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    3 stocks Hemang Jani will go for irrespective of fear in market

    Synopsis

    “The core focus now has to come back to earnings which are going to be out and what happens to the US market. Overall we should look at this market with a positive bias because each and every correction that we are seeing in the last one year or so, has been bought into. So, overall we remain positive and constructive on the market.”

    Hemang Jani-NEW1-1200ETMarkets.com
    "Number one is Axis Bank. Post last quarterly numbers, the overall conviction level has increased and the data points are suggesting a very strong growth visibility along with better margins. The second one will be L&T because this has been a laggard for almost five years and there is a revival here which typically stretches to a couple of years. The third would be something like Indian Hotels or Westlife," says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL

    We have seen a very reasonable comeback on Monday and Tuesday. Is it only short covering or is there more substance to the rally?
    The reason we had seen such a deep correction both at the index level and at the broader level was that there were increased cases of Covid in China and the fear of spreading that and I think the market probably was looking out for a trigger to correct itself.

    The reason for which it was corrected may not have such a big negative impact on India. So even if there is a scenario where there are some cases, given the overall experience that we had in the last two years, people are far more prepared to deal with it, including the most vulnerable sectors – be it airlines or travel, hospitality and so on and so forth.

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    The core focus now has to come back to earnings which are going to be out and what happens to the US market. Overall we should look at this market with a positive bias because each and every correction that we are seeing in the last one year or so, has been bought into. So, overall we remain positive and constructive on the market.

    What have you bought? Which are the three stocks which you are going to be buying where the fear does not matter?
    Number one is Axis Bank. Post last quarterly numbers, the overall conviction level has increased and the data points are suggesting a very strong growth visibility along with better margins for Axis and the valuation zone remains quite compelling. I think Axis Bank, irrespective of the market, remains a high conviction bet for us.

    Given that capex is a big theme and we have just started that cycle, L&T would be something that we would be looking at because this has been a laggard for almost five years and there is some revival that we are seeing and typically this will stretch to maybe a couple of years. L&T is something that we would definitely go with.

    The third maybe something like Indian Hotels or Westlife because both on the hospitality and the QSR, our view is that you know that is also going to remain quite a good sector to look at from a growth perspective. So these are the names where we have a very high conviction and would continue to look at buying them.

    This is that time of the year when we get into New Year resolutions and normally the resolutions are I will exercise more, I will eat less sugar, I will consume less coffee and you are telling our viewers to buy Westlife which is into burgers, french fries, coke and coffee?
    I think we should look at these two things separately and evaluate how it makes sense to you. I agree with you that now people are going vegan and have become far more health conscious. I do not prefer having burgers and french fries but from an investment perspective, we have to look at what sort of franchise it is, what sort of growth it offers.

    So from that perspective, it completely makes sense. Just to give you a data point, globally look at McDonald’s and Burger King and Subway. If you look at the market size and the size of the opportunity which is there versus that in India, the market cap is 1/15th with a much higher population and much higher runway of growth. These are extremely compelling levels if one has a three-year view. Whether it is the restaurant brands in India or Westlife, one should grab it with both hands.

    Defence as a sector has really stood out. There have been a lot of efforts by the government to boost indigenisation and pick up growth within the space as a whole. Given that we have seen quite a heady runup in a lot of these defence stocks, what does the next year have in store for the space?
    I would like to point out two things. One, the overall mine space is going to be there because of the geopolitical issues, because of what is really happening at the China end and of course the way the government is supporting domestic production.

    Secondly there are investors who are looking out for some stable companies with good revenue visibility on a consistent basis. While these stocks have run up, given the increased defence spend and the higher visibility of revenue, people would want to have a part of that pie and from that perspective, we like Bharat Electronics and HAL. We do not cover some of the ship builders and many other categories which are there as a part of the defence ecosystem. But I think it makes sense to have some allocation to the defence theme given the very strong revenue visibility and the increased focus.

    While we talk about IT and pharma as defensives, both these sectors have their own issues over pricing power, contraction of business, attrition. Which sector do you think has a greater promise of revival? When we started 2022, nobody thought banks would make a comeback. But they made a comeback. For 2023, which theme would you bet on because if you get the theme right, then whatever you buy, will make money. If you bought banks, it does not matter whether it is larger cap or small cap?
    There is definitely a phase of the market where the most neglected or the hated sectors bounced back and as you rightly pointed out, at one point, no one wanted to touch PSU banks . We saw how strongly they bounced back and everyone wanted to have a buy on that. It is the same with telecom. At one point, because of the intense competition and losses, people did not want to touch those stocks but we saw how strongly both Reliance and Bharti Airtel have managed to come back.

    At this point, since the market has run up so much, you do not have too many sectors where there is so much of under ownership or people do not want to have a pie of it.

    Two wheelers could be one space where we are not seeing any meaningful participation and the data points are also not looking that good. Given very high comfort on the valuations and the fact that the franchises are so good, be it Hero, Bajaj or TVS. People are not talking about disruptions because of electrical vehicles. In fact, it is quite surprising that the big daddy of EV, Tesla, is down 70% from the top. So two-wheelers is one category or sector, which can be a dark horse, though at this point the visibility is not that strong.

    Do you think that the best of the EV rally is behind us?
    Yes, the Tesla stock is down sharply 70% from the high but the EV theme or the story that continues to remain strong. I do not think we are at a stage where one can say that a large part of the penetration has already happened and there is not much in terms of runway for growth.

    Tesla is correcting for some other reasons, maybe because the market actually valued it far too much compared to what it can deliver in terms of growth and that euphoric phase is behind us. But EV as a theme continues to remain strong as more and more companies are investing and trying to build an ecosystem around that.

    From that perspective, be it Tata Motors or some of the auto ancillary companies, Bharat Forge or Exide and a whole host of companies which are trying to build that infrastructure or ecosystem, I do not think we are at the fag end of it. We continue to have a positive view on some of these companies particularly the auto ancillary companies like Bharat Forge where apart from the EV pie you have a defence and the automotive businesses doing reasonably okay.



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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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