Now that the rate cut cycle has officially begun, what do you think are the sectors which are best placed back home in India because in the last few cycles we have seen NBFCs had done very well to begin with. Do you think this time also we will follow suit and we are favourably placed when it comes to the NBFCs?
Hemang Jani: So, clearly what we are seeing is that large part of this rate cut anyway was known and pretty much discounted both in India and US and that is what you saw as a reaction. Now, coming to the point that what are the sectors where we would be favourably placed. So, clearly in the entire market, there are two things which are happening. One is that the companies which are high growth or where people are more confident about the growth, though the valuations may be on a higher side, I think those stories will continue to participate.
Something like maybe retail story, exchange capital market related stories, two wheelers, airlines. So, I think that theme continues to remain as it was before this rate cut. But as a part of the sector rotation, we saw that banks and NBFCs were in action. In fact, NBFC was in action even before that. So, I think you might see some more upside when it comes to the banks, maybe some of the metal companies. So, as a part of the rotation, you will see these two themes play out well.
One cannot ignore the kind of move we witnessed in the IT sector yesterday, be it largecaps, midcaps, across the board that selling pressure was evident. What is this a sign of and do you believe that there are any lucrative buy ideas as well within the space?
Hemang Jani: Yes, I do think that this was just a sort of profit booking or maybe a little bit of a sector rotation kind of a play. I do not think there is anything incrementally negative that one is really talking about.
In fact, both the quarterly numbers post some of the companies indicating that some of the verticals are showing revival. People have got more positive on the sector. And within the space, we like something like HCL Tech. We do like LTIMindtree, which actually was sounding very positive on the growth forecast going ahead. Some of the midcap plays also, we like something like Mastek, which has not performed that well vis-a-vis some of the other midcap companies. So, we have a positive outlook on some of these names.
Do you think the next lap of the rally is going to be led by banks, that rotation is already at play? It is a global rally we are part of and purely because of the weightage as well the Bank Nifty has, that is also going to propel the markets up in any case inevitably.
Hemang Jani: I think we have seen a big underperformance almost for two years from the Bank Nifty and the banking stocks and within the entire sector you have NBFCs, you have insurance and capital market related play. So, there is a different interplay when it comes to capital market play or insurance and NBFCs versus the pure banking.
And I do think that given the stark underperformance that we have seen, there is a case for some sort of outperformance and more so because by and large the performances have been good and this entire issue of the banks not being able to raise the deposit, I think over a period of let us say next three months or so you will see some improvement over there.
So, I do think that it makes sense to go with something like ICICI Bank, State Bank, Axis Bank at this point because of the valuation comfort versus the overall market.
So, you are saying do not go with the likes of ICICI Bank, Kotak Mahindra Bank, etc, at this point of time?
Hemang Jani: I am saying it makes sense to go with these names because they have actually delivered on the quarterly numbers and the valuation comfort is much higher versus many other pockets of the market.
Talking about the power sector a bit more because NTPC as we pointed out will be in focus on a kind of DRHP, Power Grid is in focus on account of order win, IREDA wherein that QIP approval has also come in. What within power would you still recommend as a buy?
Hemang Jani: So, I do think that this entire renewable energy, green energy story is at a very initial stage of the entire growth phase that one is really looking at and though these stocks have gone up quite a lot for something like an NTPC where if you see the subsidiary filling the DRHP and if subsequent listing happens, we have seen what kind of response these days the IPOs are getting. So, there is going to be certain amount of excitement because of that.
Tata Power because of the kind of solar module that they have gone into and the overall growth prospects that one is really looking at, this can become a very big story over the next two to three years.
But yes, what I would like to say is that when it comes to renewables, green energy, you need to have a certain amount of allocation. You should not go whole hog and try to get into anything and everything which is there and there is an excitement. So, one needs to be a little more careful, but the story overall looks quite promising.