Why Kunj Bansal is willing to buy afresh in Polycab

Yes or no on ?

Yes you are right the market is quite bipolar as far as Zomato is concerned. There are a few things here. Obviously on the clear basis of the fundamentals and financials, there is no way one can justify the public listing, public participation or an IPO or listing of such a stock which does not have profitability, which does not have cash flow and the visibility of that in the foreseeable future is also very low.

So the question comes then what? I think it comes back to the market liquidity flow, certain sectors being liked by the market and things like that. Ideally these are the kind of investment opportunities which … stayed in the unlisted world. The regulatory authorities, namely Sebi, has relaxed the listing criteria for the companies to come in with IPO in the last few months and probably rightly so. Ultimately, it is the investor in the market who is taking risk. These companies, till some time back, were listing abroad and people were making money there.

So coming back, I do not think valuation has anything to do here and one should try to justify or not justify it. The only thing is whether one wants to take an exposure to such gig economy/ fintech/ online stocks. So if one had to take exposure to that kind of a stock, it should have a limited weightage in one’s portfolio. If somebody wants to buy it, it has to be at the present valuation. So, conservative investors need not take part in it. But the high net worth individual (HNIs) investors who want to take some risk and of course, institutional investors can take exposure but they will have to accept the valuation.

Despite so many problems, Siemens has come out with a good big uptick in their order book and the stock is 7% higher. Your view?
If we analyse the announcements by the companies or the management commentaries post results in March quarter as well as in the current ongoing June quarter results, there has been a clear indication of capex going up. Most of the companies have now started talking of some kind of capital expansion either as a brownfield and in some cases greenfield; increasing capacities, making newer investments. Some of these sectors which have announced capex include auto, the auto ancillary pack like tyre companies. Specialty chemical companies have announced capex. All the commodity and metal producing companies have announced capex besides a few others. Siemens supplies either directly or indirectly to the capital goods oriented sectors, growth oriented sectors and that is where clearly the order book is building up.

The market is probably rewarding that much more than the current financials because if you have a order book over a period of time, it is that it would hopefully convert into top line growth with a good bottom line growth. If the demand goes up, probably pricing power will return at some point of time as far as the raw material prices and other things are concerned. In the bigger orders these days, these are passed on through a pricing mechanism so that it does not affect margin.

I think that is where the whole positivity is coming from. Also the fact that with continuous inflows coming into the Indian market, new money keeps looking for the newer sectors which will become growth sectors in the next one, two, three years. That seems to be happening with capital goods and infrastructure oriented sectors.

Where do you find opportunity in this market to buy afresh? Also, would you be brave enough to do so?
That is a question which is always difficult to answer. If we look at two, three things that have happened in the market in last 10-15 days or so, we see that Nifty after consolidating for one and a half month in and around at 15,900 mark, finally broke on the upward side and we had a sudden surge of FII inflows for three, four trading sessions which with the help of largecaps, took the Nifty to a new life high closer to 16,300 odd.

In this whole process, small caps and midcaps underperformed. Wednesday also for a large part of the day, whichever incremental money was coming in, did not go into mid and smallcaps. Looking at the largecap participation coming back, probably some part of the money was taken out of mid and small caps and was shifted to largecaps. Now in such a market, it is better that only those who have a reasonably medium term horizon should take a call. The very short term participants will obviously be traders and they know their stop losses and will accordingly trade and should trade.

Coming back to the medium term investors, 15 days ago when mid and smallcaps were daily hitting new 52-week highs or new life highs, they were going anywhere and everywhere. That probably is the time when a feeling of missing out (FOMO) was coming in.

Last 15 days’ correction has led to marginal corrections in some good quality midcaps. Those could be 5-6% correction and in some cases up to 10-15% correction. I would go with the companies which have announced the results for the June quarter because that removes part of the uncertainty. Within that, despite the correction, the valuation may not be comfortable, but one stock which comes to my mind is on the consumer durable electrical electronic space. It is

, a relatively new listing. That is a company which has given reasonably good numbers. In the last three, four quarters since listing, the company has been doing well . in terms of introducing newer products, gaining market share, selling more branded products and in general improving its financials in terms of top line, bottom line growth and return ratios. That is the kind of opportunities that one can look at in this market.