Who is buying into some of these consumer staple stocks? In last three years, they have become wildly expensive. HUL trading at a PE multiple of 50 plus, Titan almost reaching there and these are expensive stocks. Yet the price action is indicating that the buyers are still chasing these stocks?
I would address it slightly differently. You will not find value here. Rather, you will find some normal growth. Buying into some of these stocks will continue.
There will be periods in time when they will be quoting at 50-60 multiples, the largest retail company in India by market cap. When this stock came out in the public issue people thought it was expensive, it listed 50-60% higher, people still thought it was expensive. Today we are talking about 5x the listed price and there are buyers galore. So, expensive stocks will remain expensive because people are drifting to quality and polarise to good managements which is actually the play.
So, who is to say that 50 PE is expensive or 65 PE is also expensive but who is to argue between 50 and 65? Once it goes beyond 15-20 range, you tend to get into multiples. That is really what the market is willing to bear.
But the markets are betting on a domestic cyclical recovery and typically when the bent of the market is tilted towards a genuine economic recovery led by capacity expansion and rural demand, cyclicals should be the toast of the town. But cyclicals are not doing all that well as markets were anticipating them to do?
The take here is to go with anything that is infra focussed because that is where the biggest action. So, we are bullish, for instance, on the road infrastructure space.
Pure EPC companies?
I would say a combination of EPC and toll companies. You travel the countryside and that activity is there for everyone to see. And today with InvITs etc coming in, these people can get the debt off their balance sheets and deleverage themselves just as efficiently. So, these companies will show very good topline growth and possibly with efficiencies coming in, very good growth can be expected.