Is it time to buy the fall or wait it out till we get better entry points?
The PE has moderated from 23 odd to near 19 now. It would be a very good opportunity for investors for short term, However, I cannot comment on how the announcement will be or will shape up but at 11000, people were afraid to invest at such high and rich valuations and preferred to wait for a correction. The correction has happened in the 10% to 11% range. This provides a decent opportunity as companies with good earnings growth potential are there and one should invest in those.
In 2017, we had four-five global events lined up and the market was in fearful and yet we saw a good bull run of 29% return in calendar year. Summarising that, it seems that the macro factors are not that worrisome. We are still growing but in a slower pace and the GST impact will get normalised may be after one or two quarters more.
We are at the start of the earning season of Q4 where analysts are expecting that conservatively there would be a 7% to 8% growth for the quarter and in FY19, the analyst community believes that it would be around 14% to 15% growth. Normalising all these, EPS would be at 10% growth range. You will get Rs 530-540 EPS for FY19 and best case scenario is Rs 580 to 590. Considering that, we are at 18.5 times and currently at 10,000, it should be a good opportunity for investors.
Are auto ancillaries like Bharat Forge or a Motherson Sumi something that you could avoid right now because they may not be isolated and decoupled if at all there is a trade war or the tensions escalate between US and China and may be some other countries as well?
My view is a little different. In case of a trade war, India is not immune. We have some kind of a repercussion there, but on the overall basis, Motherson Sumi plays in the European as also the domestic market and it is a leading player for new disruption in technology with SMP, SMR and Cable or so.
It provides a good opportunity on correction and may be some more correction is on the cards. It would be a good investment at current level. Among auto players, we have a domestic play like Maruti and Bharat Forge if the defence theme plays out well for this company. A big trigger could be on the cards. The stock has also corrected recently from highs of 800 plus to now below 700.
Is there a big concern around some of these private corporate banking names? Why where the selling coming in on an Axis in particular as well as ICICI Bank? How should one be treating these stocks now — stay away or have they corrected enough to start nibbling in already?
For Axis Bank particularly, it will be a long haul and it would be materialising beyond FY20. Axis Bank can have a wait and watch kind of status. ICICI Bank has corrected a lot now and some kind of shift may have happened from names like ICICI Bank and Axis Bank towards IndusInd Bank and HDFC Bank. Maybe the migration has happened from the fund side and the HNI side but on the valuation front, it is near to little less than two times price to book at on the price to book valuation on ICICI Bank.
Any further correction by 5%-7% would be a good opportunity to have a portfolio but again, the upside will not be a doubler kind of a returns from here but it will be a conservative one with 15%-20% on an annualised basis.
IndusInd Bank has a consistent growth of around 20% since last so many quarters and provides a decent opportunity for an investment rather than Axis Bank. We have a buy rating on a disclaimer side on ICICI Bank, Axis Bank and IndusInd Bank as well.
How are you approaching crude? Do you think one should OMCs and may be look at ONGC?
When crude moves up, we have to look at upstream marketing companies and when crude moves down, it is downstream marketing companies like OMCs. In the current scenario, when the rupee is stable and crude is inching up due to extension of production cut till 2019, then at $70-72 per barrel, we are very much covered to the risk of rising crude prices for the balance sheet of India.
But for ONGC, it will be a positive because the realisation would be in their favour and right now, the crossholding in OMC companies is now settling into the individual balance sheet. So, it seems to have a nullifying effect of sorts. However, at the current price, ONGC would be favourable rather than OMC companies.