Will keep L&T in the portfolio despite potential underperformance: Deven Choksey

In a chat with ET Now, Deven Choksey, KRChoksey Investment Managers, shares his views on Larsen & Toubro, Reliance Industries.

ET Now: I would start off with what some of the other brokerages have said as well, CLSA for example in the model portfolio have said that they are replacing Larsen & Toubro a beaten down large industrials name with Reliance Industries a stock which has already had a bit of a rally in 2015. Now, I know you personally believe that Reliance Industries has got a long way in 2016, would you do as much if you had for example a Larsen & Toubro in your portfolio would you be comfortable giving it off at these low levels and go into Reliance, do you think the extent of outperformance would be as large from Reliance in 2016?

Deven Choksey: Well, certainly there is no denial of the fact that the Reliance would probably outperform in 2016 and the gravity of outperformance could be quite significant. The fact ramains that the profit margins would improve going forward given the lower crude oil prices, which should play to their advantage as they are refiners. On the other side, Reliance Jio could be another re-rating provider for the company. As we have been maintaining, this is one area where you probably feel more confident that the current Reliance profits could be produce by Reliance Jio itself in the coming two to three years.

So, from all perspectives Reliance should be the outperformer, there is no doubt about it. It could probably produce better return compared to others in the frontline stocks. However, having seen Larsen already corrected by almost 50 per cent I would rather like to probably see whether the improvement in the economic situation is resulting into better order inflow for Larsen, and, in turn, give the company better visibility going forward.

May be a couple of quarters they may struggle, they may not have the kind of performance which the market wants, but generally, for the long term investment portfolio we rather let the stock perform over a period of time. So, perhaps at this point of time, I would think that even if Larsen comes down to a certain extent after the result announcements, it would present a buying opportunity vis-à-vis the selling at this point of time.