Expect sluggish undertones for the next fortnight: Sudip Bandyopadhyay, Inditrade


  • I will refrain from buying or recommending a buy in auto.
  • We like State Bank of India and Bank of Baroda among PSBs.
  • Among private banks, Axis Bank and Federal Bank look good.
The market has corrected significantly post the budget and after that correction, there is very little to cheer and move the market up from here, says Sudip Bandyopadhyay, Chairman, Inditrade Capital. Excerpts from interview with ETNOW.

Do you expect things to weaken from here or remain in some kind of a narrow sluggish zone?
We are very clearly in a sluggish zone. The market has corrected significantly post the budget and after that correction, there is very little to cheer and move the market up from here. The only things which will be able to push the market up would the corporate results. On the other hand, we are not expecting any great fireworks from the companies as well. It is a matter of sideways movement with sluggish undertones for the market for the next fortnight. We will probably remain in a range. Nobody is expecting good results from most of the sectors. Some global news flow can change the contours of the market but that is not visible yet at this stage.

Even though the IndiGo CEO is saying that the daily functioning is same as ever, the stock has been greatly affected. What do you make of this entire mess and more importantly, what does it really mean for investors in the stock?
It is a very unfortunate thing to happen. This is kind of a star airline. They have built the airline from ground up, performed incredibly well and they are examples of how to run an airline. It is unfortunate that this is happening at this particular point in time when the opportunities of scaling up the business for them are significant with Jet getting out of business. That’s all I would say as far as this episode is concerned. But it is definitely unfortunate for the shareholders. Yes, the CEO has come out and said that it is not going to affect the functioning of the airline, and to at an extent, that is correct but definitely it will have an impact and the impact will be far-reaching as far as shareholders are concerned and as far as IndiGo is concerned.

We will have to wait and watch. It is too early to pass a judgement either way and the nervousness displayed by the shareholders is to an extent justified. Aviation is a very delicate and very challenging business. In this business, if you destabilise either internally or externally, there are chances of things getting derailed. Aviation as a space we like at this stage but under these circumstances, the share we will like an investor to buy will be SpiceJet not IndiGo.

How you are looking at the overall media space? We have forgotten what is going on with Zee Entertainment but that does not mean that investors are not waiting for some sort of deal to actually culminate. Today Dish TV is under a bit of pressure but when do you think we will hear some sort of an announcement on the stake sale front?
The Street will like to see a strategic investor with long-term interest in media as well as Indian markets coming in. That will be the ideal scenario. If the price offered by them for the shareholding is at a significant premium to the current market price, that will be the icing on the cake. The way I look at it, the share price will definitely move up and we have been bullish on Zee for quite some time. The turmoil which we have been seeing has to do with the promoters borrowing and their involvement in other businesses.

Fundamentally, Zee is a strong business. They have been performing very well. They have probably become the leader in the non-sports general entertainment segment (GEC) and that is quite commendable. Overall the ad revenue growth has been reasonable under these circumstances. The only point of concern has been they are spending on the OTT platform.

One does not know how things will pan out there and how much more money needs to be put in to make it a viable competitor for the biggies -- Netflix, Amazon and Hotstar. That is the grey area. But the coming of a strategic investor will definitely be a significant boost for the counter. In any case, even if a financial investor comes, that the counter will see an upward movement in the near term.

You are not terribly inspired by earnings this time. Are there any specific names that you would be closely eyeing? What would you look to buy at lower levels?
There are a few counters and few specific stocks in the financial space which we have been tracking and which we like. In the entire housing finance space, we like Can Fin Homes that has got a pretty retail book and a solid book at that. Also there is corporate action in terms of Can Bank exiting the stock and the strategic investor or a financial investor coming in that is a likely event. All this makes this stock an interesting buy at current stage.

As far as the PSU banking space is concerned, we like State Bank of India and Bank of Baroda. The recapitalisation of funds which the banks will receive will definitely give a boost to their growth. We estimate that about 30% to 40% of the amount will be used for growth capital and that can change the tone of the business as far as these better capitalised and better managed banks.

On the private sector banking and NBFC space, we like Bajaj Finance. There has been correction and there has been some concern about the earnings for the quarter on the back of slowdown in demand but fundamentally, if somebody is looking at long term, the quality of earnings is fabulous. They can buy Bajaj Finance at current levels or taking the opportunity of some correction which may happen post the announcement of results. In private banking space, Axis Bank and Federal Bank look good and those can be considered at current levels.

What would you want to hear from Infosys in terms of the management commentary? Also what is your assessment of TCS? When it comes to a heavyweight like this, with valuations looking good, a steady management, earnings growth on track for the long haul -- does TCS remain one of the favourites within the space?
I completely agree with the assessment on TCS. There is fundamentally nothing wrong in TCS’s earnings. Everybody expected BFSI to slow down and it has slowed down, may be slightly more than what the market expected. But look at the digital earnings. About one-third of the total business is now digital and they have demonstrated about 40% plus growth in digital and that is the new age business. It is quite commendable the way TCS has pivoted their business in these directions. It is a good story. At such a large scale, you will have some disappointments if you calculate on percentage terms in quarter on quarter basis. But if you want a fundamentally strong sound safe technology bet, TCS is definitely going to remain in our recommended list.

As far as Infosys is concerned, we will have to carefully watch the results and how they have been pivoting their business -- their BFSI and US earnings -- and also the margin they come up with. We will have to watch the position of the bench because we believe that by and large the bench is exhausted and we will have to see how they have utilised the manpower as far as Infosys is concerned.

Some amount of buying is coming in Sun Pharma in the last couple of sessions and also in some of the other pharma names as well. Is that a trend that you are seeing any merit in?
We have been turning bullish on some of the select pharma names for the last three-four months. Sun probably has seen the worst but I will still not go and buy Sun, I will wait. If I have to buy a largecap pharma, probably I will go to Dr Reddy’s. The sign there is pretty promising and their foray into China, the way the business is developing in China is very promising. Apart from that, they have done the right things in terms of their pricing strategy in the US as well as the regulatory remedial actions.

Overall we believe a target of around Rs 3,100 is achievable within a period of 6 to 12 months as far as Dr Reddy’s is concerned. In the midcap and the other pharma universe, we like Jubilant Pharma and we believe that the specialty pharma basket which they are developing is quite promising as well as the valuation post the US FDA warning. We also believe that the warning probably will not get escalated any further and there is a merit in buying Jubilant Pharma at current levels.

How are you looking at the dynamics for the auto sector because one cannot deny that for nearly a year now, the volume growth has been impacted and sales have been in the slow lane. Maruti is now trading at 5800, Tata Motors Rs 150, Bajaj Auto as well has been under pressure of late, a little bit better in comparison to the others. What is the view on autos? Do you prefer two-wheelers or four-wheelers or any recommendations?
You can call this a perfect storm. There is a huge concern on the flowing down of demand. There is also no visibility as to when the demand pickup will happen once again. Juxtapose this against the regulatory and the government position, the government probably is pushing very hard on EVs while the industry is battling this massive slowdown and also in some cases conversion into a better kind of a vehicles there. The government is pushing for a launch of EVs at a very short notice. So, there is a perfect storm as far as automobile sector is concerned. It is better to stay away for sometime rather than plunge into this space.

I have been maintaining my reasonably bullish view on Maruti as well as Bajaj Auto but at this stage, looking at the determination of the government to move to EVs as early as possible and also looking at continuing slowdown in demand, I am a bit sceptical and I will refrain from buying or recommending a buy in auto.




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