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Private banks and FMCGs to lead the next rally: Hemang Jani, Sharekhan

Among midcaps, Polycab, Atul Limited, some of the midcap cement companies are on our radar.

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Last Updated: Oct 10, 2019, 11.35 AM IST
Hemang Jani-Sharekhan-1200
At some stage there will be a big rally in largecaps with certain midcaps, says Hemang Jani, Senior Vice President, Sharekhan. Excerpts from an interview with ETNOW.

Would you buy autos now because DA has been increased, interest rates have come down, base effect has kicked in, retail sales are stabilising? Whatever could go wrong has gone wrong for autos, it is not that all Indians will start using Ubers, it is not that all Indian cars will become electric. Is it time to buy a Maruti or for that matter a Ashok Leyland now?
Yes, I agree with the assessment that a large part of the pain and the bad news is already known and is already in the price to a great extent. The key question is whether we are going to see a revival in the near term and what would be the intensity of that revival. Our belief is that though valuation wise, in terms of price damage, the worst is behind us, the revival maybe slow and probably the market is hoping that this revival to be a bit steeper. We are just waiting for two, three monthly data points and once we get that, we would become far more positive on auto as a pack.

Within the space, definitely Maruti looks to be much better vis-à-vis two-wheelers though last two years they have been struggling and we are not able to see that big rebound in numbers per se. Definitely, at some point we would turn positive on the auto as a sector.

No Indiabulls, no telecom. What else is there on your radar apart from TCS?
Our belief is that somewhere around 11,000 or thereabouts, the market has already made a base and what is going to happen is that the companies which have been generally doing well, particularly in this quarter, will also get the benefit of the tax cut, are the ones that will lead this particular rally.

We have been saying that a large part of the private banks and FMCG companies would be contributing to this upside. At the moment, we should focus on that and at some stage you will see a big rally in largecaps with certain midcaps participating as well. Some of those are also on our radar, maybe a Polycab or Atul Limited, some of the midcap cement companies which are extremely well placed in the current environment.

Apart from Bajaj Finance what are you doing in NBFCs?
In NBFCs, we have a buy call on L&T Finance and HDFC of course is the top buy that we have at this point of time. After this entire NBFC crisis emerged, we have been extremely selective about what we are getting into. Our sense is that in terms of price damage, we may all feel that it is already done but till the uncertainty about the kind of asset quality we are going to see and whether there is going to be an incremental negative news flow, that part is still not very clear and the debt market per se has not stabilised. We are not too positive on to two- tier, three-tier NBFC companies even at this point of time.

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