ET OnlineBy Mohammed Sabir
MUMBAI: The benchmarks are unlikely to stretch the rally and may grind around current levels due to a variety of factors in the next three months, says P Phani Sekhar, Fund Manager-PMS, Angel Broking.
In an email response to economictimes.com, Sekhar says that the pharmaceutical sector will surprise with its research and manufacturing innovations. He shares his multi-bagger ideas and advises to stay away from PSU banks. Excerpts:
Q: The benchmarks have bounced back after the US Fed said that the interest rates will remain at zero for a long time. Will the Nifty hit fresh highs soon or consolidate? Where do you see the Nifty this Diwali?
The Nifty is around its life highs. However, it is unlikely to deliver more than 5 per cent from the current levels. While the US Fed has intentions to keep the rates low, yields on the 10-year and 30-year have been steadily climbing in the past month by 22 bps and 15 bps, respectively.
Scotland’s referendum in a few days and the potential of Britain exiting from the EU in the event of Scottish independence will keep the financial markets on the edge.
Moreover, we have witnessed a large part of the risk-off trade playing out so far due to the global commodities across energy and agriculture being at multi-year lows, creating a sweet spot for emerging markets such as India. However, domestic fundamentals, though on the mend, are likely to disappoint as they may not turn around fast enough for the markets’ liking. On the balance, while we have enjoyed the gains so far, the markets may grind around current levels due to a variety of factors in the next three months.
Q: What is your view on PSU banks? The stocks have been in an up-move even as fundamental concerns remain. Would you recommend investors to buy these banks at current levels?
No. PSU banks face multi-year headwinds as they battle with poor asset quality along with capital constraints. They have been systematically ceding market share to private banks for the past decade.
We might see that the market share loss by PSU banks may enter a climactic stage as they scramble hard against time, unions, and politics to mobilize capital ahead of BASEL 3 norms kicking in the next 3 years.
Besides a constant supply of their stock as PSU banks sell their stake regularly to mobilize capital will be an overhang preventing any meaningful re-rating in them. However, we will continue to witness trading rallies in PSU banking stocks. So investors can benefit by trading in them for 10% gains over short periods, but they can’t be considered as core investment ideas in your long-term portfolios.
Q:Snowman Logistics has had a stellar debut and there is still a strong appetite for the stock. What is your view on the stock? Which companies are you bullish on in the logistics space?
We hold Gateway Distriparks, the parent of Snowman Logistics, in our investor portfolios. With this disclosure, we continue to be positive about the prospects of the entire logistics space and the cold chain segment within that.
In the medium term, valuations appear expensive, but being the only listed investment option in the exciting cold chain segment and a favorable long-term story, the stock may still deliver another 25 per cent returns in the next one year.
Q: Pharmaceuticals companies are in action with deals and pacts with MNCs. What is your view on the sector? Anything you like from the midcap pharma space?
Indian pharma is just beginning to discover its true potential. While the pharma sector has been delivering spectacular returns from the last 5 years, the business landscape has been getting better in the last 2 years. Many large and mid-sized Indian pharma companies are striking lucrative manufacturing deals with global pharma majors along with bagging exclusivities for many blockbuster drugs that have gone off-patent.
We believe that the sector will continue to surprise with its research and manufacturing innovations. We like Aurobindo Pharma and FDC in the midcap space.
Q: Give us at least two multi-bagger ideas.
Indiabulls Housing Finance and Hindustan Media Ventures (HMVL). While Indiabulls Housing will be a prime beneficiary of the government’s low and medium income housing policies, HMVL is an excellent long-term story of leadership consolidation in the Hindi print medium in the states of Bihar and Jharkhand, while it continues to be in the second position in India’s most populous state of UP.
MUMBAI: The benchmarks are unlikely to stretch the rally and may grind around current levels due to a variety of factors in the next three months, says P Phani Sekhar, Fund Manager-PMS, Angel Broking.
In an email response to economictimes.com, Sekhar says that the pharmaceutical sector will surprise with its research and manufacturing innovations. He shares his multi-bagger ideas and advises to stay away from PSU banks. Excerpts:
Q: The benchmarks have bounced back after the US Fed said that the interest rates will remain at zero for a long time. Will the Nifty hit fresh highs soon or consolidate? Where do you see the Nifty this Diwali?
The Nifty is around its life highs. However, it is unlikely to deliver more than 5 per cent from the current levels. While the US Fed has intentions to keep the rates low, yields on the 10-year and 30-year have been steadily climbing in the past month by 22 bps and 15 bps, respectively.
Scotland’s referendum in a few days and the potential of Britain exiting from the EU in the event of Scottish independence will keep the financial markets on the edge.
Moreover, we have witnessed a large part of the risk-off trade playing out so far due to the global commodities across energy and agriculture being at multi-year lows, creating a sweet spot for emerging markets such as India. However, domestic fundamentals, though on the mend, are likely to disappoint as they may not turn around fast enough for the markets’ liking. On the balance, while we have enjoyed the gains so far, the markets may grind around current levels due to a variety of factors in the next three months.
Q: What is your view on PSU banks? The stocks have been in an up-move even as fundamental concerns remain. Would you recommend investors to buy these banks at current levels?
No. PSU banks face multi-year headwinds as they battle with poor asset quality along with capital constraints. They have been systematically ceding market share to private banks for the past decade.
We might see that the market share loss by PSU banks may enter a climactic stage as they scramble hard against time, unions, and politics to mobilize capital ahead of BASEL 3 norms kicking in the next 3 years.
Besides a constant supply of their stock as PSU banks sell their stake regularly to mobilize capital will be an overhang preventing any meaningful re-rating in them. However, we will continue to witness trading rallies in PSU banking stocks. So investors can benefit by trading in them for 10% gains over short periods, but they can’t be considered as core investment ideas in your long-term portfolios.
Q:Snowman Logistics has had a stellar debut and there is still a strong appetite for the stock. What is your view on the stock? Which companies are you bullish on in the logistics space?
We hold Gateway Distriparks, the parent of Snowman Logistics, in our investor portfolios. With this disclosure, we continue to be positive about the prospects of the entire logistics space and the cold chain segment within that.
In the medium term, valuations appear expensive, but being the only listed investment option in the exciting cold chain segment and a favorable long-term story, the stock may still deliver another 25 per cent returns in the next one year.
Q: Pharmaceuticals companies are in action with deals and pacts with MNCs. What is your view on the sector? Anything you like from the midcap pharma space?
Indian pharma is just beginning to discover its true potential. While the pharma sector has been delivering spectacular returns from the last 5 years, the business landscape has been getting better in the last 2 years. Many large and mid-sized Indian pharma companies are striking lucrative manufacturing deals with global pharma majors along with bagging exclusivities for many blockbuster drugs that have gone off-patent.
We believe that the sector will continue to surprise with its research and manufacturing innovations. We like Aurobindo Pharma and FDC in the midcap space.
Q: Give us at least two multi-bagger ideas.
Indiabulls Housing Finance and Hindustan Media Ventures (HMVL). While Indiabulls Housing will be a prime beneficiary of the government’s low and medium income housing policies, HMVL is an excellent long-term story of leadership consolidation in the Hindi print medium in the states of Bihar and Jharkhand, while it continues to be in the second position in India’s most populous state of UP.
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