UltraTech, Welspun India & Indian Hotels for good long term bets: Sudip Bandyopadhyay
This week has been very industry specific from a news feed perspective, as we’ve seen a lot of momentum around the metal space with aluminum. Lots of small activities took place throughout the week, but in general there was missing a trigger that could move the market forward. What do you think may be the next big trigger as I think the market overall has digested all of the central bank action, be it the Fed or the ECB in terms of tapping. So what will the market expect next?
You’re absolutely right. What the market was missing was a major trigger on both the upside and the downside. The market continued to move sideways and was in a bit of a consolidation mode throughout the week.
We saw profit taking at higher levels and we also saw new buys at a slightly lower level. So in a way, a little bit of consolidation is always a healthy sign for the market.
That said, the next big trigger the market will consider will likely be business results for the next quarter as well as government policies that may or may not be announced.
Apart from that thing that has become clear with the recovery of the BFSI sector is that they deserve a better valuation which is pretty much reflected in the stocks of this sector.
Themes like China’s action and inaction that may influence metals, FII flows and some specific sectors like textiles or specialty chemicals that may be affected by government policies are expected to drive the market forward.
Kotak Mahindra Bank recently announced the lowest interest rate ever on home loans, which will only be applicable for a limited period. Do you expect other banks to do the same given that the holiday season is coming soon?
I think in the banking industry we have seen a growing demand for banks. Asset quality has been our focus for some time and once the asset quality issue stabilized people focused on growth, which is why ICICI Bank to some extent Axis Bank and even SBI have seen some good moves. Sadly, Kotak and HDFC haven’t seen much movement despite the excellent quality of their assets. They haven’t really seen much growth, which they deserve.
I think that’s why these banks are trying to focus on growth again and the only way they can grow at this point is probably to lower the interest rate on home loans.
Kotak being a very conservative bank, wants to gamble on home loans, which is probably the safest bet. By trying to generate growth through the home loan segment and lowering the interest rate, they are trying to be aggressive in this industry and there is nothing wrong with doing that.
Overall, I think housing finance is an interesting industry and there are a lot of housing finance companies that are doing well and will continue to do well.
From a longer term perspective, what would you recommend to traders in the current environment?
I would suggest a few areas for investors to consider. The first is the textile sector which I believe will benefit from the government policy announced yesterday.
In addition, some of the companies are getting great traction in the international market as China is losing favor and more and more buying is done in India.
is a company that we believe investors might consider keeping the price target at around Rs 175. Investors can hold the shares for a period of 9 to 12 months.
The other sector that will certainly benefit from the economic recovery is the hotel industry. Thus, investors could turn to cottage hotels as well as Indian hotels for an increase of 30 to 40% from current levels.
The last sector I would like to mention is the construction sector where cement stocks look very promising.
The recovery of cement after the monsoon, the boom in universal housing construction as well as government infrastructure spending should ensure that demand for cement remains robust. So
should do well in the future.