Clipped from: https://economictimes.indiatimes.com/markets/expert-view/valuing-sbi-like-a-private-bank-might-be-a-folly-deepak-shenoy/articleshow/88126204.cmsSECTIONSValuing SBI like a private bank might be a folly: Deepak ShenoyLast Updated: Dec 07, 2021, 08:45 AM ISTSynopsis
If we do not see extreme restrictions due to Covid, then Indian hotels will be a prime target for a big revenue kick this holiday season.
“A lot of stocks are now 40-50% off their highs and relatively in a buy zone. So, buy selectively is my advice and in general,” says Deepak Shenoy, Founder, Capital Mind. Exited excerpts:
What is going on with the markets and are you telling your clients to sit on cash?
The markets have been coming down but they are still not 10% off the all-time high. We are not saying it is time to take your money out of debt and start putting it into equity. But we are saying that it looks like a decent correction will come and therefore it may be a good time to start looking at investing over the next one-two month. However, it is not the end of the fall. It looks a little premature to call it a bottom. Tech charts suggest there will be a correction that lasts a bit longer.
The markets are not as expensive as they used to be. A lot of stocks are now 40-50% off their highs and relatively in a buy zone. So, buy selectively is my advice and in general, we are doing that in the PMS as well.
Stock AnalysisStock score of ICICI Bank Ltd is 6 on a scale of 10. View Stock Analysis »What would you recommend buying right now given some of the cream names, which were really sought after, are now available about 20% to 25% lower than their October highs. Also, do you buy more of the same or do you completely rework your strategy?
I think the quarterly results have been quite interesting. A lot of Nifty 50 companies have announced fairly decent results. I would avoid cyclicals like steels and metals packs. If there was more of a downside in the entertainment and unlock category, I would pick up those. But in general, there is no need for a massive change in strategy right now. Fundamentally, nothing has changed dramatically. I would say add more to the winners that you have in your pack and perhaps the stocks that you have the largest conviction on.
As for the newly listed startups, I would still say invest over a period of time if you like them and if they continue to show better results in the times going forward. You do not have to change your strategy. Just add on to the players you like the most.
What are you telling your clients to do to ride this uncertainty at a time when volatility seems to be the flavour of the season?
To be fair, I think, everyone more or less expected some kind of correction. They are asking if it is the time to put more money in. But I am of the impression that we need some more downside for me to be able to say that add more lump sums now. Here is where monitory policy and other factors will come and try to make an impact.
Crude has fallen nearly 20% from its peak hit in November. We have seen inflation show some signs in November but that should decrease this month. The December data will come in a while but November data will be a little bit surprising on the upside. In general, we might see some hints of a taper in the US and perhaps some reaction in India but the rupee has not actually gone further than 70. It is only 75.1 or so. So, I am not seeing a panic on the forex side yet even though there has been so much talk about FIIs leaving.
Given this macro situation, I do not think a lot of changes will happen all of a sudden. Even if there is a taper announcement, there will be an announcement that will give us so much time that markets will probably see more of a relief than anything else. Though initially, the reactions could be sharp. We should prepare for volatility in the next one or two weeks. In the last part of December, there usually is not that much volatility because people do not want to sell big nor do they want to buy big. And then if whatever else has to happen will start happening in January. People should just prepare to wind down for the calendar year and enjoy the last few weeks and not get too worried. Whatever decisions have to be taken can still wait till January.
Do you thinkICICI BankNSE 3.57 % supersedes the rest of the private banking names given that across the board you have had brokerage upgrades and targets in four digits?
We are long on ICICI Bank. I think I am biased but I think I like the structure of the bank in comparison with the rest of the banking industry today. They are not super aggressive as they used to be which resulted in a bad situation at a later point in time. They are actually grabbing a lot of market share out of retail focussed banks at one end and public sector banks at the other end. They do not have a serious presence in credit cards yet but they are starting to grow that offering. In general, just pure banking play at ICICI is quite strong. We are finding that certain banks demonstrate layers of weakness — whether it is governance, people quitting or other things; this will actually result in a flow of those to ICICI Bank and Axis to a certain extent. So I would choose one of these two banks to play the corporate theme right now and ICICI has been our choice. Today’s price is not really relevant in the overall scheme of things but I do expect it to grow. In five years it could even grow 50%.
Would you also perhaps balance it out with some exposure to SBI given that they as well are doing extremely great work and growing when it comes to YONO in specific? God knows if YONO is going to eventually list individually or not; even if it does not that only makes SBI dearer, no?
Well, yes, SBI is a strong player here. We used to have it but I am not a big fan of it from a fundamental perspective. SBI always finds a way to make bad things happen to itself. Sometimes it is by merging — the government merges it with some weaker banks and therefore it loses its aggressiveness. In other cases, the franchise is crippled for various other reasons which involve the fact that it is a public sector bank. If it were a private sector bank, it would be valued at least three or four times than this. I am not a big fan of countering. I would actually counter an ICICI Bank with an HDFC rather with SBI. If SBI was about 30-50 or 60% cheaper than where it is right now, then it would have been a decent bet. But right now, we are also pricing SBI as if it was not a public sector bank and that might be our folly in the longer term. So I am not really interested in buying in SBI at this point.
How are you looking at the reopening theme?
If Omicron damage happens, then foreign tourists would not come in. They were not coming in much anyway as November 15th was supposed to be the opening. But we have had a lot of local, domestic travel. The hotel stocks, for instance, may actually benefit quite substantially because Indians cannot travel abroad for tourism; it has become difficult and complicated. Indian hotel stocks will actually do very well in this season unless India also has those extreme restrictions like in Germany or Austria. If we do not get those extreme restrictions, then Indian hotels will be a prime target for a big revenue kick this holiday season. Come next year,PVRNSE 4.39 % will also benefit. There are lots of movie releases slated and if Omicron does not turn out to be a disaster, in terms of locking down, people will go back to theatres and start to watch again and things will start looking better. Having said that, some of the stocks were also priced to perfection. So, a little bit of correction in all of them is likely; at least for a little while before things get clearer.