What are you making of the developments at Zee. Is the deal with Sony minority shareholder friendly? Can one still buy into this stock?
Zee this year has seen tremendous move. We have been expecting this kind of a move in Zee since it was languishing at around Rs 200. There was talk of some strategic investor coming in and that has materialised now. It is definitely positive news. It is minority shareholder friendly because if both of them merge, they are going to be a big entity with a big market share in India. But then everything comes at a price.
So, after this kind of movement, I do not think it is that attractive to enter into right now. Also, it is still a non-binding agreement. They are going to have the talks in the next 90 days when the deal fructifies. One has to be a little bit cautious.
The new age companies which have recently debuted on D-Street continue to have high valuations. Many investors believe that half the juice is already out before they come to the equity markets. How should one look at these businesses?
The kind of valuations they are getting listed at does not leave too much on the table for the short to medium term. Maybe for a long term, because the growth that they are going to see from such a small base will be tremendous. So there is scope but it does not make too much sense to invest in them at such high valuations.
Long term investors in the markets have seen that the market does not go in just one direction. There are periods when one sees correction and where we see significantly higher valuation companies even correcting more than what the normal market will do. One needs to be patient and be on the lookout.
IT has been one sector which began its move from the March 2020 lows and since then has not quite stalled. We have not even seen a fair amount of consolidation, leave alone a correction? Where within IT could one buy afresh?
IT will continue to outperform the market even going ahead. So be on the lookout for opportunities to buy IT stocks at any correction in the market. Go for some of the good companies which are still available at a discount to maybe the larger players. One name is HCL Technologies. Compared to TCS or Infosys, it is still available at some discount. Over the next 2-4 quarters, I do not see IT losing its steam. It should continue trading strong.
The other theme which has held out quite well and led by ITC has been the return of FMCG. These stocks have definitely made a comeback largely because of the ITC impact. How sustainable is this move?
After the kind of move we saw in stocks like Hindustan Lever, Godrej Consumer, I don’t think there is too much value for an investor to invest today and make a decent return for the next one to two years. I would rather go for more infrastructure related, capital goods and realty sectors where return can be much more. They can outperform the market.
So like IT, even FMCG can be a market performer. They may not really give corrections to enter into. At these valuations, I do not see too much of an upside potential though if one is satisfied with 7 to 12-13% kind of a return, one can still enter into stocks like Dabur or Marico, but for investors there is not too much left after this kind of run up.
