The metals uptick continues. Does the cost pressures that many industries are facing augur well for metal stocks?
Yes, indeed it is and frankly it is quite contrary to my expectations. I was expecting metal prices to peak out and that would have resulted in the peaking of the metal stock prices as well. But nothing happened. What is more surprising also is that the market is in such a bullish mood. The euphoric phase in the market is driven by liquidity and news flow. It is not taking cognisance of the fact that some sectors will get affected negatively by higher metal prices.
For example, the auto sector will clearly be affected to the extent that their margins will be under pressure but the market is in such a phase that it is not negatively punishing that sector. Maybe there is a little bit of underperformance or lack of participation, but not a significant drop down in their prices or a significant underperformance. That is an even more surprising phenomenon but probably these are the signs of the times and the bullish markets.
Today IRCTC went up by almost 7.5%. What to make of this?
This is a bull market. In the case of IRCTC, there is no negative news per se but if I extend my horizon for the stock to last six quarters or so let us say from the time that Corona started, there clearly was a significant de-growth in top line and bottom line for the stock because of the business not being there. But except for a few times in between, in the last six quarters the market has not punished the stock and has not not taken notice of the stock.
So long as the strong liquidity flow continues, as long as the market finds buyers, it does not matter if there are intermittent hiccups in the performance of the business as long as the business model is strong and we are comfortable with the financials and the pedigree of the promoters.
Of course, the liquidity inflow in the market as well as the liquidity and/or shareholding pattern of the individual stock has also played a part in such cases. These have been rising markets with fewer sellers and more buyers. It is difficult to predict what will happen going forward. The stock keeps going up every day and one can keep wondering what is happening to the valuation.
Do you think HDFC Bank results can change the sentiment for the financials at large?
I do not know if HDFC Bank will change the sentiment but it is a matter of time as this is a rising market and it is not taking cognisance of negative factors in the sector. Money has been coming in largely from domestic investors and also from global investors. So at some point of time. The sector rotation and the stock rotation is bound to come into play and the results have been reasonably good and marginally better than the expectation.
Also, there is underperformance there in the background for the last six, eight months, maybe up to a year. It is a matter of time before the whole sector as well as HDFC Bank come back into the limelight. It will come back into the buying list of the investors.I agree with you that it is bound to happen.
