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HDFC, fundamentally strong corporate banks top our shopping list: Deven R Choksey

Few good quality companies still very strong, says MD of KR Choksey Investment Managers.

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Last Updated: Mar 31, 2020, 01.38 PM IST
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Deven Choksey-1200
Some of the corporate banks which have gone down to 0.5 times price to book and are fundamentally good could be added into the portfolio.
What is it that you have been doing in the market these past few days?
Certainly. We continue to hold companies with a fundamental approach. We look at businesses and keep on identifying companies which have up till now remained expensive but in the current market scenario are available at fairly decent valuations. Housing Finance companies like HDFC would remain in the preference; insurance companies would remain in the preference. This is the time to accumulate those companies.

Some of the corporate banks which have gone down to 0.5 times price to book and are fundamentally good could be added into the portfolio even considering the fact that in the near term, they might have relative pain in the business. But I would think that ultimately they would come out successfully because good management has the better strategy to deal with it. So some of these businesses definitely stand first as far as our list of shopping is concerned and we continue to look at those companies favourably.

Does it seem like the worst could be behind us or is there a possibility that once we know next week, what is happening with the lockdown, we could see further pain in the market?
Globally, equities have been hammered very badly. They have fully discounted probably at this point of time about the future of the business of these companies. Some of the good quality companies in the Indian market still remain very strong. Let us not forget the possibility of the scenario that when the current lockdown is subsequently lifted, you would see the immediate push up in the demand coming in. So one will have to look at companies a little bit more favourably at this point of time because the fundamentals are still there in the businesses and the companies are ready to take that advantage once the market opens up further; so I am definitely not giving up on that aspect.

What is your approach on the telecom companies, given the fact that now telecommuting, video conferences are going to become the way of life post the coronavirus. Do you think there is a lot of potential within the listed telecom players?
Yes, I would think so. Today you have a choice of companies, which is between Jio and Bharti Airtel. These two companies probably offer you the maximum amount of possibility as far as the product and the services are concerned. So certainly these companies will have a relatively better time going forward. Jio particularly would be much better placed because they have got the fibre to home product in place and if they expand this particular product faster, they would be the one who would be giving a complete facility to run the entire activity from whichever location you are operating from or even from the mobile devices.

So I would think that these companies are better placed today and certainly going forward, the future should be better. When the normal situation resumes, I would like to think that we will be buying some of these possibilities even for our regular working environment going forward. Also because the machines are going to be talking to each other simultaneously and that is where you are likely to see some of these telecom companies probably emerging stronger going forward.

What is your take on Future Group of companies where business is suffering because of lockdown and stocks are suffering because of the promoter pledge? It has been a straight line fall for Future Group, which owns big brands like Big Bazaar.
It is a tough call in the given situation for sure. Those companies which are largely exposed with a higher amount of debt are having a significant amount of pressure at this point of time though I do agree that to an extent force majeure clause will help these companies particularly on the rental side of the activities. So the cost structure to that extent would probably come under control. At the same time they will have to be significantly pumping in new capital going forward. Should that happen, it would probably be one step near to the survival stage; otherwise these kinds of companies will probably have to be looked at a little bit differently and probably allow them to continue their operations for a limited period of time.

Maybe some of the ideas will have to be thought of and help these companies to remain stable. Governments in different parts of the world have done this job. Many such businesses in different parts of the world would require the additional capital infusion coming in from the resources which are beyond their means. So obviously, they will have to be talked about.

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