Reliance is benefiting from Russian oil imports, says Pashupati Advani

“I am moving deposits and putting FDs because I think the FD rates at 7 plus are quite attractive and certainly something to look for. People are actually taking money out of savings accounts and moving them into FDs and putting two-year FDs. People are very comfortable with , ,” says Pashupati Advani, Founder & Chairman, Global Foray. Edited excerpts:

ET Now: Of the earnings that have been reported so far, it seems that the majority is in line with Street expectations. Given that we had a bulk of the banks’ earnings coming out over the weekend. What has been your key assessment of the big numbers that have been declared so far?
Pashupati Advani: I think the expectations are a little softer than I would have thought. We are going into the Budget next week and I therefore feel that the market is reasonably buoyant but it does not feel like it, I mean that is my personal take. So some of the earnings that have come out have been okay, some of them have been weak so I mean it is a tough call and I think that all is a bit of a push according to me even though all the banks have seemed to have pushed their earnings out.

ET Now: What is your take then, on specific on what we have seen within the entire IT basket, the kind of numbers that have come out in terms of midcap IT as well in particular. For instance, for there was a guidance upgrade coming in, there was a guidance cut for L&T Tech. We have seen a margin recovery for the likes of LTI MindTree. Has there anything in particular within midcap IT that has stood out?
Pashupati Advani: Well, I am not so bullish on IT generally. This new wave of chat GPT is going to change IT in a big way and it is certainly going to change the way business is done. The problem that we are facing is that all our companies are trading at huge multiples. When the multiples are high, there is only one way to go, which is downward. So as I said, I am not particularly bullish about IT.

ET Now: What is it that you are making of cases like a for instance a) the pressure that you are seeing on the numbers and b) to add to that this entire new challenge which is the Bombay High Court now disallowing the write down of Rs 8,400 crore of AT-1 bonds?
Pashupati Advani: Yes Bank is a special case. It was taken over when it was in a mess.

took it over and is trying to make it a second bank — in the likes of Air India and Air India Express. You got SBI and Yes Bank so I think it is going to take time. This was a setback obviously because nobody was expecting the CEO of Yes Bank to be pounding his fist saying they have no right to say this but let us see what happens when they go to Supreme Court because obviously they will have to go there to try and get any kind of lessening or reversal.

There are other banks, which have turned around like RBL. It has gone from double digits to around just under 170, gone up to 119 and come back down again and of course, the traditional frontline banks, which are doing very well.

ET Now: What is it that you are doing with banks and the larger ones here is what I want to talk about the performance from a Kotak, the performance from an ICICI Bank. I mean, it more and more seems like that the skew has turned towards either PSBs or the more bottom-up stories which have not participated in the 2022 move in banks. So an ICICI bank definitely is not going to give you that alpha. It may be a Kotak or an Axis?
Pashupati Advani: Well, I hate to be flippant but what I am actually doing is moving deposits and putting FDs because I think the FD rates at 7 plus are quite attractive and is certainly something to look for. You are seeing the movement of mutual funds also from equity mutual funds to fixed income mutual funds and you are seeing it definitely in the deposit space where people are actually taking money out of savings accounts and moving them into FDs and putting two-year FDs. People are very comfortable with HDFC Bank, ICICI bank and the deposit base is a little bit I would say more fair-weather so that is why they are having difficulties.

The others are average as you are showing so I think that is one thing. But on the share market side, obviously if people are coming back, they are coming back to quality, FIIs have been selling, FPIs have been selling and I think we are seeing some selling in all the top-rung banks so maybe it is time to, I am personally not very happy about the banking sector but I think there is a lag effect. Certainly, it is 20% odd of the index, so it is here to stay but I think this time next year, we will be at similar kind of levels.

ET Now: What are your thoughts on post its numbers, it clearly seems that the O2C business E&P that has driven the beat. It has been a bit of a disappointment when it comes to Jio, ARPUs as well have been quite soft. Retail was relatively strong. Your views on the earnings?
Pashupati Advani: I think is benefiting from the fact that the country is buying Russian oil and they are also getting their share of that. The refining business has always been the part of the business and it has been the driver for the other two. Regarding ARPUs, I think we are seeing a gradual increase in rates so I think that is helping. That is a slightly longer term effect but I think that will do well. Regarding retail, it has been good. I think that it will continue to be decent. Plus Reliance has gone into online in a big way and they are buying other businesses that are synergistic with its retail.

Reliance has always been the stock to have as a mainstay of your portfolio. I think that it actually benefits when they split into three which I guess they will do in the next 12 months. If I was to bet I would say it is probably going to be this December on Dhirubhai’s (2:57) birthday. I think that is what it is. Regarding the Budget, I think it is going to be a friendly budget because this is the last one really before the 2024 elections that is going to have any kind of effect. Hopefully the basic exemptions will go up because inflation has been there in India and certainly a lot more expensive to live. Hopefully that will help. There should be smiles after February 1st after Madam stops speaking.