Rahul Shah, V-P-Equity Advisory, MOFSL, says “starting from Punjab National Bank or Bank of India or like some Jammu Kashmir Bank and Canara Bank will be available at very reasonable valuations and under owned by the investors, especially from the foreign institutional side if you look at all these banks. Whenever FIIs flows return, this is the sector which will continue to do well and will be hitting more new highs from the current levels.”
What did you make your clients buy yesterday? What was the Muhurat idea yesterday?
One idea was very clear. We have been talking about PSU banks for the last one year or so and the earnings are quite visible in that sector. Most importantly, they have been more resilient in spite of some sell-off in the private banks and financials.
Bank Nifty is down maybe 8% from the peak and still they are just holding on to most of the PSU banks. Except for largecap SBI, all mid-sized banks have done quite well. This is the time for PSU banks which will continue to do well in the next one year or so. So right now, the sector is trading at a 20% premium to the long-term averages but this will keep on getting re-rated.
In the last 10-12 years, PSU banks faced a lot of problems in the banks and now this scenario has changed. If you look at this quarter’s numbers and not only this quarter but also previous quarter’s numbers, the numbers are bang on. I feel that PSU banks starting from Canara Bank, Bank of India, Punjab National Bank names like Jammu and Kashmir Bank, all will do very well. They have already done well and then if you look at a 52-week high, and you might say think it has been working for a long time but there is still a lot of steam left.
In a lot of places, in the next year-year and a half, there could be a chance of a doubler from here as well. A few of them have already been doubled or maybe more than that but still there is a lot of space in the PSU banking universe. That is the trade for the next one year, that is what it looks like.
We are getting a lot of income because India is buying more health insurance but they are not reporting a good set of numbers. If Indians are buying more health insurance, where is the business going?
Obviously, the numbers have been weak and nothing so great in terms of the number if you look at the listed entities like ICICI or maybe Star Health. The numbers have been pretty, pretty okay kind of stuff and it does not look like that in near term, anything is going to happen in this sector. Only thing is the way we look at it, the story could get better in the next four or five years and very few companies in a listed space are available in this sector to hold them for it. So the size of opportunity is huge. But near term, it does not look like any of these stocks will do well.
What is that one sector that you are betting on for Samvat 2080?
We have been liking some of the public sector banks. I feel that public sector banks will make a very good comeback from here. We will get re-rated and way the numbers have been in this quarter and will continue to do well so that this as a sector, starting from Punjab National Bank or Bank of India or like some Jammu Kashmir Bank and Canara Bank will be available at very reasonable valuations and under owned by the investors, especially from the foreign institutional side if you look at all these banks.
Whenever we see that flow from the FIIs coming back, this is the sector which will continue to do well and will be hitting more new highs from the current levels.
Where are you looking for opportunity within the entire auto space or even auto ancillaries for that matter?
I am more positive on the play on rural economy theme and Mahindra & Mahindra remains the top sectoral bet in the entire auto space. The results last week were slightly below what the Street was estimating. But this is the one play where 65% of the revenue comes from rural play. If somebody has to play a rural theme, then this is one of them.
Ahead of where we have seen the launches in the SUV space, the numbers have been quite good with the stable RM cost. Thirdly, the new EV launches will add value to them. It is still not an expensive sector. If you look at the value after a long long time, Mahindra & Mahindra started trading with a premium in the last three-four years, if we look at what used to trade earlier at a discount in the last 10-12 years.
At risk versus reward at 15 times earnings, there is nothing to be lost from here. If I had to bet on the entire auto sector, Mahindra & Mahindra will remain my top bet.
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