We need to take lessons from 1918-1920 Spanish flu where a lot of Indian lost their lives. The government, even though delayed, has acted rightly said A K Prabhakar, Head - Research at IDBI Capital said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q) Crude oil has fallen more than 60 percent from its January 2020 high. Do you feel it is favourable for India given the likely low tax collection and COVID-19 led lockdown?
A) The fall in crude is a big positive for India and like China. If India can buy and store at current prices or buy in 1-year forward contract, it would be even more positive. High taxes on petrol & diesel would help the government in bridging the fiscal deficit.
Q) Should fundamentally strong and cash-rich companies buy into small and midcaps which have been derailed by the pandemic?
A) Here there are many moving parts, the company should be a right fit in their business strategy, otherwise, it doesn't make sense as persevering cash is better at this point of time.
Q) Which stocks do you think can emerge as multibaggers in 2021?
A) ICICI Bank: One of the largest private bank with 5,275 branches network and loan book of Rs 6,35,654 crore. It trades at attractive valuations and trades less than 1-time adjusted book. It holds many subsidiary companies which can create additional value.
Avenue Supermarts (D-Mart): Th company is growing at 25 percent in last few years and we think the company is pulling consumers away from unorganised stores due to high discounting and now delivery to home on minimum charges would help the company grow in next few years.
HDFC Life: Life insurance business is growing at 15 percent CAGR in the last 17 years in the private sector and for next 10 years, similar growth looks possible. The company grows faster than peers and has better margin and this correction gives a better entry point.
Bharti Airtel: Now duopoly in telecom between Jio and Airtel would give pricing power to both these companies.
Muthoot Finance: Gold NBFC is safest in this crisis situation with NIM around 15 percent and loan book of around Rs 38,000 crore. It has one of lowest NPAs for high margin business.
Q) What are the major challenges in front of the government now?
A) We need to take lessons from 1918-1920 Spanish flu where a lot of Indian lost their lives. The government, even though delayed, has acted rightly.
And, in 1918, all it took was a few months. An estimated 10-20 million Indians died (a fifth of the global death toll, making India the worst-hit country).
Q) Report suggested that lockdown is expected to create a big problem for banking & financials sector in terms of NPAs. What are your thoughts?
A) This could be managed if RBI can relax rules for the next 3-6 months.
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