This week we got earnings from a lot of auto majors as well as pharma majors. What is your reading of the numbers from the likes of Doctor Reddy’s, Cipla, Dr Lal Path Labs etc?
A lot of companies’ numbers have been reported by and large in the Nifty universe as well. If we talk about the major numbers which were reported this week in the pharma pack, I think both the numbers for Cipla and Dr Reddy’s were below estimates of what the street was estimating. We have also seen the stocks have been punished by the markets so I feel that the numbers are weak.
The most important thing is to look at what happens in the next quarter and I think a couple of big pharma names are still left. Sun Pharma is still left and I think Sun has been quite strong. If you look at the entire pharma stocks basket, if you look at the large cap space, I think the numbers reported for the last two quarters are pretty decent for it. So that is more important to look at for the Sun Pharma numbers and what the management commentary is, which is going to be most important.
Secondly, when we see Mankind’s listing, which was a blockbuster, and look at the valuation vis-à-vis the listed side, then I think a lot of pharma names are also undervalued at this point of time. In a mid cap space Gland, which has been underperforming for quite some time and then in the last two quarters, the numbers were below estimates. The stock has also been decently down. So I feel one should focus on these two names which I have been talking about.
Do you expect that there is limited headroom for upside from here on or do you believe that the broader markets will continue to get that charge once again with the FII inflows that we are seeing continue for the 11th straight day?
The most important thing to look at is the Q4 numbers by and large there are no negative surprises from the large names. I think they were what the street was estimating or better. If we look at financials, which have given blockbuster numbers, HDFC Bank, Kotak, ICICI, Axis all of them had superior numbers. If we talk about PSU banks as well we had a good set of numbers from the large banks. So I think financials remain the top bets. Secondly, if we talk about IT names where there was a major disruption in the earnings and I think we did see the stocks correcting anywhere between 10-15% or more. They are just settling out over there also. So I feel IT sorted, auto we had a decent set of numbers. It was a mixed bag if you look at two wheeler space.
There could be a stock specific market from here onwards which is what is happening in spite of the straight 11 days and the FIIs buying I think we have seen that a few stocks and select pockets have been moving up. So I think it will be very select stocks from here and going forward that is going to be the key part.
We read a lot of headlines coming in with respect to ONDC, how there was a discount war or how there could be some caps on discounting, etc as well. What impact could it have on the likes of Zomato and valuation of even other companies because the likes of Nykaa etc have been underperforming?
After the strong sell off in most of the new age businesses I think some of them have become interesting. Zomato is one of them, which we have seen some 10-15% momentum building up from the near term lows. We believe it is not going to get more impacted by this ONDC thing, which we came out of the clarification also on the report perspective as well.
And talking about the other new businesses, I think Paytm, which reported the numbers last week, the commentary that the management gave was quite encouraging. So I think that looks interesting at that price. At a given price, a lot of stocks in the new age businesses like Paytm, Zomato, are on the top of our mind which look interesting after the steep fall in the stock prices. Nykaa, also, somewhere or the other place will make some bottom and then I think post numbers will come back. Overall, by and large, these stocks remain convincing in the new businesses.
What are your top bets within financials, private banks, public sector banks, NBFCs?
Private banks have had a very good set of numbers and like Axis Bank has underperformed vis-à-vis other three private banks. Axis remains the top bet, with a solid performance this quarter and going forward, they should deliver and the commentary was also very strong. So I think Axis remains the top bet followed by State Bank coming out with their numbers next week.
So, State Bank should be interesting to watch. Last two quarters have been very bumper results for them and we have to look at it going forward how the street reacts post State Bank numbers. These two banks look promising from our standpoint and then a private sector bank, like ICICI Bank and HDFC both have delivered decent numbers. So ICICI from the wholesale banking pack I think we prefer that. We like all of the banks but I think the preference would be Axis, ICICI and SBI.
