What is the view that you are developing right now on private versus PSU banks?
I think there are two aspects here. One, in terms of the entire sector and deposit mobilisation, seems to be the sore point for stocks within the private space or the public space in general and therefore how deposit growth will shape up is something that the banking industry will look forward to. Do they look for alternate sources of funding, commercial paper, certificates of deposits? Do they increase their lending rates? Do they increase their deposit rates which might take a little bit of a hit on the NIMs and spreads? All these aspects are something to be looked for, for the sector as a whole.
Having said that and with the expectations laid out the earnings expectations for most banks within BFSI probably still look very strong. Asset quality pressures are significantly off. You are probably seeing capital adequacy remaining extremely strong, specifically tier I capital and the provisioning that most banks have whether private or public on their balance sheets will cover in terms of expected losses over the next few quarters as well. The expectation in terms of how this entire scenario plays out will only be known in the next two quarters. But looking at what you asked me in terms of the argument for private versus public, I think both spaces still seemingly look attractive.
Now that monsoons have been rather good, you have the festive season, wedding season coming ahead, do you think now is a good time for someone to foray into the FMCG space?
Our take on the FMCG space is that with expectations of inflation cooling off and the expectations of the rate cut cycle also expected to initiate in India, the rural consumption should start taking a big boost. Therefore, I think most management commentaries from within the space are indicating a significant amount of rural discretionary spending coming back in the second half with better crop produce and better crop realisation and so on and so forth. Now, as that translates into better volumes and better price realisations as well, both volume and price-led growth should be relatively better for the sector as a whole. Obviously, considering the kind of SKUs that they have introduced the direct reach in terms of retail spread and expectations in terms of the presence, both in terms of online as well as e-commerce, I think that should also abet growth when it probably comes to volumes across product categories.
Having said that, our own sense for the entire space is that QSR players should show steady recovery from the second half. FMCG companies selectively are looking attractive based on all the parameters that I discussed. A few of the stocks that we hold in our global portfolios are stocks like Jyothy Labs, Mrs Bectors Food, where our belief is that it should start getting reflected in all these factors in terms of better volumes and stability in earnings as we map that to our EPS ratings over the next few quarters. So, being a little bit selective, but optimistic on FMCG and QSR as a space.
Are you spotting something interesting and how would you navigate the week coming ahead?
I think it should be a reasonable amount of time. Do not see any structural downsides for the market. Having said that, we like Praj Industries at Marketsmith India. Our belief is that the kind of innovations that Praj is making outside the petrol-diesel blending, the diesel blending and marine blending, they are into high purity solutions, their engineering business, specifically in water management, is doing well. They have got a decent order book in excess of 4000 crores, that is not much of an issue. Margins have been pretty solid this quarter around and show signs of improvement as well.. So, it fits most criteria laid out in CAN SLIM and therefore, Praj probably becomes one stock that we are liking at Marketsmith.
