Amnish Aggarwal: Usually the commodities do well when the interest rates come down and there is a hope of increasing demand. But as far as real demand is concerned, at the global level, we have to wait and watch how the actual rate cut pans out. However, if there is some increase in the uptake in demand from China, while the Indian demand has been reasonably good, then this trade can also play out.
But having said that, the visibility on sectors like banks and all is far more and in metals usually, it is very sharp. It happens in 15 days or a month and then it cools off. But given that globally there is a trend of a cut in interest rates and we might see some sort of an increase in demand which obviously will happen over several quarters, then metals can continue to see some strength on the basis of this.
Where do you think Bajaj Housing Finance will eventually stabilise? What is the fair value according to you for this?
Amnish Aggarwal: It is a very difficult question because Bajaj has been growing well, and it can grow at even 25-30% CAGR without difficulty. But if you look at say even FY26, FY27 numbers, the stock might be trading anywhere between five to five-and-a-half times price to book. So, if you look at the price to book of say five, five-and-a-half, it practically does not leave anything on the table for at least near to medium term.
So, while the growth rate may be good, the advantage that Bajaj Housing has today is because after the merger of HDFC with HDFC Bank, we do not have any large housing dedicated company. However, our belief is that from the current level, the stock will have long consolidation unless and until you see very astronomical numbers coming from Bajaj Housing Finance. But to buy anything at five, five-and-a-half times there is always an element of risk. So, I expect a long consolidation to happen in Bajaj Housing.Do you think somewhere there could be a compulsion at play in Bajaj Housing Finance because this becomes the go-to stock for institutional investors because this is the only large player in the mortgage market after the HDFC Ltd and HDFC Bank merger?
Amnish Aggarwal: Yes, that has led to the Rs 70-stock which was offered at around say Rs 70, it is trading at 160 and that is why it might not crack down in any major way at least in the near to medium term and that is why I said it will undergo long consolidation because institutional investors will continue to buy the stock, but the significant outperformance from the current level is going to take time.What is the concern with HDFC Bank? Is it fundamental or technical? If it is fundamental, what is the concern? And if it is technical, which is FII selling, that seems to be getting over.
Amnish Aggarwal: Yes, HDFC Bank has undergone a merger with HDFC. So, once you have undertaken this merger, your balance sheet has been redrawn and you need much more deposit growth than you historically have been doing and your LDRs, they were running at say 105, 110 kind of a number. So, although the incremental LDRs are coming under control, the balance sheet as such in terms of NPAs and all, that remains absolutely, absolutely clean and it is only, I would say, the time correction which is happening.
On the technical side, today, the weightage of HDFC Bank in Nifty, is much more than what actually is warranted. So, practically, no mutual fund can hold that much amount of stock in their portfolio. These are some of the technical factors which actually required more of the FII inflows as well as domestic non-mutual fund kind of investors to start pulling up the stock.
Now, with sufficient time having passed away, some of the ratios also getting better and the visibility improving, it is only a matter of time before the stock also starts coming into the limelight. But suffice to say, my sense is that a lot of it will also depend upon the FII inflows and FII buying into the stock because the mutual funds have very limited buying opportunity because of the cap on the holding.
Which is the large cap stock you would be happy to hold for three years. It may go down 10-15%. That is a market call, that is technical but I am happy to hold it for three years and I expect a CAGR return of at least 12-13% for three years now.
Amnish Aggarwal: One stock which we have been very positive about is Max Healthcare. It is a growth company. It is undertaking acquisitions. The margins are better than anyone else and this stock has undertaken strong consolidation from the year, year-and-a-half and the benefit of all the investment will now start reflecting in. So, Max Healthcare is one.
The second, you can look at, say, Siemens because the stock in line with the other stocks in the capital goods sector has corrected by nearly 20% from the peak. The order books remain strong. The inflows should be good and post demerger the stock will offer value from the current levels. The third one can be HDFC Bank or ICICI Bank when the banking trade plays out. These both stocks are going to give you reasonable returns from here.
What is the outlook when it comes to pharma, when it comes to earning momentum and from individual players within pharma?
Amnish Aggarwal: You see the pharma has seen a very sharp rally if you look at the past six months or so, the API prices remain benign for most of these players, the pricing pressure is not there in any of the markets. If you look at most of these stocks, Sun, Cipla, Lupin, all of them have done well and many of them are near their 52-week highs. In fact, last quarter, Lupin did exceptionally well and we are recommending this stock even from the current levels. So, as far as your near to medium term is concerned, the visibility on pharma stock looks absolutely great.
