Is that a challenge at all for Trent you believe, sitting at life-high levels? What would be your recommendation for people on Trent?
Deven Choksey: Well, my understanding of the subject is that currently most of the aspects about the business are fully factored into the price. When you look at the valuations, it expresses all. So, from a valuations perspective, the stock is adequately covered on every aspect. However, having said that, important point to observe here that majority of the funds who have been holding on this stock for the want of second company available in their portfolio of a size, probably they stay limited with likes of DMart, likes of Trent in the portfolio. Maybe some amount of softening of the price may happen eventually, which could possibly be the entry of Reliance Retail in the market. Now, if that particular situation happens to be the reality, then in such situation, you might see some moderation or correction in the existing e-comm companies which are currently quoting at a valuation which is fairly premium at this point of time.
Any new stocks or themes or sectors that you are watching out for?
Deven Choksey: See, as a direction, we find that the commodity space will remain probably the outperformer in coming months. Largely because of the fact that on one side, the crude oil prices are remaining low and there are promises to remain low. Should there be a positive outcome on Russia-Ukraine war front, I think definitely it will augur further positive for the crude oil prices.
And if the crude oil prices remain low, then in such situation, derivatives of crude oil prices including the energy cost and which is a raw material for metals, I would think that this is going to be directionally very positive.
Second most important point as we progress further on the green hydrogen as a power, we believe that the metal commodity will have inherent advantage of consuming the power at a significantly lower cost with the green hydrogen coming into play, which is going to be a play for next 5 to 10 years, of course but I think in the near term also, market is expected to factor that aspect into.
So, commodity as a space, including chemical commodity, we find that probably the better times going forward. From the pipeline, I think the expensive inventory is also out and as a result of which some of these companies are looking relatively better placed on the margin front for FY25.
Similarly is the view that we carry for the BFSI space in particular, the banks which have a capability to acquire a larger amount of current deposits, those banks are relatively better placed comparatively and that is where some of the corporate banking names I think we feel are relatively better off.
The cost of fund coming down is going to be an inherent advantage and which is going to be a structural move for next four to six quarters. So, metal as a commodity, banking and financial segment, including the market intermediaries into it and insurance into it, we believe that could be the outperformers in the market going forward.
Also want to pick up on the point on the Nifty IT index. While it has sure hit that all time high and the charts are indicating further an uptick, but Kotak like Anisha was highlighting earlier has come out with a note on LTIMindtree, Tata Elxsi, while for Tata Elxsi they are retaining the sell, the fair value they are pegging at 5500. For LTIMindtree, of course, they are extremely bullish, they have upgraded the stock to an add. Are you also spotting any opportunities within the IT pack at all?
Deven Choksey: Yes, I think so. We find some of the companies very interestingly positioned. You mentioned Tata Elxsi, I would probably add to the Tata Technologies. These companies have some distinct advantage in form of I think their product offerings, service offerings. A) They are operating in a niche play. Say for example, Tata Technology, in the auto vertical as well as in aviation vertical within the transportation segment they provide end-to-end solutions.
So, obviously this particular company has a larger amount of business to talk about from both these verticals which are likely to grow and grow systematically because there is a systematic approach I think towards the multiple technology segments happening in the auto sector as a whole, that is where this company is likely to see a roadmap ahead for next three to five years with a good amount of clarity on execution as well.
Similarly for Tata Elxsi to I think though auto as a one vertical which remains I think common between the two companies, but the kind of services they deliver within the auto space vis-a-vis Tata Technology, Tata Elxsi also has relatively different kind of roadmap to follow with other four verticals also equally interestingly positioned.
So, yes, we find that companies which are with engineering and R&D along with and the ability to deliver the IT solutions either to the manufacturing or to the consumer as a whole, probably have relatively better time compared to the larger peers who are likely to grow relatively slow at 10% to 15% at the best whereas these companies could possibly grow between 20% to 25% in the next three to five years’ time.