Keval Bhanushali, CEO, Marwadi Shares and Finance Ltd is of the view that retail investors are the reason that small and midcap companies, including those without solid fundamentals, remain resilient. Trading volumes from retail investors in India have hit a record 45 percent.
For Bhanushali, realty and power “are the most fascinating sectors”. In an interview to Moneycontrol’s Kshitij Anand, he says realty stocks would be the new theme for the decade. Edited excerpts:
Bulls got their grip back on D-Street, pushing benchmark indices higher. The Nifty closed above 15,000 for the week ended May 21. What led to the price action in the week gone by?
The most important reason for the recent volatility has to be the geopolitical tension between Israel and Palestine-based Hamas groups. It became essential to witness how things unfold as they could have gone either way.
We saw Israel take a firm stance, which the US then backed. This intervention in the international military conflicts could well be one of the most significant moves yet by 46th US President Joe Biden.
A move that has potentially spared the US trillions of dollars in offshore military expense while helping other leading economies remain stable.
It could also be the trigger that led to the upsurge in bourses globally, including India. Luckily for India, the Indian rupee also kept growing stronger during the last month, further contributing to the bullish momentum.
Small and midcaps remained resilient. What is supporting the prices?
Small and midcaps are always big gainers in a bullish market and the biggest losers in a bearish one. The reason is simple—liquidity and market depth.
We have hit record trading volumes from retail investors in India, approximately 45 percent for the first time. This could well be what makes most small and midcap companies remain resilient, including those without core fundamentals.
While buyers will always justify buying, it is something that retail investors need to be very cautious about.
Where do you see markets in the final leg of May, which is also the expiry week? Where do you see the expiry for the May series?
The Nifty closed well in the positive territory in the last trading week, well above the 15,050 level and till those levels are held on a (closing) basis the short-term target comes to 15,400 and 15,500 levels.
From the expiry point, the maximum OI concentration on the call front is in the range of 15,400-15,500. On the lower side, the support is pegged in the range of 15,000-15,100.
As far as the Bank Nifty is concerned, 34,500 is immediate support whereas 34,000 is the crucial short- term support. There was the highest OI at 34,000 levels, which got taken off in the last trading session, hence that has become a support now.
The resistance on the upside is now pegged at 35,000 on an immediate basis and above those levels, it can inch towards 35,500 levels as well from the expiry point of view.
More importantly, the Nifty Pvt Bank index has taken off its crucial resistance of 18,200 levels and has managed to close above that, indicating it will inch towards 18,600-18,800 levels on an immediate basis, which will eventually help the Bank Nifty inch higher.
What led to the price action in realty and power stocks?
Interestingly, the two most fascinating sectors for me recently have been realty and power. I would call realty stocks to be the new theme for the decade.
Please note that I am not referring to the real estate prices. This is about the companies in the organised real estate and listed space.
The current upward trend in reality and power seems to be caused by the debt restructuring hopes through NARC along with record-high commodity prices.
Also, a few big developers have reduced their debts substantially, which adds to the fundamentals.
Which are your top fundamental bets for the near future?
My trading bets would be:
Bharat Petroleum Corporation Ltd
A disinvestment candidate, likely to be completed by November 21, 2021. It has recently sold treasury shares and non-core assets of around Rs 13,000 crore.
Q4 results are expected to be very good as IOC and HPCL have announced bumper results. A one-time special dividend is expected before privatisation.
Demerger of FMCG business and cigarette business is on the cards. The FMCG sector is growing at a good pace.
At CMP, the dividend yield is around 4-5 percent. The stock trades relatively at a cheaper valuation in the FMCG sector with good operating cash flow.
Currently, it holds a 20 percent stake in CDSL, and its embedded value is around Rs 1,800 crore. It has also launched Star MF for distributor, and roughly it holds more than 50 percent of market share in digital space.
Rumours are there that its valuation is pegged around Rs 2,000 crore. Further, the company holds cash of more than around Rs 1,200 crore as per the books.
Even their international exchange is garnering a solid response wherein currently, no charges are levied. Whenever there is an NSE IPO, it gets listed on BSE. There could also be rerating of the core business of BSE.
Lastly, the BSE market cap is Rs 3,400 crore, which is cheaply valued considering the above parameters.
CARE Ratings Limited
Once the economic activity gets revived, fundraising from corporates is done aggressively, leading to growth in companies' business.
The company has an excellent dividend history, and the yield is around 3-4 percent. LIC and CRISIL hold 10 percent each in the company, which is comforting in terms of institutional investments.
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