Allocate 5-10% of portfolio in realty: Dipan Mehta | Economic Times

Enjoy the bull market but put strategic investment decisions on hold, says Dipan Mehta, Director, Elixir Equities. It seems bulls have made up their mind to charge ahead almost on a daily basis. Are you sceptical or are you riding the momentum and going with the flow?The only thought which comes to mind is I am just enjoying the moment. Being in the stock market for so many years, we have seen many ups and downs and gone through many bear markets. What we have on our hands is a beautiful full blown multi-year, multi-month bull market and one should hope that these times just last a little longer. In terms of strategic investment decisions, we would like to just put those on hold for the time being and like to wait and watch. Stocks prices have run up and it is better to buy may be at a correction. One could easily get a 5%-10% time wise correction or a stock wise correction and at that point of time, one should be ready and have the conviction to buy into stocks when they are available at reasonable valuations. Gone are the days when you would get a stock at a very attractive valuation. Now, we all have to compromise as far as price to earnings, price to book and all those ratios are concerned. But this is certainly a time to enjoy this particular bull market which you have been waiting for many many years I would say. Does that throw up a lot of opportunities within the realty pack for you?Yes, absolutely and I think real estate cycles are really long. They last for six-seven years on the upside and on the downside and after a really long real estate downcycle, we are seeing very good signs of revival. Not only are volumes picking up, but prices are also stabilising and gradually moving up in key markets. The best part is that all the listed real estate players finally seem to have got their business model right. They are focussing more on cash flows, monetising their land bank, making an entry into affordable housing and providing good quality construction at a reasonable price in a time bound manner. A lot of discipline has come into the industry which is now benefiting the companies in terms of higher turnover profits and these are being recognised by the Street. We are seeing a lot of real estate stocks doing exceedingly well and so we are very positive on real estate per se. Our top picks would be Macrotech Developers, where we feel that there is scope for considerable reduction in debt and that would lower interest rates and further improve the sentiment in the stock. But if somebody is looking for safety, then the absolute goal standard is still Godrej Properties which is nicely evolving its business model and now acquiring land banks at interesting locations so as to scale up their operations. The next two-three years are very good for real estate companies and investors should allocate 5% to 10% of their portfolio in good quality listed real estate players. What do you think is spurring this uptick in liquor stocks? What really surprised us is that despite the lockdowns, all the alco beverage companies, excluding United Breweries which is a beer company, had pretty decent volumes, much higher than what analysts and what we were expecting. Hopefully now that the unlocking has taken place, we will see more functions and out of home dining taking place, volumes should look up even further. I think the underlying trend or say the underlying force in the alco beverage industry is of course the demographics of India. With a young population looking at premiumisation and more and more consumption of alcohol, that remains the basic foundation why these companies should do exceedingly well over a three to five year period. We were quite impressed with the volume which took place even during the lockdowns which means that in-home consumption also improved for alco beverage companies. I do not think there is much of a regulatory risk just now. All the state governments want to shore up their revenues and this is one industry which can give a very good source of income for the state governments who want to boost their treasuries. That risk is not so great at this point of time and once out home consumption starts to pick up, we expect 17-20% type of revenue growth for the industry as a whole. So this is one sector within the FMCG which would certainly outperform and we are quite positive on it. We would like to go for some of the smaller companies like Radico Khaitan as well as Globus Spirits. The smaller companies have an opportunity because they were just establishing their brands, expanding their geographical reach, improving their distribution and adding capacity and some of them are also pursuing this ethanol opportunity. So I am very positive on the entire beverage industry and one could go even down the line to looking at something like Varun Beverages which will also benefit from the unlock trade and many positive factors going for that company as well. A disclosure, we and our clients have interest in these companies.