What IIFL’s Abhimanyu Sofat is looking at in a falling market
Would the excise cut in ATF be a big boost for aviation?
As of now aviation may not be the best sector to invest in considering that the currency may depreciate a bit and that could lead to an even higher oil price. Also on the consumer side, the demand scenario may be a bit a tepid going forward considering that overall consumer sentiment is likely to be a little bit lower. I would only look at IndiGo which is around 15% lower than the current level to build a position in that particular stock. Until and unless we see crude sustaining around $70, profitability for the sector will remain a challenge. They have not been able to pass on the increase in crude price effectively. Right now it is better to stay away from the sector.
Which are the companies you would be eyeing from an earnings perspective?
Bajaj Finance is clearly one of the stocks to look at. The stock has corrected a lot from around Rs 3,000 level to around Rs 2,200 level. That particular stock could be very interesting to look at around Rs 2,000 level, where it would be trading at close to around 4.5 price to book FY21.
Going forward, deposits as a percentage of funding mix, at around 15% is likely to double over next four years and they have enough money in terms of less than one year bucket to take care of any short term liabilities. Though there may be some slowdown in the B2B segment, whatever the government has announced in the way of SBI helping out NBFCs, for the larger NBFCs, things will continue to be quite good. The company will continue to report close to 35% earnings growth going forward. So, Bajaj Finance looks like an interesting bet.
Among the largecaps, ICICI, Axis Bank as well as SBI look pretty good because private sector banks should do well with public sector banks losing market share and now NBFCs especially the smaller NBFCs not growing that much because of the issues with capital. Also, the banks are likely to lend to NBFCs at slightly higher rate. So within the BFSI space, these would be the companies that one would be looking.
In addition, look at companies from the gas sector -- Mahanagar, IGL as well as Petronet LNG. as we feel the impact of last couple of months will be relatively less on these companies.