Buy HDFC Bk, Chemplast Sanmar with 1-yr view | Economic Times

Other than pharma and specialty chemicals, other areas where India could be beneficiaries of China plus one policy are batteries, tyres and some of sophisticated manufacturings like ships, says Sudip Bandyopadhyay, Group Chairman, Inditrade Capital. Up until yesterday it was very clear that it is ICICI Bank and SBI which are really showing leadership within the banking pack. Now with RBI lifting the ban on HDFC Bank issuing credit cards seems to have given a breather to the private bank. Can HDFC Bank be bought after the recent correction in the stock?A significant overhang on HDFC Bank has been lifted after the RBI permitted them to issue fresh credit cards. They were losing market share continuously and rapidly to other private sector players like ICICI Bank and that got stopped. They are talking about issuing half a million cards per month and that is real. They have been doing it and I am sure they will do it. On a slightly different mode, this rap on the knuckles by RBI on HDFC Bank probably gave them a time to consolidate, relook at their technology pack and come back with greater strength. There are several restrictions still on HDFC regarding their digital platforms and one or two year down the line, this episode will probably be treated as a blessing in disguise for HDFC Bank. When you are forced to take a break, you get a chance to relook at a lot of things and come up with better and more appropriate solutions which are more robust. I hope HDFC Bank is doing that and they will come back stronger. Yes, there is definitely a case for buying the stock. If you are an investor having one year plus time horizon, please go ahead and buy HDFC Bank. There is absolutely no problem. What would you make of this China plus one strategy that we spoke about? Would it only be limited to pharma? Would it only be limited to chemicals? How would you look at some of these names because some of these sector leaders have really rallied quite a bit?Definitely China plus one strategy is real and here for all of us to see. The beneficiaries are pharma as well as chemicals, especially specialty chemicals. Yes, I would assume that it will spread to chemicals. It has got something to do with where India has capacity and demonstrated ability to produce for the global manufacturing infrastructure and the global manufacturing ecosystem. Pharma and specialty chemicals India has proven that we can do it. Our scale was much smaller, but with China plus one becoming a reality, we are getting a whole lot of new orders and new clients which all our existing companies who have facilities and capacities are enjoying. But apart from China plus one, we are also seeing China getting substituted by manufacturing bases in other geographies including India and that is also getting played out. A couple of other areas, where we can probably see some traction going forward as far as India is concerned, may be the batteries, tyres and even ships\ manufacturing. India does not really have enough demonstrated capacity in these areas, but over a period of time, with the incentives coming through PLI schemes, it can catch up and provide the world an excellent manufacturing alternative to China. The beneficiaries as of now of course are the pharma companies and specialty chemicals and as far as specialty chemicals is concerned, Indian companies have a long way to go even from here. We are just seeing the initial phase of the rerating. The valuation for Chemplast Sanmar, which got listed yesterday, was a bit of a stretch. But having said that, if somebody has a one-year view, it does look attractive on a peer comparison basis even today. So for a long-term investor, some of the specialty chemicals are a good buy. As far as pharma is concerned, with US pricing pressure, there are some challenges for companies having a significant US exposure, but Indian pharma rerating story is real and that is going to stay for quite some time. So good frontline pharma companies -- be it Sun Pharma or Dr Reddy’s can be picked up even at current levels.