Mayuresh Joshi, Fund Manager, Angel Broking, tells ET Now that other than the couple of midcaps which can be a buy on dips in a staggered manner, ICICI Bank on any significant decline remains on his conviction list.
Do you believe that yellow weeds are emerging when it comes to banks or is it a space best avoided, barring HDFC Bank?
If you divide this space into three parts –. the retail private banks, the corporate facing private banks and the public sector banks, straightaway you see the underperformance of PSU banks in relation to asset quality and how elevated provisioning and credit costs are taking a hit on their balance sheet. Those concerns continue. Though a pickup has been witnessed in credit growth in the past few weeks, how much the PSU banks can take advantage of an improving cycle is to be seen.
For large retail private sector banks, the growth has been stupendous over the last few quarters. The retail advances are still growing at a very fast clip and coupled with the strong capital adequacy that they possess, the earnings momentum should remain strong. Again, valuations probably are on extreme ends for large retail private banks with price to book or price to adjusted book at elevated levels or a premium to their historic mean. PSU banks are probably languishing but the trade still goes with selective large private retail banks. The advances growth should prop up the earnings for banks like an HDFC Bank or an IndusInd Bank. So, we remain very optimistic on these banks.
As for corporate facing private banks, the pain that they have gone through in terms of the corporate book the SME and the MSME stress which is largely related to a huge watchlist, the drill down of that watchlist along with provisioning for NCLT cases and the growth in retail advances should hold them in good stead.
What you are probably seeing in terms of the regulatory moves towards ICICI Bank and changes in the management for Axis Bank, they might have some intermittent effects for these banks. The long-term story in terms of return ratios probably remains very strong. ICICI Bank on any significant decline remains on our conviction list.
What would be the key factor that the street is going to look out for next week?
Apart from what you are probably looking out for in terms of IPO listings, the global factor is still at play. So what happens in terms of tariff movement is going to be extremely critical.
Second, apart from the near term factors, the earnings outlook for Q1 is going to be extremely critical for the Indian markets at large and the third element obviously from a macro perspective is going to be where crude probably moves and how the rupee is probably moving .
The consensus is with the emerging market currencies depreciating against the dollar. I think a) it is more to do with safeguarding their own trade related issues because of the tariff impositions and to that end, some safeguarding measures are taken. b) The second element concerns how the central banks will take follow up action whether it is the ECB or any commentaries out of the Japanese Central Bank.
There are a lot of moving parts over the next few weeks and so the volatility for Indian markets might very well continue.
I do not know if you have been a buyer in the midcap carnage, but anything that is giving a buy signal out loud?
From the broader universe, music broadcast is something that I will continue to like. The old stations probably have broken even on the EBITDA front much faster than one anticipated, in 15 odd months. The new stations obviously are also going to have a lot of say in terms of the fixed cost absorptions and the old stations probably are seeing better yields in terms of both ad volumes going up and realisations improving.
At the same time, Aditya Birla Capital has corrected significantly. In my opinion, financialisation of savings, the NBFC, AUM growing at a very fast clip, the VNB margins of insurance business turning positive, housing finance probably having a strong growth trajectory along with strong NIMs and the equity AUMs on the asset management side of the business are holding up.
Within the midcap cement space, JK Lakshmi Cement is a buy on any decline. It already has seen a sharp correction, a significant 10% to 12% improvement is seen in volumes. Over the next two-two and a half years, revenues will probably improve in terms of their cost optimisation programme for their Durg facility. Both the conveyor belt and the other cost saving programmes should abet their EBITDA per tonne. At $82 on an EV to tonne basis, it looks very very attractive. On any significant decline, these stocks within the midcap universe can be a buy in a staggered manner.