The Japanese tractor major Kubota Corporation will invest up to Rs 9400 crore to become the majority stakeholder in , India’s fourth-largest tractor maker. How did you analyse this transaction action? The stock is highly excited, do you see it is a hold for people who already have it? Is it a buy?
It is a win-win for corporate India. The Escorts stock was evidently telling us this about four months back when the whole auto sector was downbeat because of semiconductor and the second wave issues, but Escorts was defying the trend. Today, we are seeing the real icing on the cake.
Where does one get such a big investment? The market cap has almost doubled and we think it is just the starting point. It tells us that our rural play is very much the global envy point and Escorts has just set the cat amongst the pigeons.
Secondly, if I give you a market view, this should be a very big positive for our direct FDI investment. We are seeing that even though the dollar has risen, the rupee is showing extreme strength.
Thirdly, oil has now completed its bull run and is headed lower which means tractors sales, semiconductor, logistics — all these are going to see roaring business and it is also a very big plus point for rural India, which has suffered maximum. So jobs will be back; agriculture growth and infusion of capital means that the bigger players will start to take more chunks and more investment will come in.
All in all, it is a thumbs up to corporate India and of course to Escorts and the team which has been there.
In the 10-15 days, there was a lot of positioning in Vedanta. It was outperforming in anticipation of a revised open offer or a delisting while the rest of the metal pack was coming down. But what came about was a different proposal for restructuring of business dividing the Vedanta Group into 4 companies to unlock a lot of value. But the Street had a different view and stock fell 8-10%. What is your analysis of this entire proposal?
If you recall, the Vedanta Group came out with offers two times which were very mediocre but the underlying remained metals. In my career of 33 years, I have never seen Tata Steel move up five times in the space of 15 months or a Vedanta go from Rs 85 to Rs 380. It tells us commodities are in a huge bull run. They are now looking to enhance the value for shareholders which is a startling revelation because one always sees Vedanta trying to move some of its subsidiary businesses. So I think the slate is clean, we will have to see more on how it works out. Markets always will be “buy on rumours, sell on facts”.
I think if Vedanta can come out with a clean statement on the type of demerger they are proposing, it could have immense value. The third largest business in silver is with Vedanta. They have copper, aluminium, zinc, the whole gamut of nonferrous metals. I think it is a value proposition. We will wait for more colour but like I said, this is a bull market in metals. Make no mistake. All corrections in Tata Steel and Vedanta are buying opportunities.
What are your thoughts on the market which seems to have gotten itself into corrective mode, but a very hesitant correction if I may call it. What are your thoughts in the medium term of one or two months?
A couple of weeks back, I had forewarned you that from 18,600 that we are headed to 17,500 and the correction will be a sharp sell. We saw that near the expiry. Foreign FIIs, for whatever reason, have turned bearish because of inflation. It may be on the wrong side. Today a rating agency was talking about our reserves and the weakness in our GDP. I think all that is humbug. I am bearish on oil which I think can come down to $60. That means banks are in the best space for corporate lending.
Our vaccination drive is the strongest I have seen in any part of the world. With 120 crore people, 50% of the entire population are vaccinated. The government has been very proactive and I see no reason for despair. Now coming to the technical point, today is the 21st day of the correction. If we hold 17,670 and close above 17,800 this market’s trend will change today. I am looking at 18,400 in the near term.
