In an interview to CNBC-TV18, Prakash Diwan of Altamount Capital Management shared his reading and outlook on the fundamentals of the market and specific stocks.
Below is the transcript of Prakash Diwan’s interview to Sonia Shenoy and Latha Venkatesh on CNBC-TV18.
Sonia: The stock of yesterday undoubtedly was ICICI Bank, 7 percent higher there. Do you see more upsides?
A: The entire change in optimism stems from the fact that if one so called bad lemon could improve and change their fortunes and if the government were to start doing something about these core sector companies, you could see a very lumpy revival in quality of assets and that could be very different. So, if you read the Bank of America note today on ICICI, that is exactly what they are predicating this expected turnaround of sorts.
I would still wait for September numbers to come out for the banking system. The asset quality review (AQR) impact is still not completely digested and once that is done, I would still look at some of the larger public sector banks like Punjab National Bank (PNB) or State Bank of India (SBI) because they are the ones who get more positively because the mess was also deeper there.
So, if there is some sort of a cleanup, it is going to impact. PNB is sitting on a very nice favourable sweet spot because of this huge money that is going to get in from the housing finance initial public offering (IPO). You have the MetLife business also which is getting valued at much better than what it was because of the SBI 5 percent stake sale that we heard about a couple of days back. So, it is still bottom-up on the banks.
Yes, ICICI has not participated in this upmove, but if somebody were to look at private sector, large banks, Axis Bank is the one that will turn around faster if you ask me. Probably yesterday was ICICI Bank’s day. Standard Chartered is not listed, otherwise you would have had Standard Chartered flying out.
So, these are oddities of sorts and not something which is more of a trait, but yes, Axis is the one that would turn around faster. This is almost 62 percent of their bad loans, this entire group which is remarkable.
Latha: The assets that are being sold by these big groups are their best assets. The non-performing assets (NPA) remain with the banks. Essar Oil was anyway not an NPA. So, that problem remains and unless you sell the gems at a much better price, the promoters cannot bring in the money and will the promoters bring in the money? What is their intent? So, we may be counting our chickens before they hatch.
A: Yes, certainly, in fact, that is exactly why the upmove that you see in some of these banks, the same thing happened with the arbitration awards and the HCCs and Patel Engineerings of the world. It is too early. Those things are going to take time, at least 6-9 months. It tells you direction in which these stocks would move. Not necessary that you need to get them to react today itself. So, you have to be patient with these things. That is why I said, wait for September numbers, see what the broader trend is and then dip into it. They are not going to run away. I do not think you are getting ICICI at Rs 300 in a hurry. So, you could always buy it at lower prices as well.
For full discussion, watch accompanying videos...