We are bullish on infra, agri, FMCG, auto: Nitasha Shankar, Yes Securities

In a chat with ET Now, Nitasha Shankar, HoR, Yes Securities, says bad times are expected to continue for the metals and the sector is avoidable


ET Now: What is it that you are making of this big cool-off in commodities? All of a sudden, Goldman Sach says that do not buy into this technical rebound that one has seen. The fundamentals are still not convincing and we are back to losing ways when it comes to metals?

Nitasha Shankar: Unfortunately, the fundamentals still seem to be quite weak for the metal pack as such because unfortunately there has not been any pickup in demand though we saw a bit of a demand in some of the segments especially for steel but not across the board. It has not really been very sustainable given the fact that international prices are where they are with probably no signs of recovery coming in over there. We believe that bad times are expected to continue for the metals and we would certainly avoid the sector as of now.

ET Now: Commodities overall are having quite a dicey time. If you look at the crude markets as well, some opinions are coming about that a stabilisation towards $50 barrel now possibly but just as a play from the Indian point of view how should one deal with say the oil marketing companies?

Nitasha Shankar: In terms of valuations, most of the OMCs have already run up quite significantl. The delta increase that we saw because of the crude price correction is not going to be as significant as we had seen in the past but that is still going to continue for a while. Given the fact that there has been an excise duty hike in everything, as far as the consumer sentiment is concerned towards oil, that remains pretty much in line with what it was earlier. But given that demand would pick up whenever there is on the ground recovery which is sort of expected sometime the second half of this year, we would expect demand to start going up. So it bodes well for the OMCs but unfotunately not so much for the oil exploration companies because it is difficult to predict where the crude prices will be going ahead but given the levels at which they are, it is certainly not looking very good for them.

ET Now: A few sectors on which you are bullish right now...

Nitasha Shankar: We are quite bullish on the entire infrastructure play as such and particularly into companies which have recently raised funds because we believe that they are probably best poised to ride out any kind of recovery that might come in. They would certainly benefit from the execution point of view. So companies towards the road sectors as well as those in the EPC segment who started seeing orders coming in, we believe, are the good play to get into and the ones who raised capital. Another sector which is looking very attractive at this level is the agri sector.because of all the things that have been done to revive the rural economy as such and farmers and agriculture in particular. In terms of valuations it is very well poised to ride out. We also are quite bullish on the entire consumption story because we believe that rural is a very important part of the entire economy and that has not really participated in the entire consumption story as of now. So any sector which has been languishing because of that, be it FMCG, consumer durables as well as autos, two wheelers, would be the sectors which can outperform now.

ET Now: On the agri side, it is a very limited space to play within the listed segment and just one name that jumps out to me because of the whole battle that is going on between Monsanto and Kaveri. So is there a particular segment within the agri space that you are looking at that we are not taking names here but you could give your advice?

Nitasha Shankar: Probably we would be very company specific. There are certain names on the fertiliser space. They have actually been facing a lot of problems because there was a lot of inventory and now that inventory has actually cleared up which really plays very well for them. That is one area which we are quite positive on. Besides that, companies which are into the agri chemical space and which have a certain amount of exposure towards export markets as well so that they have been sort of benefiting from the global markets till now are the companies that we are really looking at as of now.

ET Now: What is the complete avoid besides metals? Are you looking at PSU banks now with RBI so determined about clean ups and the government as well choking out the loss-making banks?

Nitasha Shankar: There are two ways of looking at the PSU banks. On an immediate basis, there is a lot of news which is coming in and which is going to be positive for them because they are going to find capitalisation slightly easier as compared to what it was one month ago. But on the asset quality side, although the pace of growth of NPLs and NPAs have come down, it is still quite stressed. So till such time there is a meaningful on-the-ground recovery, PSU banks may not make sense as far as fundamental play is concerned. Having said that, if you are looking at the valuations they are dirt cheap and they are available at probably one of the best valuations as of now. So if we are very convinced about the India story as such, then PSU banks could be looked at from a very long term perspective because at least for the next six months to over a year they have a lot of problems as far as asset quality is concerned. So if you really want to play into it, looking at the larger banks could be an option but we still prefer private banks over the PSU banks.

ET Now: The pocket of interest today is the real estate space especially with the bill coming up in the Rajya Sabha and this is a sector that has been marred by image. What do you think about the real estate sector?

Nitasha Shankar: On the image side, if this bill does go through, it would help to improve the image of things but unfortunately on the fundamental side, we still have a lot of inventory on the books and given the way the consumer sentiment is at the moment, offloading inventory at such high rates at which they have been prevailing would not be possible for them. In addition, till such time the land bill is cleared and more land banks are available, trying to maintain their existing standard will be an issue as well. The third thing of course the debt on their books. Most of them have been trying to team their assets as non-core assets and trying to sell them in order to reduce that but that still continues to remain quite high. So till such time as these fundamental issues are taken care of, probably we would still avoid the sector but of course the news is welcome