ET NowIn a chat with ET Now, P Phani Sekhar, Fund Manager-PMS, Angel Broking, shares his views on some sectors and stocks. Excerpts:
ET Now: Want a quick view on pharma companies. The withdrawal of price control guidelines of 108 formulations by NPPA has been a fairly important development and is a shot in the arm really for some of these companies, especially Sanofi India.
P Phani Sekhar: That is positive. While it may not materially add to the earnings, but it is a huge sentimental kicker because just about a couple of weeks back, it was widely reported that NPPA was considering an enhanced list of drugs to be brought under price control.
The latest shortage of medicines that we experienced in J&K was widely blamed on price control. It is a welcome move, but it may not make much of a difference to the earnings materially.
ET Now: Who is buying into NBCC?
P Phani Sekhar: It is a reasonably good company and the balance sheet is very uncharacteristic of how a construction company should look like. With a lot of civil construction work, especially in the residuary state of Andhra Pradesh as well as the new smart cities and the accompanying infrastructure being planned by the government, you can expect a lot of government orders in the form of educational institutions, hospitals, etc to come out and that is where NBCC might be favoured.
This also comes in the backdrop of relatively muted post IPO period for NBCC over the last two years where government expenditure was actually being cut. So there was no scope for NBCC to really increase its order book.
A combination of all these factors where investors expect good times for NBCC in the next one-and-a-half to two years is leading to this renewed interest.
ET Now: So what is the position right now as far as the market is concerned? What are your top three recommendations?
P Phani Sekhar: We are comfortable in the defensive space, which is FMCG, pharma and IT, because we believe that the market might grind more at these levels.
The infrastructure turnaround might not be as easy as many people had expected a couple of weeks back. Although inflation might temper interest rates which in the best case scenario may come down by 25 to 50 bps, but that is unlikely to herald a dramatic turnaround in the infrastructure capex scenario.
For the time being since global cues seem to be alright, we are faced with domestic challenges, we have to set our house in order. So I guess export-facing businesses like pharma and IT will continue to do well. That is what you are witnessing in the market. Valuations still make a lot of sense, especially in IT. So Infosys, Wipro are something that we are recommending nowadays to our clients.
Sun Pharma, Ranbaxy still look good and private banks continue to be our evergreen favourites.
ET Now: Last time when spoke to you, you were bullish on GIC Housing and LIC Housing. What was the rationale there and will those two stocks still qualify as a buy?
P Phani Sekhar: They do. The rationale is quite simple, which is that they both are present in the low cost housing segment. Their average loan sizes are around Rs 20 lakh and with the government’s resolve on housing for all and building smart cities, these companies will benefit. We have already seen that government has given an extension to home loan deduction to Rs 2 lakh in this budget. So the intentions are pretty clear.
All this will greatly benefit home finance companies and that too which are in affordable income housing. This is where LIC and GIC will benefit a lot. Plus, LIC and GIC operate in tier 3 and tier 5 cities, where competition from the private sector is limited. At this point in time they are well entrenched and valuations make a lot of sense. In the case of GIC, the dividend yield itself is close to 4% to 5%. For us both these stocks continue to be a buy with a longer-term horizon.
ET Now: A quick check on Titan as well, which is a price and volume breakout too technically?
P Phani Sekhar: Gold is trading at around $1200-$1300 per ounce. This is a far price from 1700 levels that we saw not very long ago. It is good news and if you combine with the expectation of government also loosening its hawkish policy towards gold, you have the making of the rally in all these jewellery companies. That explains the rally that we are seeing in many of these jewellery companies and Titan being the leader will benefit the most.
ET Now: Want a quick view on pharma companies. The withdrawal of price control guidelines of 108 formulations by NPPA has been a fairly important development and is a shot in the arm really for some of these companies, especially Sanofi India.
P Phani Sekhar: That is positive. While it may not materially add to the earnings, but it is a huge sentimental kicker because just about a couple of weeks back, it was widely reported that NPPA was considering an enhanced list of drugs to be brought under price control.
The latest shortage of medicines that we experienced in J&K was widely blamed on price control. It is a welcome move, but it may not make much of a difference to the earnings materially.
ET Now: Who is buying into NBCC?
P Phani Sekhar: It is a reasonably good company and the balance sheet is very uncharacteristic of how a construction company should look like. With a lot of civil construction work, especially in the residuary state of Andhra Pradesh as well as the new smart cities and the accompanying infrastructure being planned by the government, you can expect a lot of government orders in the form of educational institutions, hospitals, etc to come out and that is where NBCC might be favoured.
This also comes in the backdrop of relatively muted post IPO period for NBCC over the last two years where government expenditure was actually being cut. So there was no scope for NBCC to really increase its order book.
A combination of all these factors where investors expect good times for NBCC in the next one-and-a-half to two years is leading to this renewed interest.
ET Now: So what is the position right now as far as the market is concerned? What are your top three recommendations?
P Phani Sekhar: We are comfortable in the defensive space, which is FMCG, pharma and IT, because we believe that the market might grind more at these levels.
The infrastructure turnaround might not be as easy as many people had expected a couple of weeks back. Although inflation might temper interest rates which in the best case scenario may come down by 25 to 50 bps, but that is unlikely to herald a dramatic turnaround in the infrastructure capex scenario.
For the time being since global cues seem to be alright, we are faced with domestic challenges, we have to set our house in order. So I guess export-facing businesses like pharma and IT will continue to do well. That is what you are witnessing in the market. Valuations still make a lot of sense, especially in IT. So Infosys, Wipro are something that we are recommending nowadays to our clients.
Sun Pharma, Ranbaxy still look good and private banks continue to be our evergreen favourites.
ET Now: Last time when spoke to you, you were bullish on GIC Housing and LIC Housing. What was the rationale there and will those two stocks still qualify as a buy?
P Phani Sekhar: They do. The rationale is quite simple, which is that they both are present in the low cost housing segment. Their average loan sizes are around Rs 20 lakh and with the government’s resolve on housing for all and building smart cities, these companies will benefit. We have already seen that government has given an extension to home loan deduction to Rs 2 lakh in this budget. So the intentions are pretty clear.
All this will greatly benefit home finance companies and that too which are in affordable income housing. This is where LIC and GIC will benefit a lot. Plus, LIC and GIC operate in tier 3 and tier 5 cities, where competition from the private sector is limited. At this point in time they are well entrenched and valuations make a lot of sense. In the case of GIC, the dividend yield itself is close to 4% to 5%. For us both these stocks continue to be a buy with a longer-term horizon.
ET Now: A quick check on Titan as well, which is a price and volume breakout too technically?
P Phani Sekhar: Gold is trading at around $1200-$1300 per ounce. This is a far price from 1700 levels that we saw not very long ago. It is good news and if you combine with the expectation of government also loosening its hawkish policy towards gold, you have the making of the rally in all these jewellery companies. That explains the rally that we are seeing in many of these jewellery companies and Titan being the leader will benefit the most.
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