In an interview with CNBC-TV18, he said that Yes Bank and IndusInd Bank are his top picks in the banking space and advised to buy Yes Bank on dips.
The market is in the midst of a small correction but Prabhudas Lilladher remains fundamentally positive and is advocating investors to use intermittent dips to buy into stocks that should do well in the medium term, say Ajay Bodke, CEO of the company.
He further said to stay wary of Axis Bank and ICICI Bank.
Below is the transcript of Ajay Bodke’s interview to Latha Venkatesh and Anuj Singhal on CNBC-TV18.
Latha: What are you all doing really, at Prabhudas Lilladhar, are you asking your clients to buy these dips?
A: We are fundamentally positive on the market and we are in the midst of a short correction. We are basically advocating investors to use these dips to buy into stocks which, over the medium term, should do well. There are two or three things that we are looking forward to.
One obviously is the stance that the RBI adopts in its meeting in October. Our view is no rate cut is likely to happen although the fact that the inflation is trending down is heartening. And over the next six months, the RBI Governor, in our view, would have more leeway in terms of increased amount in accommodation and a 50 basis point rate cut is what we are pencilling in over the next six months, although in October it looks very remote that he will oblige the market with a rate cut.
Also, the agreement between Iran and Saudi Arabia to cut oil production looks remote and hence India should breathe easy that any flare up in oil prices should not really be a spot of worry for them. We have seen in the last quarter the current account deficit being just a miniscule. So, that should again hearten in so far as stability of external account is concerned.
All eyes also will be on the September quarter results. Our view is that the results will not be very different from the June quarter results. What I mean is that the leg up in consumption demand that people are expecting post harvest in October-November will manifest, in our view, only in the December quarter.
So, although the volume growth trends should continue to be robust in case of consumption focused sectors like paints, home improvement companies, cement, in this quarter, like it was in June quarter, but the pricing power will only come back, in our view, post harvest.
And that is why, this combination of good volume growth and good pricing power turning into a strong bottomline growth will manifest itself from December quarter onwards.
So, second half of the year, we will see a strong earnings growth and we need to position our portfolios in a manner that can leverage on this impending improvement in the corporate earnings in the second half.
Anuj: Reliance has been a strong stock after a really long time. What is happening here and could you buy this stock now at Rs 1,100?
A: The stock has seen a fair amount of movement. And I would not be adventurous, I would wait it out and see how the launch of Jio and the counter-moves from the other incumbents pans out. So, I would stay away from venturing into it at the current price.
Latha: Among the other stocks that have seemed to see some bottom have been the pharmaceutical stocks. They were badgered along with IT for different reasons, obviously. But some support coming in, are you buying any?
A: Yes, we have been positive on the pharmaceutical stocks. Lately some of the midcap pharmaceutical stocks have been doing well. There are three names in particular we have been advocating now, for the last six months in fact.
One is Glenmark Pharma where again we are expecting the approval of Zetia to come in December.
USD 180 million of bottomline, we are expecting this to come from this one drug of an exclusivity. They have tied up with Par Pharmaceuticals to sell this drug and in dermatology and oncology, some very interesting launches are lined up from the company in this financial year and next financial year. So, there we are expecting a medium-term price of around Rs 1,200 for Glenmark Pharma.
Aurobindo Pharma is another company we like where we have a target price of Rs 943 in the medium term. Again, the story remains the same. A strong approval pipeline, this year and next financial year, improving balance sheet profile for both these companies and in case of Aurobindo, both unit seven and unit four, which contribute nearly 72 percent filings have got an all-clear from the US Food and Drug Administration (FDA).
The third stock which has already doubled but we still see some leg to the rally albeit at a slower pace is Jubilant Life Sciences on the back of strong radiopharmaceuticals portfolio and in particular, Rubifil approval, that should be coming again in December-January or thereabouts. So, these three stocks in pharma is what we are advocating investors to look at with a medium term perspective.
Latha: Just wanted to speak with you about the banks as well. Seminal falls in Axis Banks on fears of a stake sale by Specified Undertaking if the Unit Trust of India (SUUTI), its bulk government owner, as well ICICI Bank has been brought down systematically. YES Bank has been thrammed for the past few weeks. Any of these private sector lenders you would like to buy?
A: Both ICICI and Axis, I would be wary of entering at the current levels. I would wait for the results because it is expected that the non-performing asset (NPA) issues should continue to dog these banks for at least a few quarters. A very different view on YES Bank. In YES Bank’s case, the fiasco is now well behind us and fundamentally, the bank has been posting very good results, especially in the asset quality front and we see no reason why that should not hold for the next few quarters. So, at the current dips, YES Bank is a bank we are advocating investors to look at strongly and on the retail focused private banks, IndusInd Bank is one that we are asking investors to look at. So, these two banks remain our top picks, IndusInd Bank and YES Bank.
Latha: I wanted to ask you about this gas price. Now, that will get set and it is believed that it will be about 20 percent less. So, we were hearing between USD 2.5 and USD 2.8 or thereabouts. The new gas price, all priced in you think?
A: There is still some upside from both Petronet LNG and Indraprastha Gas (IGL). We are fundamentally positive on the stocks and any drop there would spell good news for both these companies.
Latha: And finally I wanted to ask you about non-banking finance companies (NBFC), so much of rallies and minor-minor dips. Are there still attractive stocks available?
A: We are fundamentally positive on L&T Finance Holdings. We see some sort of upgrades to happen in earnings going forward for that counter. Otherwise, more or less, one has seen a very sharp upmove and more or less, in the near-term at least, they look fairly priced.
Disclaimer: Reliance Industries, which owns Reliance Jio, also owns Network18, which publishes Moneycontrol.com.
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