People are talking about recovery. Vijay Sales told us average sales prices are up 30% to 40%! What do you make of this recovery?
There has been recovery and the kind of inflation we are seeing is because of demand. Demand is very strong. The inflation is also the result of the rise in raw material prices. When we look at stocks which are benefiting from this, we see that they have already run up. At the kind of valuation they are trading at, it is very difficult to buy Titan at this price.
Titan is a very good stock to hold for the long term. But to buy at these prices, investors would have to be a little cautious. One can get gung-ho because of the recovery but one should not be chasing momentum.
Value goes a long way but momentum is temporary. So though demand is visible and there is good momentum, one has to be careful about selecting what one wants to buy at these levels.
Which sectors would you be with? There are two kinds of plays. One which are not seeing recovery but are looking strong and the second is the reopen trend in the market. Your view?
I am not saying that one should not be buying at these prices. I am just saying look for value. We saw a good move in PSU bank stocks today because there was value there. Stocks like
, Indian Bank were trading at a decent discount to their averages and there was definitely a good value play there. I still feel that momentum can take them higher because valuations are not expensive.
So even in a capital good infrastructure space, looking at the government focus on infrastructure spend and increase in external infrastructure spend, one can still have value. One can look at value in that sector also.
There is a great deal of housing demand and we have seen the real estate stocks doing well. One can look at housing finance companies. A lot of upgrades should be happening now because earlier they were not looking at more than 7%-8% growth but now they are looking at 15%-20% growth and so that is also one space where I see value.
That’s what I meant when I say look for value and go for a little medium to long term approach now rather than just the momentum.
is up by 15%! It is headed towards Rs 1,200 bucks a share. What do you make of this?
This is a story of branding though this is also a part of the reopening trade. People are now going a lot to hotels, restaurants and that is where you see a lot of the sales happening for these brands. As the brand becomes bigger, the valuation has to catch up. That is what we saw in Radico Khaitan and we have seen a dream run in the stock over the last one year. It tripled in the last 8-10 months.
What about IDBI Bank? I understand the management has given interviews saying that there is much scope left for retail banking and that they want API solutions. A lot of noise is coming out about that as well as value unlocking. But this kind of a move?
The move in the smaller banks and of course IDBI was tremendous. Those stocks have been at a discount for a very long time and they have been making all the provisions and now they are adequately provided for.
So if the economy picks up, these stocks available at may be half their book. Once the economy picks up, then the growth can be faster than what we have seen in the larger banks, which are already trading at a fair value — be it ICICI Bank or Axis Bank. There also, the momentum is strong but the smaller banks were trading at a huge discount and they would get a delta which would give better returns.
