Invest in auto, reaty sectors via ancillaries | Economic Times

Among real estate ancillaries, we have added two stocks -- tile manufacturer Kajaria Ceramics and sink manufacturer Acrysil, says Daljeet Singh Kohli, CIO, Stockaxis.com. Are factors like further opening up and blockbuster movies coming to the big screen already factored into PVR stock price and are we likely to see a gradual scale up? The stock is at about Rs 1,470?Yes the market is aware of all these facts and the stock price has factored in all the negatives. If these negative numbers and losses were to sustain for a longer time, then the stock would have been trading at Rs 600-700, but that is not the case. The market understands that this was an extraordinary time when they had to close everything and things should improve going into the future. The good part is that a Tamil blockbuster was released on January 13 and the kind of response it got put fears of people never coming back to the cinema halls to rest. It showed that ultimately people will move out and will go to the cinema halls and that is what is shown in the PVR’s price also because otherwise it would not have crossed Rs 1,400. We feel that at Rs 1,400-1,500, there is not much further upside potential unless they open up fully and start building up on the F&B revenues. So, it may not be the right time to enter the stock now. If you are holding the stock, continue to hold it and we will have a positive view but we will enter at a later stage, either when there is clarity on what kind of revenues they can generate from ancillary businesses like F&B and or the stock price corrects. At this point, we are not invested in this stock in our portfolios. We will wait for the right opportunity, but the view is positive. What about the auto sector? What is the Budget likely to dole out for the sector?The auto industry will always have a long list of demands. If you ask for 20 things, probably you will get one or two and so it is always good to put out a long list. But one should not really expect a tax cut from the government as they already are so constrained and are looking for avenues to increase their revenue. So I am not expecting any major changes there. In any case GST, etc, is not a part of the Budget. If it has to be done, it has to be done outside and we are not expecting that. The only thing that people are talking about is the scrappage policy, which has been due for a very long time. The minister has been talking about that for almost four-five years. It is already prepared and waiting for approval. But again, the scrappage policy does not necessarily have to come through the Budget. It can come outside the Budget also. We will expect policies for growth and economic momentum from the Budget. Macro will be more important particularly to sectors like auto. If they are able to revive economic growth, it will automatically have an impact on all the sectors, autos included. We have a positive view on the sector as such. We are positive on both passenger cars as well as tractors. But the stocks have already moved a lot and have given us good appreciation. So, we have moved out of all of them. Right now, we are only playing through auto ancillaries. Some of the auto ancillaries hold promise and in terms of valuations, there is comfort. We are still positive on some of these ancillaries. Is Bharti Airtel emerging as the new favourite in the telecom pack? Could one focus on Bharti Airtel as the most strategic play?I have a positive view. We have again reinitiated the call on Bharti. We have recommended it to our clients again. We used to hold it earlier. We moved out when the negative news about rebalancing came in. We have re-entered it now that the overhang is gone. We believe around $700-800 million inflows can come. A similar thing happened with Kotak Bank a few days back when MSCI rebalancing happened. The bank stock had moved up from Rs 1,400-1,500 to almost Rs 1,900-2,000. We can see that kind of effect in Bharti also. In terms of fundamentals also, they have shown remarkable improvement. They have maintained their subscriber base. The only crank in the entire show is that many people have been expecting that Bharti will raise prices and ARPUs will go up. We are not expecting that to happen so fast because the major competitor still does not give that leeway for them to increase ARPUs too much. But even without the increase in ARPUs, if they maintain the subscriber base and keep on adding to that and make a lot of money through other allied services, that will help them. The rebalancing from MSCI also will be a good trigger price for the stock to move up. So we are positive and have started Bharti AIrtel stocks again. What about real estate? What is in store for the rest of the year?The first move in stock prices is over. I do not see any merit in entering at this point of time. Going by the data, there is too much noise about so many thousand houses getting registered in December. All that is good, but it has more to do with the impetus given by the state government and the pent-up demand. The people who were sitting on the fence thought this is a good time to use this opportunity and save something. And saving 2% or 5% on a house of Rs 2-10 crore makes sense. But we will have to wait for some time to see whether this trend reversal in the entire sector will sustain. It will depend mostly on how the overall economy pans out from here. The overall general sentiment has turned around. There’s a feeling that we are out of the pandemic and things will become better; job loss and salary cut fears will recede. But how much will be the increment or will there be an increment at all are things we have to wait and see. For the re-entry into real estate sector, you will have to either wait for the correction in the stocks because they have all moved very fast and almost doubled from their lows. We have to wait for the right valuation or see if sustainability is proven via Budget sops for the housing sector or revival of overall economic growth. At this time, we are sitting out of the sector. We have not invested in any of these. We can play this indirectly through cement which we like. There have been good moves in some of the small and large cement companies. We would like to play that indirectly rather than going through real estate stocks. Where do you stand when it comes to the real estate? Are you convinced by the pull back?Commercial real estate will come back when people come back to offices. Residential real estate is picking up thanks to work from home and savings. People are also looking for a bigger house and this phenomenon is seen all over the world. We have seen this kind of thing happening in the US also. We will wait to see if the rise in real estate demand is sustainable but as of now, we are plying it indirectly through home improvement and cement stocks. We have added two stocks -- Kajaria Ceramics and Acrysil. Acrysil is a sink manufacturer and Kajaria Ceramics is a tile manufacturer.