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    Infra can be a good bet; not gung ho on diagnostics: Sandip Sabharwal

    Synopsis

    “Initially we are completely defying all global trends but let us see how long that lasts because it is very tough. The kind of moves Indian markets are giving are in complete contrast to emerging markets as well as world markets. The probability of that historically would not be more than 5%. Whether this 5% carries on is what we need to see.”

    Sandip SabharwalAgencies
    While people have started buying capital goods stocks, infra stocks are still not much in demand. That is an opportunity for investors who are willing to buy and hold for a bit longer, says Sandip Sabharwal, asksandipsabharwal.com

    Indian Hotels at Rs 300 plus, Titagarh Wagon at Rs 170, PVR is holding on and IT is down. What is your view?

    I think many stocks are doing well. Auto stocks are doing well, some capital goods stocks are doing well, there’s reasonable performance from some auto ancillary stocks too and we bought tyre stocks some time back. I think it is a market where stock picking is working but overall it is an extended market.

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    Initially we are completely defying all global trends but let us see how long that lasts because it is very tough. The kind of moves Indian markets are giving are in complete contrast to emerging markets as well as world markets. The probability of that historically would not be more than 5%. Whether this 5% carries on is what we need to see.

    What is the outlook on the realty sector because NCC management was talking about how there has been a slowdown in construction but things are certainly picking up. Now a lot of global uncertainties are out of the way?
    The NCC management over a period of time has become very conservative so they give conservative guidance but the way they have managed their balance sheet vis-à-vis other construction companies is something that I like plus the dividend payout.

    Look at the dividend yield of any infra company; it would be 1% or less than 1%. The dividend yield at Rs 2 is almost 3% of the stock price when they declared the dividend. The company is growing well and we still do not see fund managers wanting to buy infra stocks. While people have started buying capital goods stocks, infra stocks are still not much in demand. That is an opportunity for investors who are willing to buy and hold for a bit longer.

    What is your take regarding the entire diagnostics basket that went for a tizzy when Adani announced that they are looking to get into the diagnostic space? Today we saw some of these names bouncing back. Is there an underlying story there?
    There is no story. The competitive intensity is increasing substantially. Lupin has got into it. The Adani group has announced plans. Torrent Pharma has also announced entry into diagnostics. It seems to be a tough space. Pricing will remain under pressure and as it is, the Covid-led testing spike will get over. So, in the next year or year-and-a-half, there will be a base impact which will keep the growth slow.

    A combination of slow growth combined with margin compression will be the story for diagnostics. The one-off, one week kind of moves will keep on happening but directionally I do not see a story here.

    After the sugar rush of the Covid business was over, the diagnostic stocks are down 20-50% from the recent high but these are businesses which are still growing. There is 10-15% growth and consolidation is happening. Plus four-five players are still there?

    The number of players on the organised side are increasing and the second thing we need to understand is that at peak, Dr Lal went to 100 price earning ratio which was unsustainable. Today given the earning cuts which have happened, it trades at around 60 times. Whoever wants to give a 10-12% growth business, 60 PE, it is good for them and if they make money out of it, better but I do not see a story at five times PEG on a longer term.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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