Expect auto space to outperform market going ahead: Devang Mehta, Anand Rathi Securities
We have been liking companies like ICICI Bank, HDFC Bank, Axis Bank among the large caps in the private banking space, says Devang Mehta.
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In an interview with ET Now, Devang Mehta, VP & Head Equities Sales, Anand Rathi Securities, shares his views on the market as well as some sectors and stocks. Excerpts:
ET Now: DoT sources have indicated that they will be issuing show cause notices to telecom companies that gave 3G spectrum. What would be your view on the incremental negative impact that you could see on telecom companies?
Devang Mehta: Yes, this sector has since the last 1.5-2 years been facing the headwinds of some regulatory hurdles that have come their way. Probably the stocks have also run up quite a bit, the likes of Idea as well as Bharti have run up and in fact outperformed the market to a certain bit. So there can be some correction in both these stocks. We have seen thse kind of notices being served on these companies and this can have a detrimental effect probably on the stock prices which also have a reason during the past few days. Yes, I feel one does not have any genuine reason right now to go and buy Bharti as well as Idea.
ET Now: Have you heard anything to that effect and how would you look to either buy or trade Polaris?
Devang Mehta: In fact, we do not cover both Polaris as well as Mphasis, but what I make out from the entire IT pack is there is some bit of strength being exhibited by them. Particularly in the large cap space we like TCS as well as HCL Tech and prudence will be there if somebody is there in the large cap space as already the rupee is weakening. So a lot of it has to be into TCS as well as HCL Tech for some material gains within the next two-three months.
ET Now: What would you make of the ONGC numbers and do you think that it is largely on account of the fact that this time around we have seen the entire subsidy pay of FY13 come in Q4?
Devang Mehta: Yes, in fact a lot has to be made about the subsidy burden that ONGC had to face and this year has to be good for companies like ONGC, Oil India, and GAIL, which bear a lot of the brunt of the subsidy burden. So probably whatever has happened to the petrol deregulation as well as the partial diesel deregulation, in this space ONGC as well as Oil India will surely get rerated as well as we have heard about the ramp up of their fuel retail outlets as soon as diesel deregulation goes through. So all these things will augur well. In case of any correction in ONGC, I would suggest an accumulate or a buy on ONGC.
ET Now: How much more downside for HDIL after the announcement that came in yesterday about mile terminating that airport development project?
Devang Mehta: Probably this stock is not on radar for a lot of investors now because there has always been a case of over promise and under delivery as well as stock price punishment that has taken place in the last six months. People are not willing to buy HDIL and anybody who is wanting to buy something in the realty space recommend a buy on Godrej Properties with a lot more strong fundamentals as well as a sound business model. Godrej Properties will do much better than going in for a stock like HDIL.
ET Now: DoT sources have indicated that they will be issuing show cause notices to telecom companies that gave 3G spectrum. What would be your view on the incremental negative impact that you could see on telecom companies?
Devang Mehta: Yes, this sector has since the last 1.5-2 years been facing the headwinds of some regulatory hurdles that have come their way. Probably the stocks have also run up quite a bit, the likes of Idea as well as Bharti have run up and in fact outperformed the market to a certain bit. So there can be some correction in both these stocks. We have seen thse kind of notices being served on these companies and this can have a detrimental effect probably on the stock prices which also have a reason during the past few days. Yes, I feel one does not have any genuine reason right now to go and buy Bharti as well as Idea.
ET Now: Have you heard anything to that effect and how would you look to either buy or trade Polaris?
Devang Mehta: In fact, we do not cover both Polaris as well as Mphasis, but what I make out from the entire IT pack is there is some bit of strength being exhibited by them. Particularly in the large cap space we like TCS as well as HCL Tech and prudence will be there if somebody is there in the large cap space as already the rupee is weakening. So a lot of it has to be into TCS as well as HCL Tech for some material gains within the next two-three months.
ET Now: What would you make of the ONGC numbers and do you think that it is largely on account of the fact that this time around we have seen the entire subsidy pay of FY13 come in Q4?
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Devang Mehta: Yes, in fact a lot has to be made about the subsidy burden that ONGC had to face and this year has to be good for companies like ONGC, Oil India, and GAIL, which bear a lot of the brunt of the subsidy burden. So probably whatever has happened to the petrol deregulation as well as the partial diesel deregulation, in this space ONGC as well as Oil India will surely get rerated as well as we have heard about the ramp up of their fuel retail outlets as soon as diesel deregulation goes through. So all these things will augur well. In case of any correction in ONGC, I would suggest an accumulate or a buy on ONGC.
ET Now: How much more downside for HDIL after the announcement that came in yesterday about mile terminating that airport development project?
Devang Mehta: Probably this stock is not on radar for a lot of investors now because there has always been a case of over promise and under delivery as well as stock price punishment that has taken place in the last six months. People are not willing to buy HDIL and anybody who is wanting to buy something in the realty space recommend a buy on Godrej Properties with a lot more strong fundamentals as well as a sound business model. Godrej Properties will do much better than going in for a stock like HDIL.
Devang Mehta: This space is about to outperform the market and in fact, Tata Motors is now our top pick. We used to push Maruti quite a bit from 1200 levels and now we are asking our clients to book profit in Maruti and switch to something like Tata Motors. The numbers that JLR yesterday exhibited give a lot of strength to the stock as well as we feel that during the entire FY14, Tata Motors, backed by JLR with a 13%-14% type volume growth, will continue to do well on the ramp up of business as well as introduce a lot of new variants as well as new models. We also feel that M&M followed by Tata Motors will be outperforming the entire space.
ET Now: Assuming that M&M beats the estimates that the polls have by wide margins, could there be follow up buying in this stock?
Devang Mehta: Yes, I do feel so. We have seen follow up buying in a lot of such stocks yesterday. A classic example was something like Havells, Sun Pharma. The companies which are delivering a good set of numbers have been rewarded by the market and it is also true that companies which have not delivered good numbers like L&T or Infosys have been punished big time. So yes M&M has performed well in the past few days, but there are the chances of derating if the company delivers above par numbers.
ET Now: How are you looking at the overall banking space?
Devang Mehta: I would always favour private banks for the next six months. We have been liking companies like ICICI Bank, HDFC Bank, Axis Bank among the large caps in the private banking space as well as something like Karur Vysya Bank or Yes Bank, IndusInd Bank in the midcap space and we feel the valuation premium that these banks are getting will be justified for still some time to come. Once the asset quality of the public sector banks starts improving, probably then the valuation gap will start narrowing down. But we will still keep on preferring the private banking space.
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ET Now: What about some of the construction names? Anything at all that you would even remotely think of or just stay within the pack completely?
Devang Mehta: In fact, as an overall play on construction as well as infra we would still favour something like L&T which keeps on surprising the street, though this time there was a little dismal set of numbers. But in the given circumstances the company has delivered well. The execution has been a little bit of on the poor side, but justifies the valuations L&T has at this point of time. If somebody wants to be in the capital goods, construction or infra space, I would prefer something like L&T.
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