Just wanted to revisit your thoughts on FMCG because you were constructive on some of these plays, like a Dabur for instance. Would you say deploy these kind of dips to perhaps add more positions?
If reasonable dips come, one should, because the stock moved from 500 to straight 620, 630, so it is a 25% plus kind of move. Stocks, they normally do not move 25% so fast and these are typically stocks where you would be looking at mid-double digit or those kind of returns, like these are not stocks which are going to give you 50%, 100% kind of return. So, you need to wait, buy at the right prices. Even now the overall outlook for consumer stocks is constructive. And if monsoons pan out the way they are forecast to pan out, then I think they will have further legs to go.
What is your own view on the entire sugar pack, considering the government is mulling an MSP hike, but for those who perhaps exited when the government flip-flop sort of happened late last year, can they look at a fresh entry point or do you think a major chunk of the rally is behind them?
I would be quite bullish on the sugar stock, especially those which have a sugar plus ethanol story going for them. And the other companies which also have a power story, but not to a very great extent. So main issue ethanol and the government statements post elections and government formation have been extremely constructive from the ethanol side. And there is also a high probability that some exports of sugar will also be allowed as we go in towards the next sugar season which starts in October. And most people panicked and sold out and dumped these stocks late last year when the policy flip-flop happened. So, these are very under-owned stocks also. So, I would think that they are reasonably well placed. The moves till now have been very moderate relative to what the eventual moves can be.
This is a sector which has been plagued consistently by the regulatory overhangs and the changes that happened. Is it something that the investors should make a bet on purely because this sector is undervalued or because of these regulatory overhangs just stay away?
It is not undervalued sector for sure. So, the other point is that the regulatory issues definitely affect valuations and this was supposed to be a sunrise sector where these companies were supposed to create huge wealth for the shareholders. However, I think the entire growth and profitability paradigm has not played out. I have been monitoring the insurance companies for several years now. They tend to disappoint more often than actually surprise positively and that might not change. So, whoever is taking a bet, it is more a trading kind of bet. Long term, I find it tough to buy into these stocks.
Now all eyes are on what the budget is going to entail. Do you think it is going to turn out to be much of a big trigger?
I do not think so because the timing of the budget is such that it is coming July end and as all of us know that after the date change of the budget, the next budget will be Jan end or 1st Feb, I do not remember the exact date. So, then the gap between these two budgets is going to be just six months. So, my guess is that there would not be any significant change in this budget because as it is so much time of the quarters would already have gone by, making any changes, etc, would be disruptive. So, I think it will be more about statements in this budget is my guess and any major action will happen next year.
What are you liking within the entire infrastructure gamut? I know it is a large umbrella and given the valuations or the pricing some of these stocks are at, it may not be the best time to buy. But what is it that is on your watch list or what is it that you recommend buying right now?
Like you rightly said, buying something from this entire infra, capital goods space looks tough at this stage. But I think the stocks which we are holding and we will continue to hold are stocks like NCC, L&T, Ahluwalia Contracts, VA Tech Wabag, Praj Industries among a few which immediately come to mind.
So, ABB and Siemens have done extraordinarily well. They have delivered extraordinary results over the last few quarters and as such is reflected in the stock prices. So, these two and Thermax, etc, I think they are very excessively valued. So, the outlook might be good but then the valuations are very excessive here.
What are you sticking to? Are you sticking with those private banking names and those auto stocks or are there some new bets that you are also making right now?
I think the infra, capex themes I already talked of. Autos, M&M and Maruti I continue to hold along with Tata Motors, it is like all these stocks have done well actually.
On telecom, Bharti continues to be a decent story for the long term. On consumer, we have talked of Dabur, Tata Consumer, Godrej Consumer, I think these companies are doing well, but at what price you want to buy you have to see.
So, I think there is a whole plethora of opportunities out there. It all depends on the price at which you buy and what upside you see from those levels.
The other thing I wanted to talk to you about is insurance stocks. I mean, of course, they have had such underperformance which has lasted for I think almost two years now. But it seems that this entire news around surrender payouts, it is, of course, is going to impact profitability, but companies like HDFC Life have given a statement that it is only going to be a 100 bps kind of an impact, which they will surely be able to absorb.
See, that is the typical statement of managements. When there is a negative development, they will always say it would not impact us much. When there is a positive development, they will say that it will have a very good impact on our company.
Now, as investor, you have to decide yourself, how do you see that? In any case, it has been an underperforming sector where delivery has been muted. On top of that, if you get some further overhangs, it is very tough to see how the performance will come.
