What is your view? Are we in for a long winter or we are nearing the end of this decline?
Chakri Lokapriya: Nifty is down about 10%. Earnings are down, if you look at the various sectors saw 10% to 15%. And on the other hand, some of the PSU stocks are down 40-50%. So, at that perspective, I do not think there is much downside, but what is clearly needed is some kind of a catalyst for earnings to revive upwards. Now that catalyst can come from RBI rate cut. I know people are talking about it being postponed to February, but RBI has increased rates by about 250 basis points, very short period of time. So, consumers and companies need to see the other side of the coin, that is a cut of rates. So, while food inflation is high, I think if there is a December cut, that would provide one of the catalysts.
Swiggy is better or Zomato is better? I am not talking about service. I am not talking about preference or menu card here. I am talking about stocks.
Chakri Lokapriya: Clearly, Swiggy is a far lower valuation today. It trades at 7.8 times is what Zomato trades at which is probably about three times.
So, both are similar sized companies. They have similar market share. Only the thing is Swiggy is likely less profitable. So, the valuation differential could be made up. So, clearly one can buy Swiggy at current levels.
What are some of the resilient to market correction names and I am sure Indian Hotels will make it to that list, that you have spotted so far this earning season?
Chakri Lokapriya: You are right. Companies like Indian Hotels because they cater to the higher end of the income segment, which has not been affected. Their spending remains strong. So, clearly one can buy. Second, now IT, information technology, with Trump coming back and US corporate tax cuts being talked about, that increases the discretionary budgets, IT budgets for companies so which is good for Indian IT.
What would it take for Reliance to make a meaningful comeback and after the recent correction, does it become a buy now?
Chakri Lokapriya: Reliance as a stock is looking good right now simply because the sum of the parts valuation is in its favour. Many of the businesses are not reflected. At the same time, one of the reasons why the stock has corrected because of the huge volatility in oil prices which has kept the refining margins in a very suspended animation. You are not very sure in their hedging policies which most companies have this problem. So, given all this, with the current outlook of a revival in the US and the whole of Europe is also cutting rates and therefore, reviving economies are always good for oil and gas stocks along with its other businesses.
You think auto has had the worst and have these stocks bottomed out? Just taking a leaf from the way Eicher has reacted after its earnings today.
Chakri Lokapriya: Auto as a sector is down anyway between 15-20% in the last one-odd month on well-known fears of slowdown in demand across commercial and consumer. But now, for instance, Maruti trades at about 22-23 times, Hyundai trades much lower. It is probably trading at about 17-18 times. TVS Motors slightly higher. But they have all kind of bottomed out. And whenever interest rates will be cut will be the next catalyst. But pretty much one can start buying these stocks now.
Good time to revisit Bajaj Housing, the IPO euphoria certainly has faded away.
Chakri Lokapriya: You are right, the euphoria has faded away. But there is no catalyst in terms of what will make a homebuyer, that acceleration that is needed to see an increase in business for housing finance companies, that is not evident yet. So, it all comes down to this interest rate cut. So, I think we would wait for that.
What about banks? Where is it that you would be adding perhaps more to your existing portfolio from amidst the entire banking pack?
Chakri Lokapriya: Banking and financial services companies, I would add Power Finance and REC, both have corrected quite a bit. They now trade at under one-time book. Their growth trajectory are intact. Their NPAs are intact. Their NIMs continue to be good. They sold off with the rest of the pack. A sufficient amount of valuation comfort by REC, Power Finance.