We are in a bear market rally; they do not usually last: Deepak Shenoy

"I would rather focus on an ICICI and a Kotak right now rather than go down the HDFC route which is what people have done for the last 20 years. I think the larger banks will do better in the financial sector and the financial sector as a whole will outperform in the next year," says Deepak Shenoy, Founder, Capital Mind.

Your views on M&M stock which is perched at a record high?
It is doing really well and as a disclosure, we have some interest in it but the momentum in the stock has been very strong. It is a very interesting company and has always been. It is not like it is a new thing. Fundamentally, it has always been attractive. It contains not just the auto business but Tech Mahindra, Mahindra Holidays, Mahindra Life and a bunch of other companies within the auto ancillary space as well.

So if they were able to separate the ownership part of this from the auto business, you would get a greater value added up but as for the result itself, I have not seen enough detail in it so far. It has leapfrogged some of the other players, especially in their EV content but also overall including the tractors. It is an interesting play and looks strong technically. I have always liked it fundamentally but just hope this is not a value trap which looks good but does not follow up.

How convinced are you about this market rebound? We have made it back to 16,600 very swiftly?
The problem right now is to figure out whether this is just a bear market rally. Usually in bear market rallies like this, we tend to see three continuous gap-up days. Ever since the expiry, we have had some strong days leading into the month end. I am not sure whether I should say that the worst is over and the best is ahead of us. We are sitting ahead of a potential Russian default in the international bond market. It already could not pay on Friday and going forward, they get a month to cure the default and there are two more bonds coming up at the end of June.

They cannot pay because the US has restricted them from paying. It is not that they do not have the money; it is just that they cannot use the money. In the face of that, it's a little premature to celebrate. We have got to wait it out and wait for some good news and if the market starts to go up on good news, then we might be coming to the end of it. It is a little too early to call it the end of the rally. I fear it is a bear market rally, they do not usually last.

What is your take regarding the new CEO announcement at Jubilant Foodworks? Mr Sameer Khetarpal now coming in as the CEO and MD and we are seeing a ruboff impact on Zomato as well. Is it the continuation of the upmove that we saw last week? What is your take on these two counters now?
So we do not have an interest here but I think Mr Khetarpal comes from a very pedigreed background having done some of this in Amazon himself. It might be interesting for the stock because there was a void as the CEO position was vacant.

QSRs should do fairly well but Jubilant continues to be a very richly valued stock. So while the move up is encouraging, I would wait to see how plans emerge and things move on. Zomato should be one or the other. I should have Jubilant Food go up and Zomato go down, if we were looking fundamentally but right now, it is just a relief rally that is across the board.

So, everybody is getting some sympathy and Zomato has been beaten up a bit. They are probably covering that up. The results were interesting but there’s nothing to signify such a big rally. In my opinion, we still have some time. Give it a couple of years and both these things will get sorted out.

What is the take about the financial sector as a whole? Do you expect the rally in HDFC twins, Kotak Mahindra Bank to continue?
I think longer term they will do well. At least the top sector banks are standing out in comparison with other financials especially NBFCs and small finance banks. We should be seeing a change in fortunes for some of the large banks, simply because they have some pricing power now. Interest rates going up and a little bit of inflation actually helps them and also the fact that there is potential funding increase of cost for a lot of their competition, heightened NBFC regulation and so on.

We like ICICI and Kotak and are interested in those and not in the HDFC because the merger between HDFC and HDFC Bank will take a year, a year-and-a-half for the overhang to clear. I would rather focus on an ICICI and a Kotak right now rather than go down the HDFC route which is what people have done for the last 20 years. I think the larger banks will do better in the financial sector and the financial sector as a whole will outperform in the next year.