At this point of time, HDFC Bank is around Rs 1,400 and Federal Bank Rs 140, which looks extremely attractive for long-term investors, says Amit Jain, who co-founded Ashika Global Family Office Services, during an interview to Moneycontrol.
State-run lenders like Bank of Baroda, Bank of India, Union Bank of India, and State Bank of India still look undervalued when compared to their peers in the private space, he says.
After the strong run-up in midcaps, smallcaps, the expert with more than 18 years spent in the Indian banking and financial services industry says at this moment of time investors should be very conscious to select any stock in this space as apparently there seems to be a bubble in 70 percent of the stocks in these categories.
Do you think the market correction looks likely a scenario in coming weeks?
If you have read our New Year Note for 2024, we have been conscious of the market since the beginning of 2024. The Nifty till December 31, 2023 had been up by almost 12 percent from its October lows, which was a very ferocious rise in the Nifty. This one-sided rally in November and December of 2023 had come up along with the global market rally in the hope that we would have four rate cuts by the US Fed in the calendar year 2024.
However, this scenario of a rate cut is looking bleak, as it is expected that inflation in the US economy will remain higher for a longer period of time. Hence, that assumption of a rate cut may not work out now. Therefore, we see a decline in the Asian stock markets along with the Indian markets.
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Most experts were expecting the banks to do well this calendar year, but now they don't see the same scenario, especially after quarterly earnings.
If you read my last three Moneycontrol interviews, I have been very bullish on PSU banks, and PSUs. This theme has played out very well for our investors. Currently, we have seen some corrections in private sector banks. However, PSU banks are still making new highs every day. Most PSU banks have given a return of 100 percent to 200 percent in the last two years due to the large valuation gap between private sector banks and PSU banks.
However, after two years now this gap has reduced to a great extent, and we can see a reasonable rally in private sector banks as well, if the global market supports it.
At this moment of time, HDFC Bank is around Rs 1,400 and Federal Bank around Rs 140, which looks extremely attractive for long-term investors. Also, in PSU banks like Bank of Baroda, Bank of India, Union Bank of India, and State Bank of India still look undervalued compared to their peers in the private space.
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What is your take on the Zee-Sony merger deal called off?
In my personal view, it is a very sad story for investors who invested in Zee in the last 2–3 years. They have been expecting this merger to happen under any circumstance, but it could not happen, which is making their portfolio bleed. On January 23, ZEE entertainment share was down by 30 percent in a single day, which can be a nightmare for investors and traders who had large positions in ZEE Entertainment shares.
Moreover, Sony Group Corporation has also sought a $90 million penalty as a fee from ZEE Entertainment which will further put a pressure on ZEE Entertainment share price going forward. This kind of deals always shakes investors confidence in share markets, hence suitably dealt by the regulators.
If you remember, in 2018, Zee share was trading near Rs 600 and today after 6 years it is trading at Rs 160, so even long-term investors did not make money in this stock, which makes me feel empathic for their pain.
At this moment of time investors should be very conscious to select any stock in the midcap and smallcap space as apparently there seems to be a bubble in 70 percent of the stocks in these categories.
Do you think that after reading the latest economic data points, the Fed funds rate cut may be delayed as well as the Federal Reserve may not be aggressive in rate cuts?
Yes, I agree with you, after the latest data released by the US Fed it seems that the rate of interest will remain higher for longer. Earlier the market was expecting four rate cuts during the calendar year 2024 but now the expectation has been toned down and the market is expecting only 2 to 3 rate cuts in the calendar year 2024.
Based on these renewed concerns on higher rate of interest we have seen that the US G-Sec yield across all tenures has again started inching up.
Do you think the major IT companies will not see double-digit growth in revenue for next couple of years?
Yes, I do agree that going forward it shall be difficult for IT companies to have double-digit growth in their dollar revenue. However, in my personal view IT earnings may bottom out in the 3rd quarter of financial year 2024-25. Also at this moment of time, we are very conscious of Nasdaq 100 from short to medium term perspective, which may put pressure on Indian IT stocks going forward.
Are the rate cuts and reforms a great theme to own for CY24?
Not really from a global market perspective, however, in India the reforms will continue to happen as the market is expecting a full majority by the BJP government in the 2024 Central Government Elections. As I mentioned above the rate cut expectations are bleak, hence, the market will be cautiously watching each commentary of the US Fed to ascertain the propensity of rate cut in calendar year 2024.
Do you expect the government to consider the measures that can boost the rural demand, in the Interim budget?
I'm not keeping any high hopes from the interim budget at this moment of time. However, as a trend we have seen that the rural demand generally picks up in election years due to extensive spending by the government and opposition parties.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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