Wealth creation | Deepan Mehta: Want to grow capital and create wealth? Look beyond FMCG, says Deepan Mehta | Job Binary


“Someone might have a trading opportunity in PSU banks, but I would not be a three, five, 10-year long-term investor in PSU banks like ICICI or Kotak. In this report, there is a big difference between private sector banks and PSU banks,” he says Deepan Mehtafounding director, Elixir shares.



How about buying your FMCG space?
We are bias neutral on FMCG and volume growth for FMCG majors, not just this quarter but the last few quarters, is typically low single digit or mid single digit and whatever the growth is. in the top row, it is related to the price increase they received.

In general, the entire industry seems to be stagnant. Rural has been a big hit for the FMCG industry, but this is also due to over-penetration and generally maturing of various categories in the FMCG space.

I think over the next few quarters or years, we’re going to see stagnant growth, and that’s not going to sit well with us in terms of higher returns. FMCG is a good place to protect your capital, but if you want to grow your capital and create wealth, look beyond FMCG.

What to do with IT? It’s not an apples-to-apples comparison, but some global IT majors have encouraging numbers and we’ll see their numbers roll out over the next 10-odd days. India’s IT industry has been under significant stress and we have seen three months of underperformance. Have they fallen enough to buy again?
You have to be patient with IT and the time to sell has certainly passed. We must wait for this cycle to resume. The long-term prospects for IT are great – be it large, mid-sized or even some specialized IT companies. Eventually, as the US and Europe begin to recover, IT spending will also return to a more sustainable level, and we will see tremendous growth in these companies.

Back to offer stories

But the next two to four quarters are very difficult. Of course they got the order books and the order wins to help them through the tough times. We see new order bookings, discretionary spending coming under pressure and this impacting growth rates. Therefore, if one has invested, it is better to look for better times in 2023, when all macroeconomic headwinds will be over and done with and good volume growth will be seen through this difficult period. Also, choosing mid-tier IT companies that focus on differentiated verticals or have IP-type businesses should be better than large IT companies. Ashu, we and our clients are invested in companies like KPIT. There are also some mid-tier IT companies that are very aggressive and we have seen numbers in companies like LTTS and LT. This indicates a growth rate that is higher than the growth rate of the industry and these companies are worth paying attention to.

What about the whole car package? New news from Volvo etc. it is assumed that due to the shortage of chips, the production had to be stopped again. Could this problem come back to haunt us, or do you think supply and demand is too expensive? Also, how are you playing the auto theme?
With four-wheelers, be it tractors, commercial vehicles or passenger vehicles, and including every passenger vehicle company, there are certain products in the UV space that are probably the fastest growing.

Right now, interest rate hikes have yet to affect demand and volume in the auto industry. If interest rates were 50 bps or higher, it probably wouldn’t have an effect, and if gasoline prices were at those levels, it wouldn’t be such a good dampener. So, these are two risk factors with respect to automobiles and if they are more or less, we are going to see a very good period in the next two to three years.

Auto companies have been going through a lot of challenges in the last few years – regulatory issues, interest rate, NBFC crisis and many other changes happening in the industry like moving to the sixth phase of state regulation and all that. volumes affected. But now the worst of them is behind us and we can see a great increase in volume. Margins are likely to be better because commodity prices have stabilized as well, so we are positive in the auto space.

Disclosure, we and our clients invest in cars. The best auto choice remains Mahindra & Mahindra as their capital allocation policy has come into play due to the type of products they market and even a slightly lagging tractor division. I think M&M’s are firing on all cylinders and this might be our pick, but

and should provide a decent income in the future.

Banks seem to be the event right now and the movement started through and. also taking part in the rally and now smaller PSU banks are also taking action. From a fundamental perspective, do you want to increase your pool of bank names from an investment perspective?
Banks have reached a golden age and I think this is a blue sky scenario for them where loan growth has picked up and loan losses are still out of hand and starting to affect profitability. The problem is that there are so many banking and NBFC stocks and so many to choose from and many investors tend to be overweight to equal weight in banking, so one needs to be careful from a portfolio perspective to avoid overweight. Generally I think if you have 30 to 40% of your portfolio in banking you are good but above that you enter the risk zone there because overconcentration in any sector is not a good way to invest. markets. You are right, I think the next two to three years are going to be great for the banking industry, even for NBFCs. If your portfolio is underweight in banks, then you can buy banks and NBFCs even at these levels. There are many choices depending on your risk appetite.

Our preference is for private sector banks and not PSUs, but PSUs should also have a decent trading rally as the kind of numbers they report are quite impressive; Overall, in the long run, private sector banks tend to outperform PSU banks.

Lately we have seen that we are doing very well, SBI is at an all-time high, what is your feeling in terms of PSU banks? Do you think there is a lot of interest there?
Most of the PSU banks are trading anywhere from 0.6 to 1 per cent and they have cleaned their balance sheets, they are well capitalized and the kind of network they have and the kind of brand equity they have and they can attract current account and savings account deposits, PSU banks in a very positive way at this time.

Perhaps the next year or two would be the best for PSU banks and stock returns as well, but the thing about PSU banks is that we never know when the tide will turn. Usually, after two to three years of aggressive lending, they have a spike in NPAs and it is difficult to understand when that point will be and what the quantum of NPAs will be.

Overall, I think their lending standards, risk management approach leaves a lot to be desired. Keeping this fear in mind, PSU banks may have a trading opportunity, but I would not be a three, five, 10-year long-term investor in PSU banks like ICICI or HDFC or Kotak. In this report, there is a big difference between private sector banks and PSU banks.



Source link