Going forward, we will see more activity in infra space: Sanjay Sinha, Citrus Advisors

In a chat with ET Now, Sanjay Sinha, Founder, Citrus Advisors, says infra companies are now on the front foot as far as award of projects are concerned and also in terms of execution.

Edited excerpts:


Just going through your market strategies. You have talked about how infrastructure is seeing an improved order book positioning as well. Do you still think there is value in some of the infra stocks?

Yes, because if you look at the trajectory of the market over the last three years ever since the NDA government came to power, we have seen the broader market represented by the Nifty and Sensex go up by about 30% to 35%. But during the same period, the infrastructure stocks individually did not do so well till the last couple of months.

We now have the NDA government somewhere in the later part of their mid-term in the five years that they have. They are now on the front foot as far as award of projects are concerned and also in terms of execution.

Many of the things that they were trying to put into place over the last couple of years is now bearing fruit and a combination of all these things is now translating into better order book position for infrastructure companies.

Also, the cascading effect of the previous order book positions are now getting executed and the awards getting realised in terms of revenues by these companies which are also now getting into place. In my opinion this is not a plateau, this is just the beginning of a momentum. Going forward, we will see much more activity in this space and that is why I have a very positive view on this entire space.

The other space you are extremely bullish on is the auto sector. You foresee a long structural trend building up here but there is much divergence within the auto space. There are passenger vehicles which have been holding up very well and that is the case in the last three years but then again some of the tractor sales are beginning to pick up and so is the case with heavy vehicles. Which part of the auto story are you most bullish on?

The most attractive segment is of course the passenger car segment because there are a couple of things which are now converging to give an absolutely exponential growth trajectory to this segment of the autos.

Our overall per capita income has now crossed Rs 1 lakh. We have also seen that the aspiration to own a car is now going up tremendously. Recently I travelled to the interiors of Bihar. Bihar is not qualified to be a very developed state but if you see the road network that has been developed there, it is now far better than what it was say a five years back.

In the villages, now you see far more cars than you ever saw before. A combination of these three-four things, one the rising aspiration level of an average Indian, the extremely good condition and the availability of road network, bank finance becoming easily available are all converging to create a very large potential demand for passenger car segments.

There was a time when prosperity in rural areas got translated into a very large growth in the sale of motorcycles. We are now moving up the curve. This aspiration is now translating into the demand for cars and in my opinion this is something which is structural in nature and this will be something that will be lasting for a few years and not just for a few months so that of course looks like the most bullish segment.

As far as the other two segments are concerned, the MHCV and the tractor segment, the later will be very closely related to how the monsoon develops. With the government also having a policy to double the farm income over the next five years, much of that will happen with the mechanisation of agriculture and tractors do play a part not just in moving grains around but in villages people use have multiple uses for them. I expect that sale will grow but may not be as strong as what we have seen in the passenger cars.

Right now, on the Nifty the top five gainers are from the IT pack. Would you say this is technical in nature? A couple of bullish brokerage reports also come out. With HCL Tech and TCS in particular, there is also a buyback programme that is underway. Could that be one of the factors as well?

I quite agree with you on that because I feel that this short term move in the IT sector stocks is probably more of a technical bounce from the lows to which they had slipped. At this point of time, I am not seeing a structural recovery in the outlook of the IT sector. A lot of developments are happening globally in the IT sector which has more to do with the fact that IT as a space is moving from the traditional domain to the newer domains which are focussed more on issues such as artificial intelligence, application of digital technology, leveraging on the cloud computing and so on so forth.

Indian companies have shown a very strong growth of income and profits over the last almost 10-12 years. We do not see that sort of growth trajectory in the near future. At these rich valuations, they will be range bound, they will slip to some levels and bounce back technically. But I do not see them breaking out from a range.