Next market bottom would be closer to 16,200: Nitin Raheja

Where do you see the bottom for the market? It was 15,100 in June and you do not expect markets to go there, but 16,000, 15,500 – where would you put the bottom? Currently we are at 17,500?
I would think that 16,000 odd would be the number where the market could go if it has to correct, but definitely not around that 15000. If you look at it from a fundamental perspective also, if you go ahead to ‘24, you are talking of a 1000 plus earnings for the Nifty and then you are talking of it trading at about 15-15.5 times roughly, which for an economy like us which is growing at a nominal GDP of 13% to 14% is pretty fair from a valuation perspective.

I would think that it is definitely an outstanding opportunity to buy but if we get this correction now, it would be closer to 16,200 from where the market should bounce back.

What sort of companies should you look at in such an environment when inflation is likely to cool off and rates go up in the near term? Would FMCG be the best play because they have taken the pain of high raw material costs and have taken price hikes to pass on that?
FMCG is a good place to look at. However, the only concern on the FMCG pack is that the rural economy continues to be a drag. Even the monsoon has not been evenly spread this time and the rural economy which was expected to come back on the back of good monsoon and festival season might be impacted.

Let us hope that August and September see the rains come back in some form but clearly they will benefit from lower prices. The key element has to be top line growth and volume growth coming back which is where the challenge is in the FMCG plays.
But clearly the sector that we are most bullish on, irrespective of inflation and which should actually benefit even if inflation is there is the whole financial pack and the financial services. We just think that post almost three or four years of pain, this space is very well poised and should benefit from a lag in terms of liability getting repriced. In that sense, they should see a better margin and see credit growth come back.

Just last week, the largest public sector bank declared numbers with almost 14% plus credit growth which is fantastic! The relentless selling that the sector has seen over the last 10 months has made the valuations look very attractive. We are bullish on the whole financial space at the present moment.

What is your top pick in the banking and financial space? Would you play it via insurance or via private lenders or public lenders?
We like the private lenders and they are the top of the pack. We like some of the domain specific non-bank companies as such and more so we like the mortgage space within that tremendously. Lastly, we like the insurance pack within that.

Are the fundamentals hinting that could emerge as the leader and beat the ranks of Kotak, or an or even for that matter?
From a valuation perspective, I do not think some of these tier two or tier three banks are ever going to match up in terms of the historic valuations that they used to enjoy prior to 2018.

This is primarily because during this period of time, the larger banks have really taken market share, raised low cost funds in the form of capital inflows or deposits and are the best place to capture the best customers as such. The tier two banks saw so much selloff due to the problems they faced during 2018-2021 and saw some amount of rerating. We might see them deliver better performance in terms of the stock prices purely because of rerating. Once that phase is over, I continue to believe that the large players are going to perform and do better.

Between and , what do you like?
We do not talk about specific stocks as per our internal policy but both the sectors as a whole are poised to do well. If you really look at the hotel sector, the kind of room that we are seeing at present has a lot to do with pent up travel needs both on the business as well as leisure side. I think this is largely because the sector as a whole had delivered under par return ratios for more than a decade and so. There was hardly any accretion in terms of rooms and as the economy and growth are coming back and India is poised to do well over the next few years, we are seeing this shortage of rooms play out. Also a lot of companies in this sector have now moved from asset heavy business models to asset light. So hotels as a sector should do very well.

Coming to autos, the whole PV segment is looking good. New models are driving and whichever company has come up with new models has grabbed market share. I think it will be interesting to see how the leader in the segment comes up with the model upgrade which was lacking for the last couple of years and resulted in loss of market share.

We are bullish on both the sectors and both have seen a run up. I would probably hope to see a little bit of cooling off before we look to build positions there.