Nifty likely to remain on a steady wicket: Deven Choksey

"I think the steel would be definitely in high demand going forward as well. However, I think the influence of the China steel prices definitely keeps everything under control," says Deven Choksey, MD, KRChoksey Holdings Pvt. Ltd.

Why are steel stocks doing reasonably well? I mean, the demand for steel is not that strong. We know that China is no longer guzzling. We know that they have a surplus capacity. We know that Russian steel is back in the market. Yet a stock like Tata Steel actually has done rather well for itself.
My understanding is that India is an economy which is basically spending heavily on building the infrastructure and that is a roadmap that the government has set for 10 years. So obvious it is that I think in current scenario, the metal consumption would remain higher be it construction activity, be it infrastructure activity, be it consumer products activity, everywhere I think the metal requirement would be on a higher side.

I think the steel would be definitely in high demand going forward as well. However, I think the influence of the China steel prices definitely keeps everything under control. And in between in the last year, we also saw some very ugly surprises on the fuel prices, energy prices, as a result of which the margins and everything also had come under pressure. But I would think the demand scenario would remain intact. I would see if the crude oil prices remain stable, then the margin scenario also should remain intact and India's specific demand scenario would continue to grow well, as my reading says.

So maybe I am not a very big fan of buying commodities because commodity assumes a bigger amount of cycles. But I feel that I think when given opportunity corrected prices I think if the stocks are available in the course of its journey, probably one could buy them at lows.


Another stock which I think is worth revisiting is ICICI Prudential. Now that ICICI bank has got permission to increase their stake in ICICI Prudential. I mean, this is a couple of years ago, they had to sell their stake in ICICI Lombard because they needed capital to run their banking business. Now they have got permission to increase their stake back in ICICI Lombard, albeit at a higher price but that is something which would help the stock.
I think on the fundamental side of the company if I look at it in each of the product vertical in which they are operating, probably I find their strategy quite unique in the non-life insurance space. And that is where I believe that this company is having a relatively sharper edge compared to others in the non-life, particularly.
You look at I think other products including the products which are facing consumers including the motor vehicle loans. I think the strategy that the company has adopted is suggesting that they are physically hitting the sustainable growth path.

And that is where I believe that this company remains relatively strong so I find fundamental strength in this company quite high.

Maybe I think this particular transaction of increasing the stake could possibly result into the stock price remaining firm to higher that would be a given situation. But I see the sustainability of the business is quite high in this company.


It is trading at 18 times, 18 times trailing with a 3% dividend yield. Is the margin of safety now strong in buying into a stock like Infosys 12% down this year. The guidance was not great. But is the margin of safety strong if you buy Infosys at about 20 times?
Absolutely, I think, no doubt in my mind. I think in fact, when the stock price hit low at that time also, I think it is a contrarian buy in this particular company largely because of the fact that if one is talking about significant amount of proliferation of the cloud computing, machine learning and artificial intelligence kind of programs, I would think that the companies like Infosys, TCS would definitely get significantly large amount of orders from the global market.

Maybe in a given situation when the global economy is hitting rough patch in some of some recessionary conditions over there, they may have slightly muted progress on that front. But otherwise, I think they would continue to do well. Given that kind of a strong positioning that these companies are enjoying, I would think that any corrective downside in the stock price is a definitely welcome.

And I think that is what we got in the month of February, March this year. I would think that even at current price, as you rightly said, I think the valuation wise the stock is compelling. Downside risk is protected, margin of safety remains on the higher side. And at the same time, whatever the direction of guidance that they have given, I believe that by the end of the year, I think they would be probably surprising and give relatively better guidance going forward. So I would rather like to buy at a price when it is available which is I think quite attractive at current price.

Some of those paint companies as well in the spotlight today, JP Morgan coming out with their latest report. It is a neutral rating on Asian Paints with a target price at 3128. And some of the other paint companies as well in the spotlight. Yesterday we were interacting with the management of Indigo Paints and they were pretty categorical that they are not worried about competition intensifying within the space and eating up their market share. What is your take on this scenario?
Growth in the industry continues. Consumer is spending money. As we talked about earlier about the housing business growing, in my viewpoint I think with the infrastructure space continuing to grow, with the consumer continuing to spend money, the demand scenario is never in question.

In fact, I think other competitors when they entered into the market they are unlikely to cause any kind of a margin threat to the existing companies.

Companies like Asian Paints, which is well integrated with the input cost, which is I think predominant factor, they are well integrated on this particular front as well. So obviously on one side, they have got the ability to source material at a lower price and keep their margin protected. On the other side, I think higher amount of distribution which they have created, that is also giving them unique proposition.

Any new company coming into this particular space, they will have to definitely build the situation and create the space for themselves in the distribution.

And at the same time, I think they have to protect the margin, which is quite vulnerable due to the volatility of the crude oil prices.

In my viewpoint, I think the likes of Asian Paints would continue to do well in the paint business also. And also I think the other line of activity which they have started, they are showing reasonably good amount of growth as far as I think the home decor business in which they are and they have already entered into.
So from that perspective, I would remain comfortable with the likes of Asian Paints, which shows relatively steady amount of growth trajectory here after as well.

Do you see Nifty touching 20,000 before the year end?
Well, I think on the fundamental strength, yes, definitely I think it is a good possibility because in 2023-2024, we are likely to see the earnings growth continuing in the vicinity of around 15% and above. So certainly I think that particular situation also suggests that going forward, the discounting would probably move well and I think the Nifty could possibly move in the direction of 20,000 plus levels.

But more importantly, I feel that the way in which I think we are seeing the sustainability of the earnings and the growth in the earnings in one after another sector, that convinces me more that I think it is a journey which is likely to continue. It is not going to be in previous years what we have seen is that I think in one particular point of time, the Nifty would peak out and thereafter it will go on the sideways for a longer period of time.

The conviction says that the Nifty is likely to remain on a steady wicket on a sustainable basis. I would be more of the view that 2023-2024, of course, but 2024-2025 also remains reasonably promising given the kind of growth program that we are experiencing from different industries, companies in specific.