How do you look at the retail, consumption facing names — the reopen trade? Would you stay away from them until the health crisis is over?
As soon as the lockdowns end and things open up, many of the products which some of these retail companies provide are core to the consumers’ basket. So, the revival happens very fast and obviously some divergence should happen from other sources to this segment.
On the retail side, there are various companies and some have actually done very well despite lockdowns, etc. For example, Trent continues to trade at a very high level still, whereas Aditya Birla Retail has corrected again and gone into losses. So there could be opportunities here. I have not yet bought into Aditya Birla Retail but I would think that the valuations are becoming attractive from a longer term perspective.
Similarly, opening up trades like multiplexes should be on a look out for investors. If the third wave comes, then the returns you get will get delayed but the oligopoly in the multiplex or the actual industry will only grow and to that extent, PVR, Inox will benefit out of it because for investors who are willing to be patient, these stocks could give good returns.
Despite the heavy budgetary allocations, despite the tall allocations made by the prime minister himself from the Red Fort, we have barely seen the infra stocks move. Why is it that despite the fiscal push in this sector, we do not see much momentum on the market front?
Yes, many of these companies have started to grow their order books and the execution has picked up. One of the concerns for many of the infrastructure companies was the debt burden. Many of the companies have controlled that debt. Interest cost has come down for them and the government realises that infrastructure push is required for the country to move forward.
But there will always be a slip between announcements and actual execution. It is not easy because so many approvals are required and in many of the spaces like highway construction, etc, the momentum is already there on the hospitals front in the last few months. Many of the state governments have placed out significant orders with some of the construction companies, etc. But overall, as a basket, there are opportunities as there are companies which should do very well.
In the market space, a particular theme or set of themes catches the fancy of investors and that carries on. On the infrastructure construction side, there are companies which are much cheaper than the historical valuations and are now starting to do well. They are investment worthy and people should invest in them.
Did you subscribe to any of the four IPOs which are listing today, Devyani International, Tiles, Diagnostics and Windlas Biotech?
No, I did not. Personally, I do not see valuation comfort and the allocations are so low that whatever you get, the allocation won’t be much.
What is going on with pharmaceuticals? What started off with DRL has now trickled down to Aurobindo Pharma with two vicious days of selling. Cadila is also down. What are you making of the pharmace sector? Is it time to book out selectively?
In pharma, the stories are very selective. The only stock where I see value is Sun Pharma and that is what we are holding. The company is doing very well but given the negative sentiments around the entire pharma space, even that stock is not moving up as it should but I think they should do well.
On one side, we have all these companies which are selling final products and saying that they are seeing intense pricing pressure. On the other side, some of the API companies are reporting very strong numbers. So, this dichotomy is very tough to understand. And eventually I believe that if the overall market space is not giving pricing power on the final products then even API pricing or margins could come under pressure. So overall, very less opportunity is here because among the larger companies DRL, Lupin, Sun Pharma and Cadila etc are showing reverse and in some of the API companies the valuations now are very high because of the numbers they have been showing. It is tough to build out an investment case there also.
