The entire reopening trade has been playing well on Dalal Street. International travellers and foreign tourists can now enter India without quarantine restrictions. What is your outlook as far as the airline stocks and IndiGo in particular?
The reopening trade is real and there are lots of engines still to fire. Tourism is just about starting. While we have seen a lot of domestic tourism, foreign tourism is still to start and that will be an extra kicker for consumption. Hopefully, we would see a lot of NRIs come in and it is also the wedding season. Typically, NRIs do a lot of buying when they come to India. So, the business resumption and pent-up consumption — in short the reopening theme is pretty much on. We expect that while the current sentiment of consumption is still subdued, there are lots of kickers that are likely in the next few months.
It seems like everything which is travel related is opening up and consumption led should do well including the underperforming sectors like automobiles.
What are your views on the auto sector?
The auto sector has a lot of sub-segments. One of the most underperforming segments has been cars, where we have seen a lot of bottlenecks. Earlier, there was a demand issue and then, there was a chip bottleneck issue. But now, both these are coming back on track and we are beginning to see some tailwinds as far as cars are concerned. Also, with some excitement in the EV space and a lot of private equity investment likely to come into this space, we should see some of the listed players benefiting from that EV positive sentiment also.
On the two-wheeler side, the incumbents are getting more impacted negatively by startups as far as EVs are concerned. So, there may be a bit of a disruption and we are cautious on the two- wheeler space. But as far as cars and commercial vehicles are concerned, we should see demand come back and the next few quarters should see a lot of pent-up buying.
We have low interest rates which also helps at least the truck operators. The only thing that we probably need to monitor is fuel prices. As long as they stay within range and do not go up too much, we should see some good tailwinds in the commercial vehicle segment too.
In the healthcare space, chatter is coming in from the hospital sector with regards to their Q2 update. Most of them are seeing a good amount of growth in the non-Covid occupancy levels in the second quarter as opposed to even the previous quarter or the same time last year as well. Do some of these stocks merit a relook?
Definitely. In a way, this is also one kind of opening up trade. A lot of discretionary or non-essential, non-emergency treatments, diagnostics, etc, had been postponed during the Covid period because of fears and because of capacities not being available. So a lot of pent-up opening up kind of demand should also be there in the hospital space and even in the diagnostic space which is linked to the hospital space, because once you go for a treatment, you obviously need a lot of diagnostics also.
Some of the newly listed new age companies have very high valuations. Startups are entering the club in six months flat. Nykaa is more expensive than Britannia and BPCL. Paytm is getting listed on Thursday. What is your view?
It is a tough one and it would have been easier if all these companies were in one industry but they are all over the place — they are consumer tech, B2B, B2C, online finance. Each of these companies needs to be analysed separately, the business models and the valuation benchmarks are nowhere comparable. In fact, I think we are going to run out of analysts at this rate.
The big comeback that we are seeing in residential and commercial real estate is expected to start doing better with work from home becoming a thing of the past. TCS has had its last day of work from home. How are you approaching the real estate sector?
We are positive. To start with we are positive on the commercial space and we have investments in the commercial real estate space through stocks as well as commercial property. But now we have competition in housing loans and interest rates have come down structurally. Plus the wealth effect of the stock market should not be underestimated. The strength in the stock market, the strength of IT services hiring and low interest rates are a good combination for potential demand and the pick up that we have seen not only in the larger cities like Mumbai but also in cities like Bangalore, Pune and Hyderabad means that there is good retail traction at the residential level. So at least for the next few quarters, this should sustain.
