Is it right to say that happy hours are over for the market?
Hemang Jani: I am not so much used to happy hours, because we have extended office hours and only weekends are meant for that. But what you said is right after the re-rating across the broader markets and PSU themes. When you look at the market cap that some of the companies are commanding, the possible earnings that one can look at, I think the best of the re-rating phase looks to be over.
Having said that, you might see a certain theme extending itself, given the overall structural reforms or the growth visibility that some of them offer – something on the defence side or clean energy side. This time, it would make sense to be a bit cautious and not get carried away by the kind of momentum that we have seen over the last year or so.
Morgan Stanley in its latest note on the chemical sector, is talking about how earnings are not fully de-risked, upgrades are still some time away, and while there are some green shoots visible across verticals, that has been offset by the pricing pressure. What is your view on Deepak Nitrite, PI Industries, and Aarti Industries?
Hemang Jani: While many people are talking about a revival in the specialty chemical space, the fact remains that for almost now four quarters there has not been any significant earning-led revival that we are seeing. And when you look at the quarterly numbers, when you listen to the management conference calls, things are not that clear.
Only two or three companies stood out for me. One, of course, was Atul. After almost about two-and-a-half years the company reported a good set of numbers and the management sounded very confident on the entire portfolio in terms of growth for next year.
Deepak Nitrite has been delivering consistently for the last two years and has invested in their businesses. So, some of these companies surely I would recommend in terms of allocation, but I would not want to get into a whole host of companies, be it Vinati Organics or SRF. Even Navin Fluorine has not delivered for an extended period.Defence stocks were all abuzz in trade yesterday. Of course, there was a little bit of a news flow that gave these stocks a fillip. Do you believe that the long-term trend is looking intact and do you have any favourites?
Hemang Jani: Yes, the overall order flow has been very strong and given the geopolitical tensions and the pressure on the government to have high defence preparedness would mean that this will continue. So, some of the companies delivered good numbers. This quarter, BEL reported a very strong set of numbers; the same is the case with HAL. But a whole host of companies were not up to the mark in terms of the numbers and they also have got majorly re-rated be it shipbuilders. It is time to be a bit careful, be selective. BEL and HAL are the names that we like. I am not going to get into any other pocket just because they have corrected through this correction.
Where do you see the most potential within the broader markets? Can you give the top three stocks?
Hemang Jani: Telecom is something that should do reasonably well and we have seen the way the earnings growth picture, and the outlook on ARPU has been, so maybe Bharti and Idea both could be one pocket that people would want to look at. BSE has been one of the best-performing stocks and though there have been indications from SEBI that they will take some steps to curb the retail participation, given the IPO launch by NSE, BSE being the meaningful incumbent, would see some rub-off. BSE is a stock that I like and during this volatile time, it would make sense to add on to that.
