Expect Santa Claus rally in export-linked stocks only: Chakri Lokapriya

In a chat with ET Now, Chakri Lokapriya, CIO & MD, TCG AMC, says expect Santa Claus largely be in export related sectors, including oil, commodities, petrochemicals, textiles.

Edited excerpts


One of the most important influential investors in India is getting into the retail business, buying out promoters stake and it is day one of this listing. Do you think that is the kind of demand pull that the brand has in Being Human given it is associated with Salman Khan?

I think it is a great brand and it will be a great listing and also it is a low-ticket consumer discretionary item, buying a T-shirt or one of those pendants is a far easier thing to do and I think we will see great kind of momentum in these kind of stocks and we would see I think in the pipeline a few more companies like this.

What if the Fed does not go as per script and they sound either more hawkish than expected or perhaps give the market a surprise of a no rate hike?

I think we go into today evening with the assumption that the Fed indeed raises rates by 25 bps and this comes at a time when the US is doing well and Trump is talking about additional spend which is a return to inflation or a reflation trade which is a great thing. If you notice, the developed markets have done very well from November 8thwhich is the US election date to today. And so I think the Fed hike is on a glide path. They have May as the next number. It is a fairly well scripted out set of events that we would see between now and the next six months and it should not really surprise the global investors.

You are bullish on Mandhana Retail. Whatever it does, there is also Aditya Birla Fashion, there is Arvind which has got that very interesting deal done as well and then we were talking to Indian Terrain today. So, there’s a handful of names. Two or three of them are reasonably liquid and large too and there is this whole talk of unorganised to organised, people being cautious of brands, etc. Are you bullish on this theme?

This is a brands business and this is a brand equity business. Salman Khan brings in a huge amount of brand equity to Being Human and similarly the other names that you mentioned have created distinct identity. A brand identity drives up valuations, besides they are also easy on the pocket to buy.

Let us work with an assumption that they do what everybody expects them to do. What do you do with the investing scenario then because we have 15 days until December ends. December typically has seen a Santa Claus rally but we are hitting a month which from an Indian perspective will have terrible earnings if managements are to believed. So what do you do in the remaining 15 days of December? Let it be light or anticipate a small rally and therefore load up on positions?

We have raised our cash levels. Our cash levels have gone up to about 25% and earnings are likely to be very weak for the Indian companies because of demonetisation. It is largely something which caused for ourselves. And in terms of any Santa Claus rally it will largely be in export related sectors, including oil, commodities, petrochemicals, textiles, which will have less to do with India, more to do with the developed world.

Those kind of stocks will do better going into the next few weeks.

Where are you on the IT basket because if I see couple of spaces doing reasonably okay the last two or three days, it includes largecap IT and to an extent midcap IT, MindTree yesterday, Mastek today, HCL today, Infosys in the green. Tech Mahindra has had a good run the last one month. What are you doing here?

IT valuations have corrected and are looking largely okay in line of the newer lower growth of about 8-9%. Also, January-February is a month when IT fresh budgets in the US are announced. And while Trump has come out with some rhetoric about cutting back on overseas employment, still as a sector the valuations are good and business outlook in the US remain strong. Whatever negative changes may or may not happen is more a longer term issue. I would continue to look at and buy these for a positional trade.

What did you make of this-- their disclaimers and they did a fairly lengthy interview on the channel as well and spoke to us yesterday morning, Rajeev Jain that is, but what do you do here because what holds true for Bajaj Finance in some measure or the other holds true for the other NBFCs as well, what do you do with this consumer facing NBFC theme?

I think Bajaj Finance is a slightly different animal versus the Mannapurams of the world. Consumer financing will come back because they anyway finance some of the smaller ticket items as well. You have seen a slowdown, fears of a slowdown extending into the next couple of months but I think NBFCs as a business model where the last mile is cash, that model will significantly need to change because of the demonetisation. But wherever involves an EMI kind of a thing will be less impacted.