ET Now: What is the big trend that you have drawn from this week? We have had a hectic activity in terms of earnings; you have had new stocks make it to the one lakh crores rupee market cap club and then you have had five central banks come out with policy action?
Mayuresh Joshi: Absolutely. I think the central bank policy action was at the forefront in the week gone by. But a large element in terms of the action mandated by the central bank were on expected lines. Again the governor, specifically in the Indian context, drawing out the inflation trajectory. I think the markets are also of the view that even though it is a neutral policy and even there might be a pause in the next policy, a 25 bps hike can still be seen with the 4.8 inflation projected for the second half and 5.1 for the first quarter in the next fiscal.
Having said that, I think the mixed results that have come through, the results in terms of positive numbers outweigh the weak numbers. That gives us reasonable amount of confidence that the second half should probably see reasonable expectations of earnings recovery carried well into FY20.
How the private capex plays out, divestments, what happens on the fiscal deficit front, with elections coming up over the next few months, I think these can act as overhangs for the market. But the market is climbing wall of worries and the US economy looks in fine fettle. What happens with trade war fears on the global front will also probably be something on the markets mind over the medium term.
In my opinion, I think results are something that will keep our markets on a good footing and that will show a reasonable amount of growth. So our own premise in terms of having a stock specific approach is going after good names that valuations are not too expensive still continues.
ET Now: There are concerns around the two-wheeler pack ever since Bajaj Auto talked about that pricing pressure. So one really wonders whether they have set the cat among the pigeons or not. You have seen that underperformance play out for TVS as well as Hero MotoCorp along with Bajaj Auto. There are fresh concerns around Eicher as well on whether Harley is going to bring about any damage to the segment that is currently dominated by Royal Enfield. A slew of downgrades coming in on Eicher, purely citing all the concerns around the rich valuations and the monthly sales data as well. First, I want to get in your take on what should one do with two-wheelers now?
Mayuresh Joshi: I think, ever since Bajaj Autos numbers were announced and what the management displayed in terms of going after the market share, sacrificing margins, had a trickle down effect on most companies within the space. But, a large element in terms of demand is still holding up for the better part of the second half of this financial year and the year after that. The expectations of good monsoon and MSPs may have a significant positive say in terms of discretionary spending, specifically from the rural and the semi-urban side, and it should hold volumes up.
On the other hand, in terms of the inflationary pressure that we have seen, I think all managements have probably alluded in terms of taking these hikes. So, I think all these hikes will probably mitigate the pressures that you have seen on the EBITDA margins and along with stable volumes, create the necessary leverage that one really needs to see on their balance sheets.
So, I think from an entire rural perspective, with the assumption of government spending, MSPs and good monsoon, Hero MotoCorp still remains one of our preferred picks.
Bajaj has been very-very resilient, specifically in terms of the export numbers, and what it has done in terms of Pulsar sales and in terms of cuts of two-and-a-half or three odd thousand rupees for the entry bikes, whether it is the CT 100 or the Platina in terms. But, Hero MotoCorp stays one of our top picks within the two wheeler space.
For Eicher in particular, the news surrounding the stock in terms of Harley coming in, I think that is a long way away at least at this point of time. The volume will normalise as per the management and the expectations, in terms of realisations holding up and the bottlenecks that they have seen in terms of productions, I think that should normalise in terms of waiting periods coming down. So the hold rating on Eicher continues with clear disclaimer.
ET Now: It is going to be hectic earnings week as well. Anything in particular where you think there could be some major outperformance or underperformance?
Mayuresh Joshi: A large element of how the public sector undertakings have reported numbers will be very interesting to watch.
State Banks numbers will be important, with the drill down of their watch list, and the expectations of a large element of their subsidiary mergers behind them. Asset quality pressure should also start coming off, reflecting in better credit cost management. So, I think SBIs numbers will be very-very interesting.
A few pharma companies, I think, what Cipla does with its domestic formulation growth and the expectations in terms of the respiratory inhaler, specifically for the British or the European markets, and any launch date lines would be interesting to know.
And the OMC pack, I think, what you have seen in terms of crude price hikes and what happens in terms of inventory gains or losses are something to be watched out for, along with the management commentary in terms of their capex plans, where crude moves and their sensitivity to earnings and cash flow.
So, OMCs, few pharma companies and State Bank of India will be on my radar.