L&T, ICICI Bank and LIC Housing Finance top bets before election: Gaurav Mehta

In a chat with ET Now, Gaurav Mehta, VP, Institutional Equities, Ambit Capital, shares his views on top pre-election idea.


ET Now: Give me a top pre-election idea?

Gaurav Mehta: We really do not think like pre-election and post-election point of view but the three ideas that we think should work best given our view of the macro and given valuations would be L&T, ICICI Bank and something like an LIC Housing Finance. So those would be the three top ideas, L&T, ICICI Bank and LIC Housing Finance. All three of them belong to relatively cyclical sectors, all three of them should benefit in the market scenario which is more normal, which is a bit more risk loving than it was for the last three, four, five years so those would be the three picks.

ET Now: L&T is up from 850 to 1250, it is trading at a PE of 22, ICICI Bank is up from 900 to about 1230 it is trading at a price to book of more than two, do you think lot of good news in L&T and ICICI Bank is that not in the price?

Gaurav Mehta: We are looking at cyclically suppressed denominators when you talk about PE or PB at this juncture. They have rerated somewhere they were about two months, three months ago. We have been advocating this move for the last six months and we do not think that we have as yet reached saturation on those names. If anything as the cycle recovers those denominators will themselves move up quite handsomely and from that point of view those PEs, PBs that you are looking at right now and which looks a bit inflated will very soon start appearing a bit more sane. From a cyclically depressed PEs and PBs they might be little inflated but on a more cyclical basis we think that these PEs, PBs will eventually start looking very attractive once the economy recovers. So I do not think those stocks have saturated at yet at best we might be half way through in terms of that.