Unlike the previous rallies where it was all about the FII participation and only the promoters and FIIs made money, this time, it has really been the retail investors who have participated and made money. Yes FII flows are good but they are not the only game on the Street.
Absolutely. Retail investors are better off. The SIP book has continued and this rally makes one remember that more money has been lost waiting for correction than the actual correction. I am pretty excited that equity culture is building in India and that is why I keep saying that anything which plays financialisation of savings is a good long term theme — be it insurance, asset management, whether those are depositories or agents. Valuation wise everything is expensive and now we are seeing the banks and realty, etc, also contribute to the rally. It has been quite a stellar move but honestly, now is the time to be more balanced and more prudent and have more reasonable expectations going forward.
But would you say do not fight the trend, do not try and fight the ticker or would you say it is time to get a little bit cautious and at least take partial profits off the table and maybe sit on some cash for whenever the markets consolidate?
We have to be selective in putting incremental capital to work. I am not a great believer of booking profits and then re-entering because it involves two legs. You might get lucky in exiting. You may not get lucky while entering back. So go for earning support. Go for more long-term trends. Do not chase momentum. We have seen that with some IPO listings being subpar. Market can surprise you and sometimes the moves can be very quick.
So keeping some powder dry is welcome but one should stick to healthcare including API and CRAM, selective play on some platforms and technology, financialisation of savings both in and out of home consumption and the entire housing revival — four-five broad themes. But buy what is more reasonable. Do not pay just any price. Growth at any price can give subpar returns, at least in the near term.
The kind of move we have seen in , the weightage is going to be crucial.
Absolutely, in fact I have said before that the first company in India which will probably hit $500 billion and a trillion dollar market cap would be Reliance. If not the first, at least in the top two, three. It is evolving more into a platform play. I have not seen global energy businesses transforming themselves and setting up great consumer franchises.
Today 40% EBIT is coming from the new age businesses. The key trigger from the medium term is the monetisation of the oil to chemical business. They have great plans on energy which I will be keenly watching out for. The way Jio is shaping up with the launch of a new phone and becoming more of a digital ecosystem play would be the one to watch out for.
This is actually a great combination of bread and butter, oil and chemical and the new age businesses and the possible demerger of the business into three or four entities as time progresses could be the next catalyst. So constructive on it and Reliance touched Rs 2,400 levels at around 12,000, 13,000 on Nifty. It has recently started and then probably there were some periods of lull. So considering that everything is expensive, Reliance is relatively more reasonably priced amongst the blue chips.
All the real estate stocks are up. How are you making sense of this and also let us not forget when people get richer, they also shift their net worth from the equity markets to buying real estate. That has traditionally been the trend in India.
I agree with you partially. We are probably seeing some bit of said residential housing recovery. For example, DLF Q1 numbers positively surprised the Street where they spoke of 10 billion pre-sales. That means the guidance of 40 billion pre-sales could possibly be realistic. We saw Godrej in a pre-launch, on day one garnering almost Rs 500-600 crore of pre-sales. There is a pick-up in demand for residential housing. Coming back to DLF, in the rental arm, the occupancy levels are still at 87-88%. They have 8 million square feet launches lined up.
So any real estate company with a more diversified portfolio, pan-India presence and the ability to execute well should do well. A couple of names down south like Sobha, Brigade also should do well. But I am in general more bullish on the building material space. Realty will do well but the paint makers, the tile makers, the sanitaryware, the cement plays, the fast moving electrical goods are the companies with better return ratios, great ROEs and much leaner balance sheet. They probably could command the same multiples as some of the FMCG names considering that we could see four-five years of solid double digit growth. Also a large part of the market in tiles, PVC pipes and sanitaryware is still unorganised. The unorganised to organised play will eventually aid both the top line and the bottom line.
