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For a 5-10-year story, consider insurance: Hemang Jani, Sharekhan

A part of the money from NBFCs and PSUs got deployed in insurance.

ET Now|
Nov 26, 2019, 10.35 AM IST
Hemang Jani-Sharekhan-1200
We continue to like HDFC Life though it has run up and valuation-wise, it may look a bit expensive but the growth visibility and management credentials is exceptionally good, says Hemang Jani, Senior Vice President, Sharekhan. Excerpts from an interview with ETNOW.

Any specific reasons why metal stocks are back in demand?
It is something to do with the much better global environment and in India we have seen that because of the weak demand cycle, the companies have repaired their balance sheets and the debt part is at reasonably low levels. The decision making which was pending in terms of allocation of the coal blocks etc has started happening. A combination of these factors, including the SC judgment on Essar Steel, makes the entire sector look better from that perspective. The momentum may continue for a while because the corrections were quite deep over the last one-one and-a-half years. From that perspective, it is looking quite positive.

Some of the banks saw a move yesterday. ICICI will continue to be in focus today but among the private names, what is going to be on your radar? Where do you see the next wave coming in?
Axis and ICICI clearly would stand out mainly because the next couple of quarterly performances for these two banks are going to be exceptionally good because of the kind of expansion that they have done and the kind of the CASA, franchise that they have.

More importantly, these banks have gained market share at the expense of NBFCs. We definitely think that in terms of valuations comfort, Axis Bank and ICICI Bank stand out because there is a lot of embedded value. If you look at some of the subsidiaries of both Axis as well as ICICI, the sum of the parts basis makes it more compelling and 60% or thereabout of the total deposit is coming from retail. These are the two more winners over the next one year or so.

10 years ago, India was under-penetrated in insurance; 10 years afterwards also India will be under-penetrated. But what has made the fortunes of some of the insurance stocks turn suddenly? In 2019, post June-July, some of the insurance stocks have erupted like a volcano. Why is that?
A part of the money you know from the NBFCs and PSUs was looking to get deployed into the entities, where there is a non-funding business with better growth visibility. Insurance is a better option because most of the top companies have already completed about five to seven years of operations and the overall growth is showing good momentum.

When you have to bet for a five year -10 year kind of a story, then insurance should be on the cards. This is one key reason why we are seeing a lot of appetite for insurance names. We continue to like HDFC Life though it has run up and valuation-wise, it may look a bit expensive but the growth visibility and management credentials is exceptionally good. We think that appetite will continue to remain good for insurance space.

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