2 sectors Kunj Bansal is bullish on for medium term

In fact let us look at the market from a slightly medium term perspective. While the last week’s movement as well as the development and events have been overanalyzed and over-talked about, if we look at our own market now it is the last 18 months, one and a half year that the market is in a kind of a range. So the same levels of about 18000 odd were there in the months of let us say August, September 2021 and today we are at the same level of Nifty.

And in these 18 months, a lot of things have happened, a lot of water has flown.
So we first came out of the Covid shadow and then negative developments.

From there, we moved globally as well as in India, very high inflation that obviously got followed by the interest rate increase all over the world, again by global institutions and by the Indian RBI. And then we went into the geopolitical war, that plus some other developments leading to commodity prices going up.
So we saw in the initial period of 2022, how the metal prices moved up sharply or rather before 2022 and then they corrected, oil price went up to almost $100. So, that has been the kind of the market that we are seeing for 18 months, not moving anywhere that partly addresses the question that we keep discussing and talking about that Indian markets are always expensive.

So yes, that is a fact, that is a hard fact of life. India is now the largest growing economy as projected by the various world economic organizations. So for a largest growing economy , the markets will be expensive. But that is the kind of correction, that time correction that you get in these kinds of markets. So that is where we are in terms of the Indian market. has declared its numbers and when we just look at the numbers, it is 14,200 crores versus estimates of 13,000. But, say if there is nothing major new in the numbers, what will be your view on PSU Bank specifically, SBI?
Yes, so we, till about, let us say 15, 20 days ago or about a month ago or so, we were seeing continuous rise in the PSU bank’s share prices, obviously leading to the revaluation that happened in the whole PSU banking space, which was well deserved, because this was on the back of the consistent improvement in the financial numbers over last two, three, in case of some banks, four quarters.
And in terms of multiple parameters, there was improvement in terms of asset quality, there was improvement in terms of disbursement growth, there was improvement in terms of net interest margins, and as a result leading to the profitability improvement as well. So, now at that point of time, if technically we talk, not that I understand technicals too much, the PSU Bank Index had reached almost a seven year ago level. So that also puts in light the fact that in the last seven years, the six years were of long underperformance by PSU banks and last one year or maybe if not one year, slightly longer one and a half year kind of period was a period of sharp outperformance. From there, partly led by the market correction, partly led by the fact that the percentage rise or even in terms of absolute rise that had happened a lot in the share prices, and then partly led by the recent market development, corporate developments, news flow announcements, we have seen some correction.

But given the way the numbers have been improving, I think the numbers for PSU banks are likely to continue to improve. At some point of time, whenever we see stability in the market, we will see the buying interest coming back in the PSU banks and as a result, we can see them start going up again.

What will be your idea in terms of any stocks that you like after this correction that we have seen anything interesting in infrastructure, cement, IT how would you look at any of the names?
What has happened is as we have been repeatedly discussing that especially in terms of large cap indices we are in a highly range bound movement despite some of the reasonably big events. Along with that we have witnessed flattishness in the market through the result season. Now some noticeable things that have come in the result season and as a result of that follow up is; one the strength in the IT sector. After a reasonably long underperformance of more than one year for the last one month we are finally seeing a lot of money seemingly going into the IT sector and of course as I said it is backed by the reasonably decent numbers that the companies have reported. The two sectors where the numbers have been weak largely in line with expectation maybe more than expectation are cement and consumer durables. Now on the back of the weak numbers as well as the overall jitteriness in the market the stocks in both these sectors have fallen sharply. When I say sharply it means anywhere in the range of 25-30% from their peaks in the last six months or so. Now that gives a deep contra opportunity for patient buyers to buy into these sectors.

But when I say deep contra one has to keep in mind one as I said patience that could be a long time period to an assumption somewhere that the top line demand will come back. Consumption demand we are clearly seeing that slowdown has been happening both in durables as well as non-durables. Here I am talking specifically of durables and more importantly, the fact that the commodity prices should correct further from here onwards leading to margin improvement. So that is where the valuation wise the stock prices of these two sectors cement and consumer durables have become very attractive for medium term investors.