On telecom stocks like Bharti Airtel, Reliance Jio and Vi.
The way we are consuming data, it is nothing short of the FMCG way of consuming. The way in which the economy is growing and the way in which connectivity is expanding, whether it is machine to machine connectivity or a consumer to machine connectivity — whichever way you look at it — data consumption is increasing and the companies which are positioning themselves in these areas are relatively better.
Having said that, the game changer is probably being announced by Reliance in the low cost phone models which are being given to the masses at an EMI and on a monthly plan basis which is combining the data along with it. On one side, the hidden agenda is to increase the ARPU which the industry has been demanding for some time. They have a balance sheet to fund the new phones and the ability to generate higher ARPU through the EMIs. This is a game plan which Bharti and Reliance are likely to play. I am not too sure about how Idea will fit into that but the fact is both these companies would definitely have relatively better times going forward.
In my view, the ARPU would probably increase systematically. If I count the next four quarters, an incremental ARPU coming in at close to around 15% from the current level of 20% given to the textile from the current level is distinctly possible. This would result in better realisation for most of the telecom companies and that is where some amount of rerating, some amount of enthusiasm and excitement will be seen in the telecom space.
is likely to be in focus today. The numbers are not great but the commentary may get the Street excited with the top management indicating that the worst of the chip shortage is behind us. Q3 can look different and of course this has been a really hot stock?
Indeed the management commentary of Tata Motors has been extremely strong and extremely powerful. Definitely they are trying to overcome the chip shortages and particularly from the JLR portfolio, where the relatively higher amount of business and the margins are happening in the passenger vehicle segment. That is good news. Most importantly, coming to the domestic market, the companies saw an expansion into the CV business and this could be the beginning of this particular time for expanding into the CV business.
On one side, the older generation of vehicles are meant to be retired and the new scrappage policy is coming into force. On the other side, industrial activities have started and demand for freight is increasing. That is definitely a positive point. Last but not the least, never before in the past have we seen the cost of credit at reasonably lower levels in sub single digits. This is making a case for companies to have a revival in the business and commercial vehicles in the domestic market. Tata Motors could possibly be the leader as far as the business revival is concerned. I think all the equations are in place for Tata Motors. It is a matter of time before we see a higher amount of growth coming in from this company.
What do you make of the IPO party this Diwali season? Did you subscribe to Nykaa?
From a business point of view, one should definitely be buying into it. The internet related businesses are at the start of their journey and many of these companies have played a systematic role in building the organisation, including Nykaa. So from that point of view, we are going to see a continuation of the journey in the likes of Policybazaar, Paytm or any other company that we have seen in the internet space. They are likely to see a larger group going forward. They already disrupted a part of the market in their own domain space.
In my view point, a larger subscription in the IPO is also happening due to two things. One, there is a significantly higher amount of appetite for the new generation of business and that is one point. But more importantly, the amount of money which is getting into this space is quite surprising. Most of the institutional players including retail players and HNI players are looking at the leverage funds to subscribe into the IPO.
It is a matter of time before the regulator takes a call on this particular aspect in bringing down the leverage position. But otherwise all in all put together yes I do agree that there are some of the excitement or some of the exciting businesses coming up for listing including Nykaa where we are likely to see higher amount of growth continuing in the domain space in which they are (00:28) succeeding with so I think definitely want to subscribe at stay invested into this business.
What would you say is not worthy of keeping in one’s portfolio for the Samvat ahead and what do you think is a must have?
It is always an individual preference as far as the portfolio construction is concerned. For some people, the commodity may not be as helpful because of commodity volatility. For some people, infrastructure may not be as useful because infrastructure demands a significant amount of regular investment and cash into it and for some people, consumption remains extremely rewarding.
Looking at your profile, one should be selective. I would think that the people with a larger purse, larger amount of investments would probably stay with subjects like infrastructure for sovereign funds, wealth funds etc. Traders would probably look at commodity as a meaningful space because commodity has demand and at the same time value but regular investors in my viewpoint would stay with the consumption theme.
The consumption theme is likely to work as the size of the economy is expanding and that is an area where discretionary and nondiscretionary consumption would make sense. Maybe investing into housing would be a new era which we are expecting as the demand for housing is growing as well as demand for lifestyle changing. At the same time, while investing in housing, my preference would be investment in housing finance companies (HFCs). They could regularly give returns of around 20% plus on a CAGR basis over the next five years to begin with. This is one area where one could stay invested and make capital out of it.
