In an interview to CNBC-TV18's Reema Tendulkar and Sumaira Abidi, Dilip Bhat, Joint MD at Prabhudas Lilladher shared his readings and outlook on market and specific stocks.
Reema: You are profiling a lot of midcap companies this time in your conference. There are more than 30 of them which are a part of your conference. So, straight away chatting about sectors and individual stocks, is there any particular midcap sector where we can take a top down approach and perhaps buy a couple of stocks in that sector?
A: Just to put things a little in perspective, we have got almost about 31 companies in the midcap space and there are more than 350-400 meetings that are being lined up for various investors. The whole purpose of this particular conference was to make investors feel connected with the ground realities and then try to see how they really take off from these levels.
Coming back to your question in particular, if one were to say midcap, midcap itself is a sector. In a way, it becomes a little sector agnostic, but still some two-three sectors certainly looks pretty interesting from this particular space, whether it is logistics space -- retail will be a little more clichéd to say, but certainly, that will be one of the things.
Our idea is that it is not going to be confined to a particular sector. It will be companies, broadly from various sectors that we have really brought and our idea is to really go through this particular maze and try to identify a few good ones which can really make it big over the coming years.
Sumaira: I want to get a sense of what the mood overall is like amongst your participants over there. Is the 'demon' of demonetisation completely behind them? What is the take on FY18? Are they confident of a revival in Q4 itself? Could things be protracted to the next financial year? What is the kind of sense that you are getting?
A: The conference has just begun with a few companies, but the initial sense that we are getting at the moment, yes, FY17-FY18 looks very promising for a lot of these companies out over here. Demonetisation is really a thing of the past. Possibly, people are looking forward and people have even navigated through these kind of situations at the moment.
One thing is becoming very clear that as we run into Q3 or Q4 of FY18, the run rate that we will see for most of these companies will inspire a lot of confidence and will provide a lot of tailwind to the midcap sector and to the markets too as economy really stabilises and moves ahead.
Reema: As a house, what is the advice that you are giving to the investors on the broader markets, the big market call itself at the index level? We have seen a spectacular run up, but is it time to book profits or do you see higher levels from here on?
A: It goes without saying that markets are trading in an expensive zone and possibly, you might be aware, but the fact remains that today, the largecaps and the midcaps are trading almost at the same valuation one year forward for the indices. However, as far as the broader markets are concerned, we will be very happy if there is a timewise correction. Even if there is some small correction index-wise, in terms of a couple of 100 points, that will still be looked upon as an opportunity.
Everybody is just thinking when to buy. This is what I think is prominent topmost in the minds of the investors and also on the radar. So, it is not a question of whether to sell, but it is a question of when to buy because if we have to invest, there is no doubt that the investment has to be over a timeframe of 18-24 months because currently the valuations being what it is. So, as the earnings catch up, they will make a lot of companies look much more reasonable in terms of valuations.
Sumaira: I was seeing your midcap picks and you had also spoken about logistics earlier. You have VRL Logistics as one of your top midcap picks. With the goods and service tax (GST) finally now seeing the light of day, what are the other stocks, perhaps apart from logistics that you will be looking at?
A: Apart from logistics, we are looking at select midcap pharmaceuticals also. For quite some time now, we have been recommending Jubilant Life Sciences which fortunately for us has done pretty well. There is something like Rallis India which also looks pretty interesting.
That is a company which has really underperformed over the last 1-1.5 years but going forward, that is a company that looks pretty interesting going forward. The valuations on a peer basis also looks pretty comparable at the moment. These are a couple of companies we like. Navneet Education is another stock that we are recommending at the moment; that looks pretty good.
Reema: You have got a lot of sugar companies who will be attending and participating in your conference. Dwarikesh Sugar Industries today and over the course of the next two days, Dhampur Sugar Mills, Balrampur Chini Mills, etc. will also be participating. These stocks have been multi-baggers in the last few years, so the sugar cycle has started at least 12-18 months ago. What is the early sense that you are getting? Is that upturn going to continue for sugar stocks and companies?
A: That is what it appears, that the momentum should continue at least for next 8-12 months. That is what it looks like. The ground setting is such that it is really difficult to take a bearish call on sugar at the moment. The way it is moving, of course you have seen the best as what you said, it has been a multi-bagger already.
However, even going forward, whether it can give a reasonable return, very much. Some of the sugar companies that we have brought, they provide a very interesting insight as to why one should invest in some of the sugar companies.