HDFC Bank, ICICI Bank or Axis -- which ones to pick: Bandyopadhyay offers cues

Sudip Bandyopadhyay, Group Chairman, Inditrade Capital, lists out the concerns that are plaguing the market and examines how long they may remain a worry. Edited excerpts from his interview with ET NOW.

ET Now: The market breadth this week was extremely weak. We witnessed deep cuts across various sectors and individual stocks. How are you assessing and reading into the valuations at this point of time? Do you think it is a good idea to pick up stocks?

Sudip Bandyopadhyay: There is significant nervousness in the market. The global trend does not look favourable at all with US-China trade war creating significant concern among global investors. They have been continuously selling in emerging markets including India, which does not augur well for us. We are about 10 days away from the election results and there is some amount of nervousness. The volatility is also creeping in.


Corporate results are another area of worry for the markets. I do not think corporate results have been anything other than dull and a little disappointing. Most corporates have performed worse than expected. There is a definite slowdown in demand of consumer goods, and that is weighing heavily on the mind of investors.

A bit of a somber mood has set in, as far as markets are concerned and yes, the investors are selling. However, there are interesting opportunities emerging in pockets for a long-term investor to go bottom fishing but one needs to be careful. This is like trying to pick up a falling knife -- it would be better to rather wait and watch. Selective buying is possible, but caution is the word for at least next 7-10 days.

ET Now: Are these concerns real?

Sudip Bandyopadhyay: If you look at the market and how it has behaved over the last five to seven trading sessions, it is the largecaps that have been sold. It is very clear that its the FIIs who are selling as they had been the buyers. Whether it is the HDFC twins, the Bajaj twins or Reliance Industries, these are the stocks which have taken a significant beating and it is predominantly on the back of FII selling and probably has nothing to do with the long term fundamentals of these stocks. Nothing drastic has happened in RIL or HDFC or HDFC Bank or even Bajaj or one of the Bajaj twins over the last 7-10 days to deserve this kind of selling. It has got to do with the FIIs' risk-off mode and the overall global scenario.

As far as Reliance is concerned, some of the brokerages have expressed concerns over the traditional businesses, namely the energy and pet-chem but do remember they have a leverage issue. The balance sheet is significantly leveraged and concerns over the leverage have been expressed before last week also. But having said that, the way I look at Reliance, I think there is significant potential for the company as far as the new businesses are concerned. Both Jio and Retail are growing at a phenomenal speed. Deleveraging is easily possible and the Saudi Aramco deal can take care of the leverage issue. The deal is in the works and that is what we hear from sources. Also, the tower assets and the infrastructure assets of the telecom business are supposed to be put in a REIT soon. The concerns on overall petroleum business are temporary. As a long term investor, this is probably the right time to buy Reliance and make use of these corrections.

ET Now: How are you reading into the private banking space right now? Among the heavyweights -- HDFC Bank, ICICI Bank, Axis Bank -- what are your preferred picks?

Sudip Bandyopadhyay: We have been bullish on corporate facing banks for some time and we maintain our view. There is absolutely nothing wrong with HDFC Bank or Kotak Bank or even IndusInd Bank but the valuation at which they are quoting there does not offer much scope for significant appreciation from current levels. Whereas, for corporate facing banks including the PSU banks we believe things will improve from here on. There is an opportunity of valuation moving upwards over the next 6 to 12 months. One can buy an SBI, or an Axis Bank, or an ICICI Bank but if you are an aggressive investor then you can also look at some of the midcap private banks. Federal Bank is a prime pick in that space. Their performance this quarter was fantastic and probably they will continue to maintain this trend. There is a significant opportunity as far as Federal Bank is concerned.

ET Now: What are your ideas for next week?

Sudip Bandyopadhyay: As far as next week is concerned, if you are willing to give a little time, then one can look at chemicals and cement. These two sectors are picking up and we have been bullish on them for quite some time. The current market correction is a great opportunity to buy good cement stocks. Fundamentally, the cement companies have got back the pricing power which was missing, volume growth was visible over the last couple of quarters but finally, we are seeing a price increase and volume growth and that is a good trend. North and central India are ripe for sustained margin improvement in cement companies operating in that space and one can look at companies like Birla Cement, Heidelberg Cement, JK Lakshmi Cement, JK Cement. These companies look extremely good from a one-year view.

On the chemical side, the specialty chemical companies like Aarti Industries or even NOCIL look good. They are all special chemical manufacturing facilities. With China and US fiasco playing out, the international demand for chemicals manufactured in India will likely go up and both these companies are very well positioned. Their Valuation looks attractive and they can be acquired with a one-year time horizon.