Here are the 3 top stocks that Chakri Lokapriya bought on dips

Chakri Lokapriya , CIO & MD, TCG AMC, tells ET Now, that the house bought into L&T, Magma Fincorp and Dr Reddy’s after they fell.

Edited excerpts:

What did you make of the announcements that came in at the Reliance AGM which indicate that it is not just the data offerings that are likely to add more value to the potential business. They have an offering for every level of the value chain.

The Reliance AGM was quite informative. It indicates both a medium-term and a long-term vision. In their medium term, they are going to roll out the JioGigaFiber across all the cities because that is where they already have laid out a fibre and that will be tougher to do in the rural areas because it involves a lot of physical infrastructure and last mile connectivity. But they will get there eventually.

Longer term, they want to focus more on petrochemicals if the future indeed is moving towards electric vehicles. Their vision statements show they recognise that and are taking steps to move there. The third prong is the big investment in retail. In e-commerce, they will be battling with Amazon and Flipkart. Reliance is still one of the largest retailers in this country.


When do you think Reliance will go through this PE makeover? As of now, Reliance is still getting PE multiple of a commodity/telecom service provider. On a two-year basis, do you think more than earnings, Reliance has a very strong scope for PE expansion?

In the near term, there is enough of earnings levers because of the refining business. Now their telecom business is also beginning to generate positive EBITDA and the giga fibre bit of the business will keep the momentum up in the medium term.

As for PE rating, electric vehicles are sometime in the future and it is just a vision statement now. We are clearly more than a decade or more away from electric vehicles and therefore lesser demand for fuels in the traditional sense. From that perspective, both near-term and medium-term earnings prospects are good. Valuation is fine and the stock will do well over the medium term.

How are you viewing the consumption space? How do you look at the story of Titan and what are you doing with your consumption bets? Are you profit taking there or are you continuing to hold?

From the consumption perspective, the 13-16% MSP price hike for paddy and some of the major crops can be associated with an increase rural spend. The usual suspects M&M, Hero MotoCorp and Bajaj Auto -- all will benefit. Even M&M’s June volumes were pretty strong. Auto ancillaries which naturally supply to the autos will also benefit alongside this move uptick. The export markets are still strong. So, auto ancillaries as a consumption theme will benefit.

As for Titan, some of the weakness in the stock was more related to valuation rather than a slowdown in spending. I do not buy some of the theories out there like millennials are less interested in gold. Now the oldest millennial is only 18 years old who anyway does not have money to buy gold and has to dip into his or her parents pockets. The consumption theme for Titan remains intact. The valuation needs to take a breather before it starts running up again.

Are you still betting on sin stocks or do you think in the runup to the election you may not really see gambling a) become legal or b) more and more states may impose cess on liquor companies?

This is a space that we will continue to stay away from given that elections are coming up and everybody gets moral around this time we do not want the stocks to be a casuality of that. We will continue to stay away from sin stocks.

There appears to be hope that finally the banks will be able to recover at least partially from Vijay Mallya. How do you see PSU banks reacting to the entire recovery thing?

A couple of things. With NCLT, the average recovery rate is anywhere between 40 odd per cent and 50 odd per cent. 50% is written off, 50% is raised. This is lower in some cases. In this particular case, if you use similar yard sticks then that is the kind of an amount which he had offered in the past that he would pay and so to arrive at an agreement here would be far swifter. Third, it is good for banks in general because now there is this feeling and that other cases will also see a faster uptick in resolution.

In last one month, what have been your three biggest additions or stock purchases?

In the last three months, we bought some of the stocks that had fallen. L&T has not performed that well versus the other largecaps. Magma Fincorp is a company which did a fund raising. We were a part of the QIP. The stock trades at about 1.5 times book. For an NBFC which is very inexpensive compared to other banks, a new management with CV focus and doing all the right things. The third stock we added was Dr Reddy’s because we think now with all what has happened in the past now the earnings recovery cycle for the next two years will kick in.

Which is a decent consumer staple stock to buy? We know rural recovery is round the corner. How would you bet on this rural recovery via consumer staples or for that matter durables?

Among the durables, auto is one and as far as staples are concerned, it is the same old Maricos and Levers of the world, Emami to an extent and Dabur. These are companies which traditionally have benefitted and will continue to benefit even this time around . You will see earnings revision upward in these stocks. From that perspective, both the stocks are well positioned.

Given the stark underperformance from cement in the last six months, is it time to may dabble in any of the cement names or would you still stay away?

Cement volumes are fairly strong but the pricing is simply not coming back. There has been a marginal uptick in the last month or so. Some of the stocks like Heidelberg, UltraTech and ACC have corrected significantly. From that perspective, we would be buyers of cement.