How you are reading into the quarterly numbers of HDFC Bank?
The result was a bit of a disappointment. Both NII and NIM were down. But we should not forget that there is adequate provision and they are well capitalised. We believe the company is well placed to take advantage of things as we get back to a normal life. We remain optimistic about the company. Yes, the near-term weakness is likely to be there but this weakness should be bought into. We expect the stock to be trading around Rs 1,800 to Rs 1,825 in the next one year. It remains our preferred pick in the banking and financial sector space.
Why is HDFC Bank, irrespective of the numbers, underperforming SBI? This year, HDFC Bank is up 5% and SBI is up 50%.
Maybe the base effect is coming into play at this point of time. HDFC Bank has been conservative throughout the last quarter after a heavy base. The stock has performed in the past. SBI was pretty cheap at that point of time. In SBI, we are definitely seeing some value buying. Nevertheless, HDFC Bank remains our preferred pick at this point of time.
Why are metal stocks down when metal prices have been firm?
The stocks have been one of the best performers in the last three to six months. The market is just taking some profit off the table. Inflation is inching up. I think that is having an impact on the international and the local market.
So I think it is just profit booking. The market will be waiting for results or any confirmation that things look okay going forward. You can see buying again coming as far as that space is concerned, but for now we are seeing some profit booking in metals. The sector may continue to move sideways till some clarity or management commentary gives a reassurance to the market that still there is steam left in that space. Another factor that could be taking a toll is that a lot of FIIs are not there in the market at this point of time. We also have a number of IPOs lined up and that can also have an impact on the market.
Which one is a better trade – buying banks or auto stocks on the decline?
I will buy auto. Actually, auto has not participated in this rally at all. It was either because of the lockdowns, supply chain issues or unavailability of semiconductors. As we go into the festive season, there is going to be a significant pent-up demand. Import prices are also cooling off a bit. If it is going to be a normal monsoon, then there should be a decent demand from rural India as well, which is coming of age and the contribution towards the auto demand is increasing over there as well. Auto, which has not participated in the rally, could offer huge value at this point of time.
Is Reliance still a buy for you? What levels are you looking at?
Reliance should remain a value pick. It can be a part of the portfolio. A lot of value can get unlock going forward. A lot of stories are running around. There are talks about listing of retail and Jio arms as well as monetisation of the O2C business. Reliance Industries is the holding company of these new-age businesses. It could be exciting for the market in the medium to long term.
