Jan 12, 2017 10:50 AM IST | Source: CNBC-TV18

Here are Mayuresh Joshi's top trading bets

In an interview to CNBC-TV18's Latha Venkatesh, Sonia Shenoy and Anuj Singhal, Mayuresh Joshi of Angel Broking shared his reading and outlook on the market and also gave recommendations on various stocks.

In an interview to CNBC-TV18's Latha Venkatesh, Sonia Shenoy and Anuj Singhal, Mayuresh Joshi of Angel Broking shared his reading and outlook on the market and also gave recommendations on various stocks.

Below is the verbatim transcript of Mayuresh Joshi's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.

Anuj: Let us start with banks. What did you make of IndusInd Bank's numbers and of course the big rally and is the risk reward still favourable here?

A: This is an impressive set of numbers. More or less on expected lines in terms of how the loan growth and deposits were expected to pan out but the management commentary was even more surprising. So, I think the kind of outlook that the management has given specifically in terms of the CV sales and the loan growth improving thereof as well, it is extremely encouraging and credit cost on an analysed basis still kept below that manageable mark of 60 bps which is envisaged for the better part of FY17 and again expectations of loan growth staying stable and improving in the next few quarters. So that is an extremely stable set of numbers that have come through. The management commentary itself was very robust. The net interest margins (NIMs) that they have posted at 4 percent have been extremely commendable as well.

So in the entire sense, extremely good set of numbers, valuations always traded at premium. So I think for the banking sector as a whole, the corporate facing banks might have some amount of stress still coming through with the watch-list and the kind of provisioning that I have made expected to continue in Q3 and Q4. The forbearance in terms of the Reserve Bank of India (RBI) circular for the SME part of the book is expected to play out in Q4. So Q4 numbers will be far more relevant in my opinion as that 60 days window probably gets over and what kind of stress we probably see there if any on any of the bank's books related to SMEs. So largely again maintaining an optimistic view on the banking sector, IndusInd extremely good set of numbers, basically a hold from our side.

Latha: What are your buys in the banking space?

A: From the largecaps, over the next 12-18 months, banks like ICICI Bank is something that we continue to like. HDFC Bank -- from the larger retail private space -- where the stress is not that relevant in terms of corporate exposure. Even for ICICI Bank, the kind of watch-list that I was just mentioning about -- a large part of that provisioning has taken place in Q1 and Q2 and it is still expected to take place in Q3 and Q4.

So as the large part of recognition starts taking place, the credit cost will start dwindling down from the first half of FY18. So in that sense larger guys like HDFC is something that we like.

From the smaller private sector banks, Federal Bank is something that we will remain positive about but again in the staggered manner over the next few weeks is the way to approach these bank. The kind of slippages that Federal Bank reported in Q2 of Rs 266 crore or so was far over than what one had anticipated. The overall stressed asset book 1.6 percent net NPA ratio, you got almost 2.6 percent in terms of the restructured book. So in that sense itself, you probably got 4.8 percent in terms of the overall stressed asset as part of their overall loans. So to that extent, it is still manageable in my opinion.

SME exposure to 34 percent might be of the concern for the banking sector as I mentioned. Federal Bank has that but largely again my own analysis is pointing out to a loan growth over the next four-six quarters were anywhere between 17 percent and 18 percent. ROE improvement happening because of credit cost coming down -- on 120 bps or 80 bps over the next one to one and a half years and that will probably lead to improvement in ROAs to around 0.9 percent ROEs close to that double digit mark of 9.5-10 percent. Valuations at 1.4 times price to adjusted book probably are in line with its long-term mean but with expectations of ROEs and ROAs improving, my own sense is that in a staggered manner over the next few weeks, long-term investors can definitely have a look at this stock.

Sonia: Give us a quick comment on what you expect from TCS today?

A: Our own expectations point to a sequential growth in dollar terms, 4,383 million dollars to be precise, EBIT margins close to 26 percent band and largely profits again 4 percent sequential decline, Rs 6,320 crore but it is again the entire street is focused on what the management commentary is going to be all about in terms of the client pipeline, in terms of what is happening with the digital space and Q3 is accentuated with the fact of traditional weakness with furloughs, with retail, with life sciences all of these segments and obviously I think the outlook in terms of  ifs and buts related to Trump policies. So we are expecting a very soft set of numbers to probably come through but management commentary holds key.

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