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What is your take on the markets in run-up to the budget because we have seen most of these counters or sectors actually be abuzz in anticipation of what is likely expected in the budget. What is your view?
Pramod Amthe: In terms of budget expectations, clearly what we are looking forward is some amount of relief to come through for the middle class and also looking at the election side relief for rural segment or the rural markets either in the form of looking at some direction for MSP or to that extent relief on exports of agri commodities so that should also give us some hints about sustaining the rural recovery which has seen initial signs of turnaround in the March and June quarter. So, those are the factors which we would look forward to for the budget expectations.
Are markets prepared for a change in long-term taxes? If that happens, what could be the immediate downside?
Pramod Amthe: There have been some talks about it coming through, but looking at the buoyancy in the tax collections, it looks like a difficult one because the contribution has been a very constructive manner for the government.
I doubt there will be any major changes, except for the saying that there has been challenges for FD immobilisation, which may need a tinkering, but may not be a drastic change in taxes. But if there are any of those things which you are talking about, then there can be a negative repercussions for the market.
I want to just get your view on the manufacturing space actually as a whole. You had a headline that said that Apple's India sales have seen an up move of about 33%. It has hit a record of about $8 billion. The manufacturing in India has actually gotten a flip. You also have a lot of PLI schemes also that have actually aided the performance for a lot of these manufacturing companies. Do you see further impetus for all of these companies and how is the sector looking to you?
Pramod Amthe: So, definitely manufacturing as a sector along with the other subsegments, including chemicals and all, seems to be coming back and with the budget supposed to be giving a medium-term view for five years, we expect some more positive momentum on the expansion of the PLI, considering that we have seen some initial success in the mobile phone and also in the semiconductor space and the electronic exports.
There is a higher probability that either they will be eased out or will be expanded to add up more industries or to that extent more companies to participate in this overall scheme of things, as the stability of the new government seems to be a new attraction for the medium-term capex to come through.
So, I think this theme will remain as the government initiative is to expand the manufacturing contribution to the GDP and also for the job creation to come through. So, broadly, it should fall in place as we go forward and attract the private capex in the segment.
What is the right way of looking at fintech and consumer tech companies, Zomato, Paytm, Nykaa? It has been a hot and a cold season. I mean it was a dream listing for Nykaa, it is the bottom of the barrel. It was a crazy listing for Paytm which is yet to recover. It was a big fall for Zomato, it is scaling new highs. Not everything is looking good, not everything is looking bad.
Pramod Amthe: A few of them have been quick learners from the private markets to the public markets. So, there is a difference in the way the investors look at it. So, in case of public markets, we would definitely look at the pricing power, as you rightly said, doubling up in the last six months, is what the public markets like.
Whereas in case of the private markets, it is the repeated fundraising to fund the losses at the closed circle fundraising which I think from the promoter point of view, it takes a substantial 360-degree turn to adjust to the investor mentality or some of them have been faster to learn, so we have seen that in case of Zomato hitting those bottoms and learning quick way, whereas others will follow suit as we go forward. But some of these businesses are great to be in, they have a substantial moat on a medium term basis, but the right valuation and the right turning points is what to be looked at.
This is again one sector telecom where unimaginable things have happened. First the price cut and now the price uptick. Is there a more operating leverage left in this entire sector whether it is Bharti or Vodafone?
Pramod Amthe: If you look at even from the point of view of the earnings expectations, clearly telecom is the one with the pricing discipline which the sector has shown in the recent quarters. It seems to be driving the profit growth even though there are very limited players, definitely come through.
So, in that context, it is a big utility sector where capital is getting allocated and definitely the pricing power is appreciated by the markets and the earnings trajectory is in their favour and that is what is giving a thumbs up for the sector.
What is your view on the auto ancillary space? How is that particular sector looking to you right now? At least the tyre stocks are pretty charged up in trade. Do you think that they will see a good ride of momentum going ahead? No doubt we have seen some sort of a blip coming in the auto sales number, but will that have an impact on the overall auto ancillary space?
Pramod Amthe: So, clearly tyre was more of a relief on the pricing front as the cost was going through the roof for natural rubber and except for the leader MRF, which was holding back the pricing, so that falling in place, there is more confidence that the price hikes which the others have taken is sticky and maybe realised beyond the monsoon weak season is done.
The realisation might be a couple of months down the line, but at least direction wise all the players seem to be falling in place to recover the rubber cost.
In that context, the bottoming out of margins will be there in June, so that is a relief for the tyre stocks. So, there our only preference is for Balkrishna, which is more of international play and domestic tractor market recovery for the market share gain for them.
Within the entire comm space, definitely the value per vehicle addition companies are the ones which are going to be at a relative advantage which I think along with the strong growth in those subsegments, if they are driving the value per vehicle, they are the ones which will be preferred.
Otherwise, you are right in the broader auto space in the last one or three months if you look at the performance, it has been challenging on volume, even though in terms of margin performance, they will still be one of the high growth segments within the Nifty 50 or Nifty 100 to that extent.
But looking at the current valuations for the overall auto space, where it is trading more closer to a plus one standard deviation, the risk reward for broader Nifty Auto seems very limited. Our preference is more for Endurance, which is a proxy for two wheelers and for Bharat Forge which is a proxy for CV play per se.
At the current juncture which are some of the names where you think that one should not be tempted by the recent price appreciation, you should simply sit on them because the best is yet to come, which is that in the next one year, two years, 30-40% gains should come in.
Pramod Amthe: Frankly, I have not thought about what to do on that. But if you look at broadly in terms of investment ideas, where we would still prefer is where the cycles are turning around. And if it is the initial leg of the cycle, we would not like to guess a hazard saying that how long the cycle will prolong and hence hold on to them.
So, to give you a couple of names, I would say we have been turning positive on some of the bulk chemicals names, which I think is basically the spikes has been at least around 20-30% from the bottom levels, but we still feel this trajectory has turned around.
Similarly, there are a couple of export led companies or CV cycle related companies including Balkrishna, Ashok which we feel where cycle is turning around but just not look at the stock prices and try to look at them on a more constructive two-three years phase.
Similarly, in case of pharma, we have been consistently upgrading in last couple of months, even this month, we have made use of the correction in Ipca to upgrade it. So, those are the names which we would look at to play the turnaround in cycles to remain with them through the up cycle than looking at the recent spikes in the stock prices.
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(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price