Would avoid real estate stocks: Prateek Agarwal, Head Equities, Bharti AXA Invest Manager

Prateek Agarwal, Head Equities, Bharti AXA Invest Manager, in a chat with ET Now talks about stocks.

Though we did commence the week on an extremely strong note and there was a lot of buying in the frontline stocks, we have seen a bit of pressure within the telecom space. Are there sectors that you would possibly recommend to investors to stay away from?

Telecom is something that we have been bearish on for quite some time. We are changing our position mainly on account of the fact that most of the new guys, who are coming into the business or who may be taking stakes into the existing guys, have cost of capital which are significantly lower than the Indian cost of capital and we are seeing deals happening at significantly higher price points than what a DCF kind of a valuation methodology will arrive at in the Indian context. So with that in mind and the fact that this is a part of the market, which has humungousamount of shorts, probably one could see a bounce up in this business as well.

In terms of areas where we would probably stay away from are probably national real estate guys. There is value there but fact of the matter is that most of these guys have very stretched balance sheets still and somehow people believe that this is a business wherein you should lend at 13% odd and some other businesses you could do, you could lend at significantly lower than that. So in stress times, stay away from real estate plays.