Looking for opportunities in metals and PSU banks: Yogesh Mehta
The biggest plus point for investing in MNCs is that they are much better on the compliance side.
Do you think midcaps should do well from here? When the numbers are coming in, some of the stocks are reacting quite sharply. Is that because of low valuations?
Yes, that is one part and secondly in the midcaps and smallcaps, as the flows are coming into the mutual funds, they are also having a compulsion to buy those stocks and with better than expected numbers, we are seeing a buying spree. In case of low volumes, the prices surge and this is bound to happen because on an average, a Rs 100 stock has corrected to almost Rs 50, Rs 40 and Rs 35 level. Already there are no sellers and investors are there. The weak hands and the leveraged hands are already out from those stocks’ list basket. That is why it is bound to happen. It is a natural psychology and that is why we see such kind of spurt in good quality names. I would say that investors should do their due diligence before investing into midcaps. Those are not sectoral allocations. Those are individual companies which have their own individual reasons to grow.
Any top calls you want to leave us with today?
One of the healthcare companies has come out with numbers which are very much in line with the expectations and for the next two, three quarters, the growth rate will be maintained. Fortis is one.
Metropolis is a company where one can look at on the investment side from current prices and that give you better returns over short to medium term.
What are your thoughts on some of the MNC names? They have returned shareholders some pretty healthy gains so far.
The biggest plus point for investing into MNC companies is that they are much better on the compliance side. The growth rate is higher because they are global companies and they have got a shelter there.
Secondly, ROEs and ROCEs are much better. In the last one year, we have seen so many compliance issues and many of the companies have gone from Rs 150 or Rs 350 or Rs 500 stock to zero or almost zero. This will not happen in MNC stocks. They are regular dividend paying companies.
We have seen a good flow into largecap names. Now that money is shifting into those MNC companies, which are dominated by the pharmaceutical names. I would say Sanofi, Astrazeneca among pharma, P&G, Gillette in the consumer segment, all have given better performance and one should look into these companies and are on the safer side.
Are you worried at all about the macro indicators given the kind of movement we are seeing on markets?
My reading is that though this rally has no relevance with the macro and micro factors, even the global concerns. We are seeing this rally because of the emerging market rally and the US markets are also getting stronger. At home, the crude and the rupee both are finding a strong support and RBI’s stance this time should be a status quo.
Overall, macro and micro are very much in favour for the Indian economy as far as we can say that the bigger, larger picture has unfolded once this corporate tax rate cut was announced. The numbers from the corporate earnings would be much better from the third and fourth quarters as well. That is what people have anticipated in advance and that has been projected into the price.
I would say that for the next two weeks, there is nothing on the harm side for the markets or for the economy.
There was a slight cool off today, but otherwise markets still are heading towards higher levels. What are the key names that are standing out to you?
I was bullish on auto for last three weeks-four weeks because of Dhanteras and Diwali festivities sales numbers, but once the numbers are out, the prices have already moved, The auto index was quoting around 7700-7800 or is now almost 8500.
What I would prefer from here is on the cyclical side and on the PSU bank side where I think the asset quality deterioration is much more in control and so slippages are under control.
PSU banks would be a better opportunity to get into from here on. PSU banks as well as the metals will provide a good opportunity since US-China trade war has settled somewhat. The China manufacturing index is also showing some better numbers. The prices have corrected almost to a large extent in this basket. So, metals and PSU banks would be the two sectors I would be looking for at the current prices.