Let us first talk about the oil sensitives because they are the one which sort of really held the market in place yesterday. I mean be it paint companies, OMCs, all of them a bunch. But do you think that this was just a knee-jerk reaction because crude has been seeing a steady decline for past three months now?
Pankaj Pandey: On the crude oil front, volatility is going to be there because ahead of US elections, largely if you look at, both the candidates are at extreme positions in terms of the views. But Trump is pitching for nearly three million barrel kind of increase in the oil production. And coupled with the fact that the Chinese economy is not doing so well, which is the largest incremental buyer, I think crude is expected to remain soft. Now, while the marketing margins are expected to prop up given the softness what we have seen in crude, but the refining margins is something which needs to be watched for. But structurally, some of these downstream and upstream companies are shifting their business model towards the renewable energy side and which is what makes them attractive. So, any kind of a weakness there should be used as an opportunity to look at some of these names.
What is the outlook when it comes to Zomato? I am wondering if you have a take because we have got the stock that has been gaining traction. There is a recent report that has come out today talking about the rapid retail consumer transformation as well and the company as well has been taking a lot of steps in this way. And how are you tracking it given that now when it comes to quick commerce as well, there are a number of players that are trying their hand at it, so the competitive intensity is also building.
Pankaj Pandey: We do not track the stock. But, yes, whenever the competitive intensity increases, generally the tendency is to compete on prices which again is not really a good thing for a segment to be into.
But we were also having a pretty interesting discussion around aviation, SpiceJet and InterGlobe Aviation and it seems like it is very parallel views coming in, a preferable view on InterGlobe and reduced rating from brokerages on SpiceJet. How are you reading into this?
Pankaj Pandey: So, actually there is not much of a comparison to do because SpiceJet we know is struggling. So, from that perspective, I think InterGlobe becomes the obvious choice. And overall number of players are expected to keep on growing. And with crude being softer, InterGlobe obviously tends to benefit from this. But just talking about now that we are stepping into the festive season, at least here in Maharashtra with Ganpati over the weekend, wanted to understand whether you see any sort of consumption revival kick in. Because going by the passenger vehicle sales data, there seems to be a bit of a slowdown for sure.
Pankaj Pandey: So, on the auto side, if you look at, it is the two-wheeler pack which is looking a lot more better with prospects of double-digit growth. And PV, while the volume growth is expected to be softer, overall sense is that the premiumisation leg is definitely going to benefit key players like, say, M&M, which is where we have a buy on.
Otherwise, from a consumption perspective, what we are liking is something like, say, Saregama, because company is expected to deliver 25% kind of a growth in their core business, which is music licensing.
Then, they are looking to do a capex of nearly Rs 1000 crores in terms of buying new labels and the old labels command good margins of 75-80 odd percent. So, this is one company which continues to do well as and when people consume a lot of social media, this stock tends to benefit from that.
What is the sense you are getting on this entire activity in PSUs? Suddenly, PSU stocks are showing signs of a struggle and a pause.
Pankaj Pandey: So, if you look at last one year, most of these PSUs have done extremely well. I mean, look at across segments, be it the companies in the defence side or even on the power side. What you are clearly seeing is more of a sector rotation panning out and our sense is that some of these PSUs are changing for better structurally, I mean be it banks, so from a corporate lender their book is quite balanced.
Similarly, when you look at power PSUs, they are looking to change their business model from thermal to more of renewable energy going forward. So, I am not really surprised with some of these PSUs taking a pause for some period of time and these will be a period of time when one can accumulate.
Now, you cannot really expect a sector to keep on topping the charts all the time. So, some bit of a consolidation, correction, price and time correction, should not be a big worry. So, from that perspective, structurally we are not negative on any of the PSUs, including the defence PSUs which have done very well.
What is the outlook on IT, because just up until recently we were talking about that outperformance that is continuing and then, of course, a little bit of a pause in the rally. Where is it that you stand when it comes to IT?
Pankaj Pandey: So, IT, we are not really that so bullish, largely because see, one, you have US elections pending up and both the candidates have divergent views in terms of the tax rates.
So, for example, Trump is looking to lower the tax rate to 15 odd percent from 21, whereas Harris is looking to increase it to 28 odd percent.
There is still not enough clarity in terms of the kind of impact AI is going to have in some of their business models.
And even when you look at the recent analyst commentary, near term or the next one or two years, you are really not seeing too much of a bump up in terms of discretionary spending.
So, with that said and with 8% kind of a move already coming because of the prospect of rate cut in this particular last month, so I think IT I am not really going to chase more.
So, largely, the focus is going to be domestic, domestic cyclicals, unless you have sectors like pharma or some other pockets which are looking better otherwise. With that kind of uncertainty, I would not suggest to chase IT.
What is the outlook when it comes to how you are looking at some of these sugar stocks? They have been in the spotlight of late with positive news coming in. But that sort of the only time that you actually see traction building up within the sugar space. Do you believe that it merits a relook?
Pankaj Pandey: See, bulk of the overall re-rating of this sector has already happened because a lot of these sugar stocks used to trade at mid-single digit kind of a multiple and that went to lower-double digit kind of a multiple. So, while there is definitely a better outlook in terms of the blending ratio going up to 20%, but the best of the sector is already behind us. Longer themes in terms of EV looks lot more stronger trend compared to blending which is going to happen in petrol and now in diesel also.
I like to shift focus and talk about the fintech and consumer tech companies. What has changed there? These stocks are flying as if there is no tomorrow.
Pankaj Pandey: So, we have not been covering a lot of these new-age companies. So, whenever you see these stocks, in terms of price to sales multiple, so I think the comfort will only come when you have a very strong opinion in terms of the kind of profitability which is going to pan out over a stronger period of time.
And we have other options or better options available in the market, so which is why that is one space which we have not been chasing for a good period of time.