In an interview to CNBC-TV18, Prakash Diwan of Altamount Capital Management shared his readings and outlook on specific stocks and sectors.
Below is the verbatim transcript of Prakash Diwan's interview to Latha Venkatesh & Sonia Shenoy.
Sonia: Your views on the non-banking financial companies (NBFCs) because once again we saw a big fall in most of those stocks yesterday, down 5-6 percent. How much of the bad news now do you think is in the price and at what point do these stocks become attractive to buy again?
A: This is a first wave of disillusionment that is coming in and of course it has been triggered by Bharat Financial Inclusion, sharing of data that they have come up with and particularly companies that are more active in the northern market particularly Uttar Pradesh (UP) and to a large extent even Punjab - and one name that stand is Satin Creditcare Network, so that will also see a negative impact. The rub-off will happen on some of these companies. If somebody were to buy into this space, give it some time, give it another 5-10 percent correction. Bharat Financial Inclusion could back to Rs 570-575 level today itself.
The point would be to buy companies that will be the first to get out of the woods when things start improving and that means that microfinance institutions (MFIs) with small bank combination like Equitas Holdings or Ujjivan Financial Services stand much more to gain when things improve. So if I were to buy I would buy into these two or one of these but after a while. I believe this disillusion will deepen a bit as we go along because they used to be price to perfection at some stage and there was enough meat on the bone to chew. So there is going to be some while before that happens, but the time to buy would come soon and the beginning has already been seen with SKS Micro.Latha: What do you make of the defence stocks? Should we play this theme or will it be like railway stocks; just news related and then everything dies down?
A: I do not think so. To be honest, what is interesting about the explanation that the Titagarh management shared is that this is a new segment that is opening up within the defence play, so we have had predominance of electronics and instrumentation based defence contracts which most Indian companies have started executing. Now it's the first time that you have something which is very significantly large and long-term in terms of application which is part of the infantry vehicle that they are talking about.
I would want to put a teaser in terms of not to be restricted to Titagarh Wagons because it already off the blocks but look at company like Escorts, Ashok Leyland, they also have capabilities to get into this space, even if not on the entire vehicle as a whole but it could be downstream contracts that they would start getting.
Escorts is one company that is already paying a big part in the railways business, there is something like Rs 1,000 crore of a topline that they expect by FY18 to come from this. It is a diversification that they badly need, now that they have moved out of the two-wheelers space in a significant way.
Therefore, my sense is that Ashok Leyland, Bharat Forge, which already had execution capabilities in this space, will start recalibrating their plans to be part of this whole game and it is significantly large. So there is a lot of play. Titagarh is more visible at this point but the other stories that are emerging are equally promising. So I would treat it as a flash in the pan kind of news trigger which will die out very quickly but it could be a huge change of rerating for some of these businesses as well.
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