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    How to keep up with latest policy changes and make money: Gurmeet Chadha

    Synopsis

    “India is moving from simple labour arbitrage related manufacturing jobs to original design manufacturing and original equipment manufacturing which in turn will lead to more value addition. So we are pretty constructive on Dixon and it remains our portfolio stock.”

    Gurmeet ChadhaAgencies
    “In life insurance, we continue to like HDFC and SBI Life. What we need to differentiate in insurers is that we should not get too carried away by the growth in sum assured or new business premium because a lot of it is risk underwriting and one might get short term growth,” says Gurmeet Chadha, Managing Partner & CIO, Complete Circle Consultants

    Any views on the recent cabinet briefing with respect to the change in the rail land lease policy?
    It should be positive. I would like to view it in more detail but the bigger trigger for Concor remains the impending divestment. The change of policy will probably lead to rerating. The operating performance has anyway been good and the EXIM and non EXIM revenue mix has been changing but one needs to probably look at this in more detail. We are quite constructive on the logistic space.

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    How are you betting on it? Is it the manufacturing names like Dixon, Amber, Redington with the overall manufacturing uptick that we are seeing back home?
    Selectively, Dixon is one of our portfolio stocks and obviously it has seen some correction from the higher multiples it used to command. There was negative news on Xiaomi and a few others but they are probably gaining market share across the segments they are operating in – be it mobiles, consumer electronics or LED panels. They are one of the big beneficiaries of the PLI scheme.

    Also, I think, they have a very focussed asset allocation and I think India is moving from simple labour arbitrage related manufacturing jobs to original design manufacturing and original equipment manufacturing which in turn will lead to more value addition. So we are pretty constructive on it and it remains our portfolio stock.

    Speaking of brokerage notes there is also views coming in on ICICI Lombard where Credit Suisse has maintained an outperform rating, saying that it is going to be a huge beneficiary with its large network as the IRDAI allows insurers to launch products with prior approvals. Any other stocks within the space that catches your eye?
    The performance for both general and life insurance have been a bit subdued and there have been multiple reasons for it, they have been rising claims, there have been regulatory changes. In the case of ICICI Lombard, there were a lot of regulatory changes with respect to the third party pool because motor insurance constitutes a significant part of it but we remain constructive on Lombard.

    In life insurance, we continue to like HDFC and SBI Life. What we need to differentiate in insurers is that we should not get too carried away by the growth in sum assured or new business premium because a lot of it is risk underwriting and one might get short term growth.

    It is like lending; you can get a lot of growth at the cost of your underwriting standards and you have to be careful in looking at parameters like cost to income ratio, especially persistency ratio for the number of policies which are crossing 13 months and 55 months. HDFC stands out there with a very diversified product mix, a great mix of par and non-par and protection and their dependence on bancassurance as a channel seems to be coming off with a lot of digital initiatives.

    The last two three years have been very tough for all life insurers, mainly HDFC. Probably from here on, it should consolidate. It is a good portfolio stock for the long term.

    How are you looking at the entire retail space? We have got a very positive commentary with respect to the channel checks coming in from Shopper’s Stop. What is your top bet in the sector?
    It is part of the broader reopening trade we look at which includes textiles. We are looking at it very closely. It is a big beneficiary of PLI and China plus one policy of import substitution is also playing out.

    Among the stocks which we track in this space is Gokuldas Exports. They are into making specialised garments for US brands like H&M etc. We track Aditya Birla Fashion and Retail. It is a great portfolio and things now improving as Covid restrictions are eased.

    They have a clear goal for the next two, three years in terms of revenue and return ratios and that is something we track. Among pure retailers, we are looking at some niche ideas in this space which are not yet part of the portfolio, but in our overall universe including Vedant Fashions and a few more names.



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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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