In an interview to CNBC-TV18, Deven Choksey of KRChoksey Investment Managers shared his readings and outlook on the market, specific stocks and sectors.
Below is the verbatim transcript of Deven Choksey’s interview with Latha Venkatesh and Sonia Shenoy.
Latha: The Nifty is of course teasing the 8,300 mark. What have you made of some of the events that we are about to head into? Let us not discuss Brexit anymore; I wanted to discussed Goods and Services Tax (GST). Logistic stocks have run up so much. Is there any juice left in these stocks?
A: I believe that the market always would like to play euphoric to news events and that is why we are seeing the kind of an upside into many of the logistic stocks. To my mind logistic business is extremely competitive business and it is a very tight margin business as I call it because on both side they have tough customers to deal with. So, certainly the margins can't be argued for but at the same time the volumes can. So, one who probably is playing this story at this point of time one has possibility of higher volumes. But having got the valuations which are quite scaled up at this point of time I would think that the logistic companies are not offering immediate amount of opportunity for investors. Maybe in moderation or corrections, whatever the price rationalisation takes place over a period of time in which one could selectively look for the companies. I am not doubting the fundamental or the potential but I am not very convinced with the valuation at this point of time. So, would like to wait before buying into this stock once again afresh.
Latha: How do you see State Bank of India (SBI) now on? Rs 200 odd and beginning to become a bigger banking power house, there are some rules as well to recast debt. It is a very evolving situation. How do you look at SBI?
A: Extremely positive and though this event is known for a while and the calculations have already been made I would think that on the biggest important part is that the bank has already put in the synergies and they are practicing it. So, to a greater extent in the next one year or so you should be seeing the benefits coming out of this merger into this operation and reflect into the bottom-line performance of the bank. So, to a greater extent one would like to call it as a very efficient merger and that is where I would be very comfortable with this particular bank. Given the kind of size and given the kind of efficiency that they have and given the possibilities that we are facing now with the implementation of the bankruptcy law as well as lowering of these provisionings, I would think ultimately it is going to send a good amount of note for most of the banks in Public sector undertakings (PSUs) and particularly the likes of SBI which is the larger one where you will see the benefits coming much bigger. So, certainly any correction or fall or any kind of nervousness in the market for any reason would be a buy opportunity. It would be a buy on dips kind of call as far as investment is concerned on this stock.
Sonia: Another stock that you have been recommending for a long time and which has done very well is Larsen and Toubro (L&T). In less than two months it has gone from Rs 1,200 to Rs 1,500 post its good earnings. At Rs 1,500 do you think L&T is a bit expensive or would you still be buying into that?
A: How much it can come down to, that is the question. Probably upside is known, it is probably given. Why because we believe that given the kind of an implementation program which the country is now experiencing on different infrastructure sides I would think that companies like L&T would continue to grow well. At the same time from the Gulf territory also they are having reasonably good amount of certainty on project executions. So, they would be growing well, that is given. However at what level the stock would come down to, that is a question.
Unless markets fall substantially and the stock gives in correction of around 10-15 percent we probably have to buy this stock at a premium. Not been in a position to immediately assign the price target at what level one could enter into but I would safely assume that around Rs 1,400-1,500 range it would be a safe bet to enter into this particular stock.
Latha: I also wanted your view on the announcements yesterday on the civil aviation policy. There will be more competition for domestic airlines as and when AirAsia and Vistara start flying. How are you looking at the airline stocks, listed?
A: On one side they are adequately valued. So, there is no question of buying afresh immediately. However if one wants to consider within the basket then probably InterGlobe would be better choice. Given the kind of possibilities on one side with the new aircrafts coming in you have a lower cost of fuel because of the efficient engine in A320 Neo. At the same time the airlines has demonstrated the will to bring down the cost of operations from time to time. Given the fact that they have the ability to run their operations at maximum profitability I would rather think that any correction of any degree would be a good opportunity to buy InterGlobe vis-à-vis others.
Sonia: I wanted to ask you about a couple of hot spaces these days. One of them being sugar, for a long-term investor is there anything here?
A: Considering the fact that we have had a smart run up in last few months in sugar stocks there may not be immediate gains coming into as far as the investors are concerned because quarterly results will not immediately reflect every possible performance. Having said that you have a go down stocks with most of the companies and they would gradually offload some part of the go down stocks which would fetch better price to them. But merely having a stock and just valuing them and giving a price higher which is not likely to be. So, from that perspective it would take a breather. However I do not doubt that long-term trend of the sugar. Per se I feel at least next two years are likely to be better years as far as sugar is concerned as commodity. So, certainly any dip or correction would be a meaningful buy. As of now I feel that market has run up a little ahead of expectations and time. So, maybe it may take small stop or small breather at this point of time in sugar stocks.
Latha: Ujjivan Financial Services, Equitas Holdings, you still like that brand of stocks?
A: Yes, I would think that at least in the near future we are seeing good amount of growth emerging out of this place and certainly both these companies are very well positioned. Difficult to make a choice between the two but Ujjivan may remain relatively better compared to the Equitas at this point of time. But having said that if you are looking at the investment for a longer period of time both the business models are convincing. So, maybe the valuation should be used or valuation parameters should be used to buy the stock at a price at a lower level per se.
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