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Why Devang Mehta of Centrum is bullish on these 2 sectors

By next year, some ancillaries supplying to two-wheelers or four-wheelers may bounce back, says Mehta

ET Now|
Updated: Dec 06, 2018, 04.35 PM IST
Devang Mehta-Centrum1200
We like some stocks in fast moving electrical goods category and also some stocks in the paint space which have been helped by the falling crude prices, Devang Mehta, Head- Equity Advisory, Centrum Wealth Management, tells ET Now.

Edited excerpts:

What is the call on ancillaries and defence-oriented engineering businesses? Bharat Forge is a case in point. Yesterday it was quite a rough day for the stock.

A lot of frontline ancillary companies in India are more or less dependent on global trends. Tata Motors, especially JLR, has seen very contradictory sets of numbers across Europe, China or even US. Any company that is export oriented in terms of sales of automobile and auto components, should not be bought at this point. On the other hand, while consumption demand in terms of auto sales in India may have slowed down temporarily, but in the next year or so, some ancillaries supplying to two-wheelers or four-wheelers in India may bounce back on renewed domestic demand. But that will not include Bharat Forge which has a lot of global dependence.

What is your view on the Glaxo Consumer-HUL deal?

This is one deal where the synergies would help HUL to get into the type of market where they are not present. But the valuations are not at all supportive. On a trailing basis, you talk about valuations in excess of 65-70 times and on a one-year forward also you talk about anywhere around say 58-60 times! It is a deal which will help both the companies to create long-term wealth for shareholders. It will go through a lot of regulatory hurdles, in terms of how the deals shapes up and for the next one year at least would be on radar.

If there is a correction and the valuation turns very attractive and the volume growth also improves, it would be a buy, otherwise not.

What are your top three midcap names you will consider value buys in this market?

We feel that value can probably emerge after some time but more so, we have been chasing growth and this would be a popular trade in the market. We are more present in market leaders in large, mid and even some smallcaps.

We like certain stocks like Havells, but again not recommending it. We have it in all of our portfolios. There are some stocks like Havells which are continuously growing and do not see much contraction even in the bad phase of the market or the economy. The margins suffer a bit but this is clearly a fast moving electrical goods category which has come out of its own in terms of branding and pricing power. There’s Havells.

Something in the paint space. If crude stays somewhere around $65-70, there would be a lot of impact on companies like even Kansai Nerolac, Berger Paints. This is another category which can show phenomenal growth in the next couple of years on the back of good demand.

Also Read

We are slowly accumulating auto stocks: Devang Mehta, Centrum

Devang Mehta on where to buy in midcaps

Why Devang Mehta is betting on these two banks in the broader market

Get into cyclicals with select capital goods or cement: Devang Mehta

Market could see 3-4% correction; use it to find opportunities: Devang Mehta, Centrum

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