But the interesting bit is despite the fact that there was a bit of a reaction in yields, the Bank Nifty refused to budge. What do you think will make the private banks move because the trade which is the Modi stocks have already played out, but the other trade which is probably pending is the fact of FII reversal and hence a comeback in the private banks. What is your own thesis around this?
Yes, I do agree that the Bank Nifty has underperformed Nifty not just in the last three or six months, but over the last two years. And this is despite many banks performing so well, both PSUs and private banks and some of the underperformance was largely, let us say contributed by names like HDFC Bank or Kotak Bank. Now, I think those also seem to be reversing. So, there is a case for a substantial catch-up when it comes to Bank Nifty. I think post-election, you might see this catch-up once you have a slightly favourable outcome. But nonetheless, I think even when it has not performed so much, I think if somebody has to put fresh money, I think it surely makes a lot of sense given the performance, valuation comfort, I do not see much of a challenge over there. And recently, the fact bond yields went down when you had that big dividend payout, I think there was a bit of an outperformance. So, I think you could look for some more outperformance at least over the next 6 to 12 months.
Do you track these forging counters, be it Bharat Forge, very strong upbeat guidance and the number, the stock shot up 10% on that day. Last evening, MM Forgings has come out with a very strong number and margin expansion. Of course, there are new names, Balu Forge, Happy Forgings as well, but any thoughts on the forging counters?
I think Bharat Forge was more driven by the commentary and outlook on their other businesses, defence and other global businesses that the company has, no doubt. The core business also was solid and they delivered in line set of numbers. I think that given the kind of data points which are there globally, particularly on the automotive side, there is a certain degree of traction that you are seeing.
So, be it MM Forgings, RK Forgings, they are delivering good set of numbers. So, if you really want to play for a midcap bet, I will be comfortable with the RK Forgings or MM Forgings, which are still at a substantial discount to the large players and there is still a solid growth visibility ahead.
And what about the entire hospitality segment? What are you watching out for within that because while, of course, they have given solid returns of late, at least in Q1 there is sign that occupancy has been petering.
Not comfortable buying a fresh on to these names, the story continues to look good when it comes to the overall growth and particularly the companies which have completed the capex, maybe like Indian Hotels or Lemon Tree but I am not very comfortable because we think that a large part of the story has already played out and there are no real incremental triggers to look at.
So, I would be more comfortable buying into these names only if there is a meaningful let us say 5% to 10% kind of a correction.
But these are the kind of opportunities that investors wait by right when there is value because otherwise in the market everything seems to be very overheated.
I think we have to reckon that the traditional IT services, there are no real great growth drivers in place except for the fact that the stocks have not performed or you may argue that the valuations are slightly better, but people come into the equity market for growth and yes, there is going to be a certain degree of risk but it would make more sense to participate in those stories unless you are a totally passive kind of an investor who is looking for a 12-14% kind of a growth.
So, I would think that if you really want to play IT and if you have a slightly higher risk appetite go with the niche companies like maybe LatentView, something like Naukri which is showing a turnaround in their core business, some of the data analytics company, I think that is where you will see good growth opportunity because even when you look at US market, the semiconductor, the artificial intelligence those are the stories which are really doing well but the typical services companies I think people are not really paying too much of attention.
Do you track this counter, I mean this space overall some has gotten a bit re-rated, this dairy space, people are taking it more seriously now but value-added dairy companies like Heritage any thoughts here?
When you look at the dairy companies, Parag, the Dodla Dairy, both the numbers were not good at all while some of the companies like Dodla they delivered on the top line but the margin part there is a bit of a disappointment. Also, one important element which came out during the concalls is that first time you are seeing the significant growth in the input cost, the milk prices. So, my feel is that one should avoid the space because anyway the corporate governance and those issues are very much there because of the manner in which the businesses are operating across the country. So, I would certainly avoid the space at this point.
Leave us with one tactical trade for elections.
I am giving you two, go with Adani Enterprise and go with HAL.
Your top bet within the pharma pack?
I would certainly go with Divi’s Lab, I think given the way the company has posted numbers and the kind of commands which have come out, I would be more comfortable buying that one.
PSU stock apart from HAL that you have already mentioned.
SBI
