of Baroda. Their asset quality has always been a concern. With NCLT and regulatory action coming in, we should see some recoveries happening. The second COVID wave may not be as harmful to their asset quality as was the first wave.
It makes sense to acquire PNB and Bank of Baroda at current levels for significant upsides. But you need to be a little aggressive investor. Some market movement may bring them down even further, but if you take a 6-12 month time horizon, these are probably the best picks at this stage. If you want to play safe, I will recommend SBI. It has moved up quite a bit. Beyond its own balance sheet, SBI’s strength is in its subsidiaries, whether it is life insurance or general insurance or asset management. All their businesses are performing exceedingly well. Strategic divestments or public offers may lead to further gains for SBI. So I think if you want to play safe, SBI; if you want to be aggressive, BOB and PNB.
In the last week, media has been one of the best performing sectors. What are your thoughts?
I think it is interestingly positioned. I would like to mention Sun TV and Zee; both look good to me. Sun TV has moved up from its earlier lower levels and I believe there is a significant opportunity considering that Sun Next has started doing exceedingly well. The kind of library they have in Tamil should hold them in good stead as far as their OTT platform is concerned. Their ad revenues have started pouring in now and with the unlock happening and economy picking up, this will gather further momentum.
As far as Zee is concerned, I think concerns regarding the promoter and management have been addressed to an extent. But there are lingering doubts on the role of management. I think Zee can move up even further. Overall, the channels are doing well. There are certain concerns on their OTT platform and the costly acquisition they have made in the recent past. In spite of that, it does look attractive at current levels on a valuation basis. The only question mark or risk factor is the clarity on promoter and the management’s stand.
