Motilal Oswal Financial Services
We’ve seen a very good set of numbers from HDFC Limited and you’ve also heard the comments from Home’s management. How do you see the outlook for the lending industry as it relates to the real estate finance industry? What are the main stocks you would like to bet on?
The way the markets have been and the numbers that have come in most financial stocks, there are two important things to note. First, asset quality has improved for most companies. If it also starts with banks or real estate finance companies, the quality of the assets has been far superior. Second, demand is very strong in the housing markets and disbursement levels have also been very high. The whole space looks very attractive in terms of housing finance and the way we’ve seen real estate stocks soar over the last year and a half or so.
The real estate sector is also supported by demand. I feel like the main beneficiaries are the housing finance companies. HDFC Limited remains the top pick in this whole pack and after the merger announcement we saw that the stock has corrected decently from near term highs and the valuation looks quite reasonable and very attractive.
can offer 25% returns from here with the recent drop. The figures are justified and seem very convincing. Secondly, Can Fin Homes numbers were strong again and if I want to play it in small and mid caps, then Can Fin Homes also looks very attractive. So both in the housing finance space look very attractive compared to current levels.
What about the IT sector? Wipro has been disappointed with its earnings and it is a company that speaks of a slower growth rate, which is very different from what other industry leaders are talking about. How do you see this playing out for Wipro?
Also in the last quarter Wipro numbers were a little slow and we saw the sell off in the third quarter also let’s release the quarter results and post that the stock just slipped and the numbers in this quarter are also slightly lower than this that the street was waiting for. That’s why, despite the surge in IT stocks before this crash, despite the surge in other stocks, Wipro underperformed.
I think there are better choices in terms of the large-cap space after this correction as well as in mid-cap IT stocks which look very attractive. I would pass Wipro and prefer TCS and also the L&T twins – L&T Technology and Infotech look quite attractive after this sale.
Do you recommend buying beat names like ITC?
Obviously, now that the sale has taken place in the FMCG pack, others also look quite interesting. ITC just probably on the rating metric, looks attractive and one should consider buying it, but I would like to add other FMCG names as well.
The sages are also betting on the industrial and manufacturing sector. Today we see quite a bit of feedback on Dixon Tech as well as Amber Industries. What do you think of these two counters?
I would look at other global opportunities in the markets rather than betting on these companies. So I would skip both companies at this point.
What about the consumer and the entire FMCG space? HUL reported a good run of numbers and last week when the market was a little slow, HUL was one of the best performers. Now, we’re also expecting a decent string of numbers from Britannia. Does this sector warrant a fresh look or are valuations still expensive?
The valuation obviously looks expensive when you compare the selloff in the global markets to other sectors. Equities are available at reasonable valuations due to inflation headwinds. I think it’s hard to answer at this point. I think the valuations are still expensive for this, but at a certain allocation, you have to put it in a consumer pack and an FMCG pack. I will stick to large caps. The top of mind is Hindustan Lever.
I would start allocating allocation at this point from here and secondly I would look at Marico from the current conjuncture. Obviously, the title did not react like the other titles. The risk-reward ratio therefore remains favorable to Marico. I would look at those two names and start making allocations in the portfolio.