Who is it going to be first — Nischal Maheshwari the consumer or Nischal Maheshwari the head of research? When it comes to fuel, both will have different views?
You caught me at the wrong end basically. Both the sides as a consumer…
No. The easy answer would have been if you said that you would start taking a metro or bus or Uber to work.
I hope we had better public transport. You would have taken in that. But I do agree with you that at these prices, it has started hurting the consumers but basically high oil prices naturally are bad for the country. So, it is a double whammy for the government. It is hurting the consumer but if the government cuts the excise duties, it is going to hurt the economy. The government has to take this hard pill at some point of time. Let us see how it pans out.
What about the good part of the market? NBFC earnings continue to impress the Street. While there might be a big issue with the banking sector, especially PSU banks, in some of the corporate lenders, NBFCs are giving us a sense that business is good and as usual?
Yes, NBFCs have done well. But thats what I have been saying that the PSUs are going to continuously vacate the market and given that we do not have a lot of private sector banks, NBFCs will come to the rescue and take over the market.
They are showing almost a 25-30% growth except for yesterdays Manappuram results which disappointed a bit. I saw only around 2.5% or 3% growth in gold loans but every other space seems to be doing pretty well.
We are bracing ourselves for a bit of correction if the dollar index continues to show strength at a time when the US treasury yields have also been edging higher?
Basically, this year is going to be volatile. Obviously, the global factors are now becoming much more powerful than the domestic ones and we have seen dollar strengthening and all emerging market currencies have come off and yesterday the 10-year yields in the US went up to 3.1% and it looks like that they are still set for three to four rate hikes in the current year. More and more countries like Indonesia have been increasing the interest rates voluntarily. I believe that it is going to happen in India soon. In this kind of scenario, the stock market would be volatile and maybe headed for a correction.
Any changes that you have made on your conviction call in the numbers that have been reported thus far?
One of the sectors which we have been fairly disappointed in is building products. There was a lot of hope that once GST is implemented, it is going to see the movement from unorganised to organised and we are going to see good volumes coming in but the initial signs have not been very encouraging and there has been huge cuts in the earnings of both the tiles manufacturers as well as the plywood manufacturers and price corrections. Building product seems to be under pressure and besides that, the earnings seem to be more or less okay.
Do you think the selling in pharma is now slightly overdone? Strides came out with bad numbers but that does not mean that everything in pharma should be getting smoked! Do you think the Friday selloff in pharma could be an indication of a capitulation and typically capitulation always marks the market bottom?
I do not see hope at the end of tunnel for pharma. My views on pharma sector have been very strong for a long period of time and I do not see reverse in that. There are two things – one is the US generic market and there is a consolidation at the end of the US where earlier, there used to be seven-eight players, now there are only three players and they are squeezing everybody out in the purchases. Therefore, you are seeing this kind of margin squeeze.
The second thing is regulatory and that is a very big challenge. I do not see light at the end of tunnel as far as regulatory is concerned. For three years now, Sun Pharma could not get a plant cleared. Dr Reddys have not been able to get it right. I do not understand basically what they have to do to get this thing right .
Everybody seems to be throwing up their hand and capitulating. But again, the earnings have been cut very dramatically by everybody. So, the stock does not seem to be cheap at these prices also.
Have you done some numbers — which bank will gain how much because of NCLT? What will be the impact of that on individual balance sheets? Will there be a case of bad loans becoming good loans and will that shore up the book values for some of the lenders?
At the face of it, I do not think so there is going to be any write-backs because most of the banks have provided for around 50% to 60% and that is what I think the deal has gone through, so I do not see there is going to be big write backs coming through. It was not an asset which was going in for liquidation or something. There would have been buyers and they have just got the fair value.
I do not think there is going to be big write-backs basically for banks but some of the banks which have exposure to steel are obviously the major PSUs and ICICI and Axis. All of them have exposure to these kind of assets. But the only good thing is that the NCLT process seems to be working at the moment.