Telecom, which has been a stand-out performer, remains top bet and going forward QSR stocks like Jubilant FoodWorks will gain as people will opt for home delivery and from trusted chains with hygienic kitchens, Amar Ambani, Senior President and Head of Research – Institutional Equities, YES Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Stimulus package has come and gone – the market seems to be unmoved by the same. Do you think, as and when India opens up, the market is likely to see a rebound, as the curious phenomenon of revenge shopping will surface in India, as it was seen in China after lockdown?
A) It has been 60 days of the lockdown and everyone is desperate to break free. So, it is likely that some amount of feel-good buying takes place when lockdown ends.We have seen this in China and parts of Europe. But, overall, with income disruption, job losses, and dwindled savings, one can’t bet on a sustained recovery of demand, or that for the market.
Essential spending will continue. Select categories like sanitizers, masks, COVID-insurance cover will see strong demand. In the US, people have been rushing to buy life insurance policies. But, mid to high-end consumption is still a big question mark.
Q) This could be a signal of something big. Equity inflows at 4-month low – as investors might have stopped SIPs or are afraid to invest now. What is your view and do you think it will get worse?
A) Confidence in the equity market and even fixed income instruments have taken a hit. This is a phenomenon that repeats every time there is substantial price damage in the market.
Right now, investors feel safer with their money in the bank. Not so long ago, many feared their deposits in the bank. This is a cycle that plays out every few years.
In the future, investors will find that their deposits in the bank are earning lower than 2.75 percent, the rate of small savings is falling and safe debt instruments are not attractive when Gsec yield is possibly at 5 percent.
If risk-off sentiment globally eases and results in a price up-move in the equities, many would return to equities again.Q) The big upgrade which has happened in the telecom sector especially amid COVID-19. Can it turn out to be a wealth creator – which are the stock that you like?
A) Bharti and RIL have been among the handful of stand-out stocks in the market. We’re sanguine on these two, as data consumption will rise for a long time to come, ARPUs have started inching up and this should enhance profitability.
Both feature in our model portfolio. Non-clarity is on future spectrums and the balance sheet strain that comes with it.
Then there’s AGR dues and one-time spectrum charge as well. Developments must be monitored closely.Q) Any stocks which are more or less unharmed by COVID-19 outbreak and why?
A) I mentioned Telecom (Bharti Airtel, RIL) which has been a stand-out. QSR stocks like Jubilant FoodWorks will gain as people opt for home delivery and from trusted chains with hygienic kitchens.
Another theme is around Agri stocks like Escorts Ltd, Coromandel, given that rural India isn’t materially infected by COVID, the harvest has been fruitful, government support has come through income support and multiple schemes and monsoon predicted to be normal.
But, the recent news around Locust attacks is worrying. We’re also looking at FMCG and Healthcare stocks on a case-to-case basis.Q) It could well be a once in a decade opportunity but how should one look at investing in mutual funds now?
A) The first thing to do is to set aside emergency cash for six months. This is vital in a time of health crisis and income uncertainty. Once this is secured, the next thing to do is to not sell your MF holdings or stop your SIPs, at this stage.
In fact, it’s a great time to start a SIP. History has shown that even if you’re an early buyer in a big market fall, you make fat returns over a 3-5 year horizon.
The best part is that you get to buy what you want when you want and since you can afford to stagger purchases at your price.
Whether to be an aggressive investor or a balanced one, will depend on an investor’s risk profile and present asset allocation.Q) The government is mulling to open the Aviation sector – but it will still take time for companies to sail high in open skies?
A) The government has started flights but more like a public service to help people get home. Which is why fares are capped. In the backdrop of COVID, it now seems that airlines’ overall, will have excess capacity in planes, and the operating matrix of a plane that takes-off also deteriorates, with more social distancing reducing seats on offer.
Airline stocks are best avoided. Some may unfortunately need a bailout of sorts by the time this crisis is over.
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