How do you think the Street is going to absorb TCS’s numbers?
Going into this quarter, there was an expectation that there would be a slowdown. And there is a slowdown. The TCS stock valuation also reflects its potential and so it does nothing much. I do not think investing at the current levels is going to make any returns alpha in the next few months or so. It is best to stay on the sidelines and you can trim some positions.
You track Reliance Industries quite closely. Below 2,300, did you see value in it or even at around 2,350? Do you think there is a case to get in because it was one of the biggest drags. It became a drag on the overall market and was just not performing for weeks now.
Yes, that is right. The company has the problems of the industry. Being one of the largest companies in the space, it kind of reflects what the industry is up to. So it is telling us that the BFSI, TMT sectors are not spending and the year over year numbers show that. Those sectors are unlikely to spend in the next six months or so. Given this, the order book is there, but it is a question of execution and whether the execution is going to be pushed out is what is going to determine the future. Margin control by controlling costs is not such a great way. But having a margin improvement because of improved pricing is usually rewarded by the market.
Are you looking at Jio Financials as well because there are two opinions out there; one is looking at building a position in Jio Financials over a period of time. By then a firm business plan, a much more visibility would start coming in. Others are saying that let us not waste time on that one. We have seen promoters and management themselves buy from the open market. It appears that they want to raise their stake further. So might as well be positioned now.
Jio Financials clearly is going to be very transformative for the industry itself, for the NBFC industry. And they will have a huge net interest margin advantage as they scale up. This is the right time as they embark on their journey and as India gets into the festive season and there is an eventual pickup in consumer spending and they have an established brand name, which is a very big factor.
All these factors are going to help and they have the capital base. So now they have made plans in terms of raising capital and also using their leverage. All these things are going to work in Jio Financials favour.
What is the outlook when it comes to the OMCs and something like BPCL in particular? Just today there is a fresh brokerage note from Citi saying that the Q2 earnings performance will cement a very healthy interim dividend. There are concerns over fuel price cuts, which will now ease the dates for the elections. What’s your view?
OMCs have traditionally been a value play and will continue to be a value play. And the closer that we get to elections, it is best to remain on the sidelines because if there is going to be some kind of impact on their ability to make price changes, that kind of shows up on the margins. These are companies which are at the current levels are best left on the sidelines.
What is your outlook when it comes to the entire steel space, the fact that over the past few months, we have seen a pretty decent performance for a lot of these companies? Do you remain guarded on the space or believe that there is more upside potential in the likes of SAIL, JSW Steel, JSPL and Tata Steel?
The valuations are pretty much in their favour but what is not in their favour is the demand outlook. China is soft. The US is still trying to figure itself out. Europe is clearly heading towards a recession. Against this backdrop, demand becomes the casualty. And these are cyclical companies. The US has not reached its peak of interest rates which is going to impact the capex decisions by any cyclical steel companies. And therefore, while valuations are clearly in their favour, I would still remain on the sidelines as it relates to the metal sector.
Download The Economic Times News App to get Daily Market Updates & Live Business News.
Top Trending Stocks: Sensex Today Live, SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price