Vikas Gupta, CEO & Chief Investment Strategist, Omniscience Capital, has cautioned speculative retail traders, who like entering troubled waters, to should stay away from Paytm as the picture remains blurry.
Those investors who can analyse and undertstand the extent of the RBI action against the payments major can take a small position of four to five percent as part of their portfolio, Gupta said.
Gupat, who has over 20 years of experience in capital markets, expects FY25 to see ample growth in revenues and earnings. "We would look for earnings growth in IT and banks," he tells Moneycontrol in an interview. Edited excerpts:
Do you expect more difficulty for Paytm?
It is possible. We will have to wait and see how things evolve. However, it is also possible that the worst is behind. As per the management, they are confident that they can migrate most of their existing business from the Paytm bank to other banks with whom they have tie-ups in place. In that case, the eventual loss of business might turn out to be minimal. Under that scenario it will turn out that the stock is trading at an attractive valuation. However, all of that depends on how things evolve.
Retail investors who believe that "since it has already fallen by 40 percent, it cannot fall more" should remember that there is no law that stops a stock from falling further.
Speculative retail traders who like entering troubled waters should be cautioned that if they don't understand the details of what has happened by reading the RBI notification and the Paytm communication and cannot quantify the potential extent of the damage in intrinsic value, they should stay away from the stock. There are numerous other opportunities.
For the sophisticated investors who can judge the intrinsic value in both the scenarios of loss of the business and recovery of the business and can compare to current valuations and take a small position of 4-5 percent as part of a portfolio fully understanding that there could be further risks, which are currently not known, can consider it.
Also, be cautious of panic selling in the stock. That doesn't help either.
Also read: Vijay Shekhar Sharma meets FM amid Paytm Payments Bank crisis: Sources
Do you think the market has priced in most of the good news and is waiting for the US Fed action and general elections?
No doubt, the market is quite keen on the Fed action in March and May and also the general elections. On that front, as of now, there is no more information. All that is known is priced in.
Also read: Will FM's talk of small tax demands really make a big difference?
Do you see the Reserve Bank of India (RBI) delaying repo rate cuts, given the inflation still above its 4 percent target?
The Reserve Bank is in no hurry to move either way. It will move very deliberately, based on the data it sees about domestic inflation. But it also has to be aware of global inflation and actions of other central banks. If other central banks start cutting interest rates, then RBI will be forced to keep those in mind and not let the INR appreciate too much.
The RBI's job has become quite complicated. It neither wants the INR to appreciate or depreciate too much. The domestic inflation scenario is quite benign and growth is gaining a good momentum. But the international scenario is where RBI will be vigilant.
After reading the interim budget, do you expect several significant announcements from the full budget scheduled to be presented in June-July?
Absolutely. The budget was a summarisation of all the work done so far over the last two terms, totalling nearly 10 years. If one reads it closely and connects the dots, it gives a clear strategic road map for the next 25 years as well as for the next five years and connects it to the policies that have evolved over the last 10 years.
Also read: APRU increase, 5G monetisation will happen with tariff repair: Gopal Vittal, Airtel MD
What do you expect from the Q4 earnings after reading the December quarter numbers? What are the things to watch out for?
We would rather say that FY25 is going to be quite exciting and there should be ample growth in revenues and earnings in FY25. We would look for earnings growth in IT and banks. This would impact the growth in Nifty earnings significantly for FY25 since banks are nearly 35 percent of the Nifty and IT nearly 15 percent.
When the earnings for both banks and IT are normalised and projected for FY25, it appears that the Nifty PE is likely to be below 20, which is quite an attractive valuation.
Which are the sectors to look for in FY25?
We are optimistic about the market unlocking the mispricing in following growth vectors: digital transformation and artificial intelligence, banks and fintech, power, electric vehicles and clean tech and renewable energy.
The China Securities Regulatory Commission (CSRC) is tightening trading restrictions for both domestic institutional investors and some offshore units. Your take?
We would caution investors to just stay away from China. There are a lot of governance issues and transparency issues in that market. Taking the country, political and governance risk besides the economy and currency risks, doesn’t make sense except for extremely sophisticated investors who can assess those risks and have an appetite for those. Further, it is unclear what potential rewards there exist for those investors to take those risks.
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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
