RIL disappoints; this is likely to be a consolidation week: Neeraj Dewan

“ICICI Bank results stood out followed by Infosys to some extent and Kotak also. Reliance was a disappointment because the oil to chemical did not do as well as people had expected to do. The results were decent but then expectations were high looking at the very high GRM margins which were there in the quarter,” says Neeraj Dewan, Director, Quantum Securities.

Which of the results stood out for you – Reliance, ICICI, Kotak or Infosys?
The top pick is definitely ICICI Bank as far as the results are concerned. They came out with a stellar set of results and on all parameters they did very well, even loan growth was quite good and even the NIMs have shown good improvement.

ICICI Bank results stood out followed by Infosys to some extent and Kotak also. Reliance was a disappointment because the oil to chemical did not do as well as people had expected to do. The results were decent but then expectations were high looking at the very high GRM margins which were there in the quarter.


In the case of Infosys, the top line growth was very good. The top line growth they have indicated for the coming year is also very good. The margin is worrying however and should gradually inch up. Infosys can be kept under the radar as a buy on dips kind of a candidate as far as the results are concerned. Kotak again had a decent set of results though there were disappointments on the profit front. But, otherwise there was no other thing that was really bad in results otherwise results were pretty.

What is your take on these platform companies including Zomato?
Policybazaar and Zomato on pure earnings were not looking good. Zomato after the Blinkit acquisition, which did not go very well with the Street, saw a correction and there also and some bit of bad news is coming through.

I do not think it will be taken very lightly on the stock because anyway they are expensive and they are still losing money. I do not really see any point in chasing these companies even on dips right now.

Zomato will be attractive at a certain price but that price is yet to come. As for Policybazaar, I do not really see any case there. Let’s see how much more they have to go as far as losses are concerned. It can be an avoid while Zomato maybe somewhere down the line, when it becomes more attractive on a pure top line, on pure revenues basis, can be looked at, but not right now.

One has seen a sectoral shift. There are beaten down IT names after TCS’s numbers and the thrashing that they got that week. Those are finally making a very strong rebound. Today we are going to be reacting to Infy’s numbers and smaller pockets like capital goods are also playing catch up. Some banks like IndusInd and some of the midcap banking names are taking the centrestage. Have you been a buyer in the last fortnight?
Basically, the consumers, auto ancillaries and even the banks and the large NBFCs have seen good improvement in asset quality as well as good credit growth. So large NBFCs, banks, commodity consumers and IT stocks. Infosys when it came to Rs 1,400-1,420 was a good opportunity rather than 20 times one year forward. Those were the opportunities which were there in the last two weeks before or 10 days back.

One important fact that came in yesterday from Infosys was about attrition. Do you think attrition itself will come down and that is something the Street has not noticed so far?
Attrition is bothering them and so it is too early to say that it will come down because attrition is part of the business which we have already seen. Of course attrition has been higher in the last couple of quarters that we have seen.

Attrition will keep on happening in IT companies. But the margin pressure which accompanies attrition because of higher salaries will slowly get consumed into this and the margin will slowly pick up. So one should focus on top line growth and the deal wins. If the US is able to avoid recession, that also augurs well for the IT space. Margins will slowly recover.

What is your take on Reliance with respect to the weakness in the O2C business?
The main attraction for these results was the O2C business where the GRM margins were very strong and so refining margins should have been very strong. That is why the results’ expectations were pretty high and there we saw disappointment.

There is nothing to crib about in Jio business and the retail business because the numbers were pretty decent. ARPUs are strong, the top line was strong but the O2C business is where the GRM margins have crashed. For this quarter, the impact of the windfall gain tax will also come in this quarter and so the numbers, which were expected to be very good last quarter, this quarter will be a dampener for them.

The main thing now is to look forward for Reliance AGM where we will see that if they have any plans for monetisation or listing of the retail or the Jio business and what are the plans for the new energy business. That is what the Street will look forward to. As far as the numbers were concerned, definitely there was disappointment and this quarter O2C business can again be challenged.

Would you wait for things to settle because there are a lot of technical factors in the near term?
The results season is going on and we need to have a close look at what is happening plus we have seen a decent rally from 15,100 odd levels in the market. We have this FOMC meeting outcome also and I think one should be a little more cautious this week because in the last couple of weeks with everyone sitting on gains, people were bullish on the market at the 15,500 level. This can be a consolidation week where one needs to watch what is happening and then take the next step.