What are you telling your clients? How should they participate in this market fall because for the first time this bull market has seen a 10% correction?
Most of the banks we are talking to, confirm two or three things. On one side, their ability to lend has improved significantly because of the collection of non-performing assets on one side particularly in the larger public sector banks.
The second aspect which they are experiencing is that the corporate sector has been asking for a higher amount of credits and that was missing till now. That is where the banks are likely to improve performance.
The third part is most important. Those who have been focussing on retail credit have every reason to smile. They are absolutely convinced that the growth is sustaining and continuing for them. So retail credit could come through and discretionary spendings could come through in the housing finance kind of verticals.
In my view, the second half of the financial year should show a significant amount of improvement in the performance of the banking companies and the current correction in the stock price is definitely a welcome move. Even if this correction lasts for a couple of months, then also, this particular opportunity is worth grabbing because banking stocks could appreciate by 20-25% from current levels. So definitely buy in this fall at this point of time.
Where do you stand when it comes to ?
One can tick every check box in each and every vertical they are operating in. In Jio platform, a large amount of footprint is created through fiber to home and fiber to enterprises and that part of the business contribution is expected to grow eventually at a very fast speed and at a very healthy rate.
On one side, mobility solutions are giving a decent amount of rise largely because of the fact that they have been in line with others increasing the tariffs. So definitely, Rs 6,000-7,000 crore worth of positive impact is coming in because of the tariff increase.
The important aspect is that the new Jio Phone that they have launched holds a potential to garner about 10 crore new customers for them and should they end up creating 10 crore new customers, it could translate to around Rs 60,000-65,000 crore worth of top line and somewhere around Rs 15,000-20,000 crore worth of EBITDA levels as far as the contribution is concerned. And with this increase in tariff, the Jio platform could also end up with an EBITDA increase of Rs 9,000 to 11,000 crore or may be little more. All in all, Jio platform looks convincing, retail platform looks convincing; in the O2C platform, their cash generation is significant. Reliance probably have got Rs 1,15,000 crore worth of EBITDA in the current financial year which would possibly be next year around Rs 1,30,000-1,35,000 crore. In two years’ time, the company is talking about producing Rs 2,50,000, 2,65,000 crore worth of EBITDA.
So all in all, Reliance remains a convincing story, such a large opportunity that they are building in the new energy segment as well. I would think that the current correction in the price is definitely demanding a buy as far as the stock is concerned.
The reopening trade had worked out very well. But now, Indian Hotels has fallen to Rs 170, but at what price would you be comfortable adding positions?
On the one hand, I agree that the hospitality business is basically demanding a better look. I would think that Omicron probably will not have as severe an effect as we saw in the first and second wave in our country in the lockdown situation.
I would think that the current situation demands that in any correction in prices, these stocks can be considered for investment in the portfolio. There is one caveat though. More importantly for the retail investor, they must understand that capital intensive nature of the hotel business is always very high. Given all these points put together, if the investor is comfortable moving into this particular space, then one could consider so. I would for one think that yes, one should consume the services of their hotel but when it comes to investment, look around for better opportunities in the consumer spending space where you get sustainable growth as well.
