Avenue Supermarts looks attractive on dips: Amit Jeswani

I'll be surprised if the market sells off a lot because of the Fed news. Of course, one to two banks going bankrupt, more in the US market, can't be ruled out. Probably more also possible… These banks actually have no large economic impact because at the end of the day, the Fed will have to bail them out. Everyone knows how this is going to end. The Fed will have to bail them out. There's no way you can let your depositors' money go to zero.

So overall, if you ask about the portfolio view, I am more bullish. We are increasing our portfolio beta over the last one-two months, we believe that a pivot is coming. And good things should come. Hopefully, 2023 will be a pivotal year and 2024 onwards you start making very decent money.

How do you now approach the overall IT basket? US treasury secretary Janet Yellen said there’s not going to be a blanket approach for all deposits. You see more concern for mid-sized banks. What about the mid-cap IT names that have got more exposure to mid-sized US banks?

So there is a risk in the IT services pack and the important thing is that guidance will come out. Most IT companies give their guidance in the second week of April that means in the next two, three weeks. Now these IT services CEOs cannot themselves know what is happening, right? And what demand will look one year forward. So it's going to be a risk off, like we've cut weights in IT services last week in our portfolio, and let's see how it goes.

It's a very dynamic situation. We strongly believe the only way to come out of a bubble is to create an even larger bubble. That's what the US has done over the last 100 years… So for us, we've gone very highly underweight on IT services.

Do you see a rub-off effect on the overall Indian banking sector? Or do you feel well-regulated, and well-insulated?

Unlike 2008, this is not a credit risk problem. It's a duration risk problem that most banks took because of their held-to-maturity portfolio. So, the Indian banking system—if you speak to FIIs and fund managers–people are generally now saying that banks… it's a highly leveraged business. If a 170-year-old bank goes bankrupt, like Credit Suisse, why be in this segment? Why have an overweight on this segment, a leveraged business and mistakes are unknown? So people are generally going overboard based on those historical facts, but overall the Indian banking system is very strong. The top three, four private sector banks look very decent.

The NBFCs have fallen a lot. And the first NBFC to recover would be the consumer lending leader and only when that starts recovering, the smaller NBFCs will start recovering. Here, the main consumer, the finance leader itself, is struggling. Basically, the leader of the NBFC space is struggling, so all the babies of NBFCs are also struggling.

But overall, I would say banks look very reasonable. If you think about it, if the market goes up 10-20 percent, I believe these banks will go up 30-35 percent. Because in the fund management business you get paid for outperformance. I believe that if the Nifty goes up 15-20 percent, banks will go up 30-40 percent. They're very reasonably priced right now. The only problem is there is some kind of over-ownership. Every mutual fund has loads of banks, but the whole trade is, when FIIs come back in the market, they will come and buy these banks. So that's the trade everyone's praying and playing for.

Which are the pockets with significant earnings potential upside?

We are buying high-growth stocks. We are increasing our hyper-scalers. In the next 10 days, we start the earnings season, and it's a very tough economy out there. Our GDP growth was 4.5 percent, 4.4 percent last quarter. So it's a tough economy. In every sector, if there are 10 players, only one or two players are going to do well or three players will do well. They'll show 20-30-40 percent. Wherever you see growth, that is where we are going to ride because we expect that very soon we'll see a very large change of market sentiments. So this is what we feel – that the Fed acts like printing money acts like steroids and growth acts like workout. So once you get steroids and workout together, you build a very nicely muscled body.

So we've added some consumer tech last quarter. We don't add so many stocks, typically. But we have added some fintech… We've got technology. We have zero positions in pharma, but we're looking to add some pharma now, like more on the hospital side. But very few changes.

Which other sectors look attractive? Any two stocks that viewers can consider and take away from this conversation?

I think on a dip you can buy D-Mart… it's trading at 50-60 times. This is not a recommendation and again it is part of our portfolio. It's just 3-4 percent of the portfolio and we will increase the weights if we get a dip. And what else? Yes, so that is the only stock I think…  Every quarter you will see a 25-30 percent kind of growth for the next five, six, seven years.

See, the other stocks what I say today, I don't know if I will be holding it five, seven years from today. But we do have exposure to fintech companies. The two fintech listed players we do have exposure and these are riskier bets. You need to have some kind of stop loss. But if we go right, I think we'll double, triple our money here.

And how about sectors? Anything over and above fintech that looks attractive right now?

Yes, actually retail is where we are heavily invested. If you go to the US market and see what created the largest wealth, you go to China and see what created the largest wealth… It was not the FMCG companies. It was retail.

And in retail, if you just fundamentally think about it, in grocery retail, there is one player. In jewelry retail, there is one player. In electronic retail, there is only one good player. In fashion retail, there is only one good player. In luxury watch retail, also there's only one player. We are looking for only ones, not just number one, only the great guy in that sector who is growing at 25-30 percent.

They're adding 15-20 percent new stores and the old stores are growing at 8-10 percent. In QSR (quick service restaurants) also, we're looking at buying one player – it's a very different player.

Eight to nine months back, we used to own Jubilant Food and we owned Jubilant Food for a very long time, but there's a new player that we will be adding on the QSR side.

Coming back to retail, I believe for this decade, retail is one where the industry is growing at 12 percent and better players are growing at 20-25 percent. I believe retail will lead not just this bull market – this entire decade, retail should do very, very well because there are monopolies which are getting created in the retail space across categories. And the opportunity size is very, very, very large. What do you ideally want? You want a player who is 2 to 3 percent of the entire market but a market leader that is growing two times, three times faster than the industry. And that is happening in every retail company. They're growing at 20-25 percent quarter over quarter.

We've also added one footwear retailer. It's a cheap 20 PE stock. We typically don't buy very low PE, but the company is growing at 30-35 percent and it's going through a demerger. In the next four days, it's going through a demerger. So you're getting opportunities in the market. This year, the next two to three years, are going to be fabulous years.

So it has been 18 years of a bear market. People are frustrated, sentiments are poor. I'm telling you people who come in now or who are already there and play right, I believe a lot of money will get created, like serious wealth will get created in the next two years. I'm very optimistic. I'm not bearish at all.

What strategy do you think our viewers could adopt at this point in time? Should they wait and watch or, with the Fed rate hike coming through, do you think it's an opportunity to go out there and buy?

See, we are always invested…  We are in a consolidative phase. For sure, very few companies are doing well…

So every four years, there's a bull market. The last bull market was in 2021. The big bull market will happen in 2024-25, and 2023 is where you are. You've gone through 18 months of consolidation, but a big bull market is coming. The Fed will pivot. There will be printing of money again because you cannot come out of a bubble. The only way to come out of a bubble is to create an even larger bubble. The Fed will have to print again and the kind of money that will get made will be too good.

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