It appears that Wall Street is now factoring in increased chances of Donald Trump coming back with sympathy trade favouring him. Mr Trump has already identified his vice president/ The commentary from Mr Powell also seems to be suggesting that we would be having our first rate cut in the US. If a rate cut and Trump coming back as President come together, could it accelerate a rally in the US, and hence India could also follow suit?
Hemang Jani: Very pertinent point. Yes, I do feel that the recent developments with an attempt to assassinate Donald Trump would result in some sort of wave which could mean that the probability of Trump coming back as President has increased. Also, there is going to be an effort to cut the rates ahead of the street expectations as soon as maybe next month we could see a 25 basis point kind of rate cut. So, the market would start factoring that in.
The only point that I would like to highlight over here is that both in India and the US, the markets have run up quite sharply. There is an incremental upside because these developments may be not very significant and we have to be slightly more careful because the market is pricing in the best-case scenarios and incremental news flow in terms of earnings, in terms of valuations may not be that supportive. So, we need to be a little careful about what you are getting into, but yes at least in the short run there is a case for some more upside.
What is your take then on Bajaj Auto? What is the outlook in terms of what the expectation could be? Do you think that in the export markets, we could see that gradual recovery pick up? Any particular commentary that you would be watching out for?
Hemang Jani: Two-wheeler has been a sweet spot for the auto industry in the last year and we have seen how there has been a rebound in terms of volume growth, in terms of stock prices. Also, a slightly better monsoon in July would support this theme further. So, when it comes to the quarterly numbers, Bajaj Auto could report about 7% kind of volume growth with a slightly better margin profile and the recent launch of CNG, how the numbers are stacking up let us say over the next two-three months is something that the market would be watching out for. We like only two-wheeler space in the auto compared to PV or CV and within that, we prefer both Bajaj Auto and Hero Motor at this point.What is the outlook when it comes to telecom with the AGR dues hearing that is expected?
Hemang Jani: Telecom was one of the best-performing sectors last year and the news flow continues to be on the positive side. As you see, the case for a slightly better ARPU as we move into this year and next year, there is going to be a decent amount of earnings visibility that one can factor in. The only thing is that having seen such a big run-up, whether people should get into the stocks at this point in time, we think that there is some more juice left in something like an Indus Tower where the asset repricing story with the consolidation with ARPU increase is getting a bit stronger and the valuations are still more attractive. I am not going to be that comfortable chasing Idea at this point. I am more comfortable buying into either Reliance or Bharti. Those are the names that one can participate in even now.
I want to talk to you about some of these dairy companies. Look at how Heritage Foods got a massive leg up and got re-rated over the last two to three months. But of course, it has a TDP to it as well. Hatsun Agro, organically has pretty decent numbers. Some of these South Indian dairy companies are turning around in operations. Do you like any of them?
Hemang Jani: Yes, from a tactical or let us say medium-term perspective, this space offers opportunities, particularly given that despite the price increase that some of the people have taken in terms of milk prices, the results that some of these companies have delivered are pretty decent and we are seeing a decent amount of growth when it comes to the top line.
So, either Parag or Hatsun, or Dodla for that matter, are the companies where we have seen that performance. Some of the companies are yet to deliver numbers. But if after the price increase, there is a meaningful improvement in the overall growth in terms of margins, then the market would re-look at these companies and there is a case for some more upside.
