I wanted to discuss the entire financial sector, as there are also a number of reports on the entire financial sector. How do you see the interest rate environment and what could that potentially mean for some of these private banks? Which banks do you think are best positioned in this scenario?
Mr Jani: The financial sector is stabilizing but has underperformed for an extended period. We believe that while banks and financial firms are struggling to raise deposits, if the first rate cut in the United States does occur, it would become even more difficult for these banks to raise deposits at a competitive rate.
So, while we like the valuations and the fact that most banks are very well capitalized and asset quality is under control, the market at this stage is looking for companies with great growth potential and excitement.
What do you think about this energy that is particularly present in the financial sector? I mean, PFC, REC, all of them are suddenly full of energy again.
Mr Jani: So, yes, you see these momentum surges in those areas as they continue to remain quite attractive in terms of dividend yield parameter valuations. Also, sometimes you see certain flows when there is a rebalancing of the indices. So, we particularly like PFC, which has delivered pretty healthy numbers over the last three to four quarters, is available at a below-average price-to-book ratio of about 1.2-1.1 and has a dividend yield of 4.5%. So, yes, I think there is still some room to run in terms of about 18% to 20% upside.How do you see this whole sector, retail, hospitality? You talk about how the increase in demand could create value. Are there any stocks you follow in this sector that you are optimistic about?
Mr Jani: So if we look at the entire food consumption space, on one side we have retailers like Trent, ABFRL and a few others. And on the food side, we have Jubilant Foodworks and Restaurant Brands of India and Devyani International etc. So we think Trent has risen sharply in the retail segment and is at a P/E of 80-85, partly because of the inclusion in the Sensex and partly because of the performance of the company. There is some interest and we think it would make sense to buy Trent even if it corrects. And as far as the food companies are concerned, I think Jubilant Foodworks has delivered relatively better numbers and the growth prospects are better, whereas this entire space is not so straightforward and we have not seen any key numbers or data points that suggest that demand is coming back. I think Jubilant Foodworks is something we like because of the better numbers.Of course, there are all kinds of concerns in the auto space whether these discounts were really to clear inventory or whether there was a demand crash. Of course, auto companies have come forward and claimed the latter. But I just wanted to know what you are doing with this space after the upswing that they have already seen because there is a lot of change going on there too. Bajaj Auto is now entering the CNG motorcycle market, they have set a big milestone and also in terms of expected sales. Maruti spoke after its AGM about what the EV pipeline will look like and how many new products will be launched. I wanted to know where in the auto space are you ready to deploy fresh money or add positions now?
Mr Jani: So there are two or three takeaways from the overall automotive space. Firstly, the two-wheeler space is doing much better than the PV or CV space if you look at the last, let’s say, last few years and given the pipeline and the fact that you had a very successful IPO of Ola, we believe some of the existing established players like Bajaj and TVS and to some extent Hero are better positioned because of the way demand is evolving and even those companies have their plans for the EV space. As far as PV is concerned, I think the growth has not been that great. There have been signs of inventory building but as we move towards the festive season, people would really like to see what the growth looks like.
We have been talking about this for 15-20 years. On the surface, it could be a small positive impulse, but I am not too enthusiastic about this impulse. The market would really like to see the actual growth numbers in the festive season, but I think Maruti is better placed comparatively because of its positioning in the SUV and particularly the hybrid segment.
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