With the easing of lockdowns and the peaking of Covid cases, do you think aviation, hospitality and multiplexes can be a sustainable bet?
I will be a little cautious about these reopening trades. Mind you, we are at $3 trillion – 110% of market cap to GDP ratio. The margin to make error is low. We should stick to where there is earnings support. So I would be overweight on tech and pharma where I can see earnings growth. You can consider hotels as a pack. Indian Hotels is probably the largest chain and is available for Rs 14,000-15,000 crore market cap but you have to be in for a longer haul. Q1 will be tough and a lot of reality check will happen in July when the numbers come in. So be where there is earnings support and be cautious. As we say in cricket parlance, just spend time on the pitch and let the opportunities come.
What is your overall view on growth and valuation of Asian Paints?
I think the valuations definitely look stretched despite the 48% plus volume growth. The numbers were very impressive and the stock made a new high. We saw Pidilite crossing Rs 1 lakh crore market cap, which was again pretty impressive. I like this building material space but the valuation comfort is not there. Polycab has transitioned from a B2B player to a B2C player with a higher share of fast moving electrical goods. Havells also reported very good numbers. I think we will see a housing recovery. A combination of housing finance and building materials will do, but some price correction can help.
What’s behind the buzz in Titan?
The valuation is expensive. We have a long marriage season. I would watch out for growth in studded and designer jewellery. The last quarter was a mix of both gold coins and studded jewellery, while other segments were pretty flat. At this valuation, I may not want to add further. Given the kind of volatility we are seeing in crypto, the appeal of traditional safe havens could be looked at. One can consider gold ETFs as a small part of the portfolio for hedging purposes.
What is your view on the entire energy basket? How are you looking at Reliance Industries at the current levels?
I think oil marketing companies are looking good. The refining margins have improved. Despite the buyback, HPCL gave a very good dividend. BPCL has a divestment angle to it. Also with Mumbai and Vizag expansion, there is visibility for FY23 earnings. They have a higher marketing output than refining output, so recent price hikes would also help. I continue to like city gas distributors. MGL numbers were stable. Gas would eventually get included under GST, which can be a trigger for Gujarat Gas as more than 75% of its revenues come from industrial and commercial users who would be able to get input credit.
Reliance has underperformed but the key trigger could be monetisation of the oil-to-chemicals arm.