Did you use the market uptick to correct your regrets? This is what Kunj Bansal did

“One good long term bet is IDFC First Bank. As per the management guidance and the fact that the issues of NPAs and big corporate losses are behind it, the stock offers quite a significant gap compared to its peers in terms of price to book valuation and that makes it more attractive,” says Kunj Bansal, Founder, Investment-illiteracy.com.

The world is falling apart and we are firm like a rock, but this kind of an outperformance is not going to last?
Should not last also unless incremental money comes into the market. In fact, we have for about a month and a half, started seeing global money coming in after 8-9 months of net outflow. So unless the incremental money finds the valuation and prices comfortable, it would not come or there may be lesser flow..

If we want more money, we should not significantly outperform the global markets, we should not keep moving higher at a very fast pace. Given the way the economy has been growing over a longer period of time, we are bound to continue to go up but if it keeps moving up at such a fast pace, the valuation comfort does not remain.

I am not too worried or too concerned about the outperformance to continue. As I said, I would not want that also. I would want macroeconomic numbers to improve. The GDP growth number that came in yesterday was slightly lower than the expectation but it is okay. Oil prices falling 7% is a boon for India and we had seen it falling earlier but then it started rising again.

Now along with oil prices, metals again fell and that is another boon for India. Now let us see how the festival demand shapes up. I will be more comfortable if the market corrects a little bit more because at its peak, there was a 15% rise in 1.5 months, which was too sharp a move.

What is your view on Zee considering that they have entered into the sports segment? Considering you are a cricket lover, would you be tempted to buy more of the Zee bouquet? How do you analyse this news?
One, a lot of things that you love or like does not necessarily make money for you or convert into shareholding return for you. So, I will keep the two things separate. I do love cricket but will I buy Zee for that reason? No

The Zee stock, more than the financials, keeps getting governed by the news flows around it and some of those news flows are true, some of those do not turn out to be true over a period of time. It is not there in my portfolio or in my recommended list of stocks for medium term investors. I don’t have comfort in buying or holding the stock. But it is a great opportunity for traders who understand their risk and who keep following the news flows.

It is a good stock for trading and they should continue and it keeps giving trading opportunities.

In this market uptick and I am using the word uptick because we are up 15% from the June low, where have you used the strength to correct your regrets?
Let me talk about some examples and these are not necessarily investment recommendations. In the auto and auto ancillary space, one of the stocks in my portfolio is Sona BLW. It has not done anything in the last one-and-a-half months of its bull run.

It has underperformed and probably has gone down also. I do not exactly remember the number. At the same time, I added IDFC First Bank which came out with very good numbers after the June quarter, not necessarily added but recommended it to my known people around me. That stock has done very well. Those are the kind of actions that have been there in the market.

Divi's Labs is another stock which I hold in the portfolio. It has not done well but I continue to hold it. I have a reasonably medium to long term view on that stock and it has done well over a longer period. Once all these corona related ups and downs go away, the stock will again be back to outperformance. But for now, it has underperformed in the rising market.

Yet another example I hold in my portfolio is a stock called Muthoot Finance. It is a gold loan company and underperformed sharply. It has not gone anywhere in the last one-and-a-half month of market rise, but since I am not uncomfortable with the medium term financials of the company, I have not exited. I wouldn’t say I regretted or corrected the portfolio, but these are some of the examples of the stock moves that have been happening, the outperformers as well as the underperformers.

It is the AGM season. The Zomato AGM has been talked about a lot. How are you looking at a stock like that because we have started to see fund managers add to it. The recent correction was also seen as an opportunity.
There are a few things. With all these newer and newer product or services that such companies, specifically in this case, Zomato starts or are starting, my view is if they have worked out some financials, in the initial years, it will be more loss-making than the overall business which is still continues to remain loss-making and that is one part which is an additional burn on capital.

It is an additional load on the financials. Any company which is in business, has to keep growing and has to do these kinds of investments. Obviously the impact on the share price performance may not be seen very positively if the financials are going through an investment phase in the intermittent period and which is where we might see underperformance.

The outperformance in all these kinds of listings are going to be the function of the highly irrational to exuberant market which is what we saw during the IPOs of the loss-making platform companies. Subsequently we saw a sharp underperformance from almost all of them, barring one or two.

The stock price has corrected and as a result, if one uses whatever valuation parameters one was using earlier, there is lower valuation than what it was earlier. But given the number of opportunities available from profit-making, good growth-oriented companies, some of them have moved up sharply so again one has to take a comfort on the valuation, some have still not moved up. So those opportunities are there.

In the market, some people will always be buyers and some will always be sellers. I do not think that the stock is going to be an outperformer in the near future. The short-term trading blips can continue to come up on both sides, but that the financials are not expected to pan out, I do not think it is going to be a consistent outperformer over next six months, one year, two years.

Give us one long-term stock idea.
I would go with IDFC First Bank which declared its June quarter numbers a while ago. After seven-eight quarters, finally the bank has turned around, improving numbers and we are likely to see another three to four quarters in its return on assets doubling and that is as per the management’s guidance.

I would not use the word commitment but as per the management guidance also and the issues of NPAs and a big corporate losses and all those are behind. It offers quite a significant gap compared to its peers in terms of price to book valuation and that makes it more attractive.

The fact that yes it has moved up almost 15%-20% in the last one month or so after the result has to be kept in mind and when the market offers some correction, that is a good medium term investment.