The Economic Times daily newspaper is available online now.

    Metal stocks good for a trading bet, pharma a long story to play: Daljeet Singh Kohli

    Synopsis

    As a theme we do not believe in investing in metal stocks for a portfolio of two-year, three-years but you can take a tactical call at certain point of time.

    Daljeet Singh Kohli-1200ETMarkets.com
    To a large extent, we are underweight on financials, says the Fund Manager, Valentis Advisors.

    Most brokerage notes are indicating that domestic steel prices are going to continue to remain on an uptick. Is there an investment opportunity in any of the steel names?
    Our view on metals is slightly different and contrarian to the normal. It can be a trading bet right now because most of the metal companies have shown very good numbers. There were few reasons for that. One main reason was that they were able to export during the lockdown period. Now export is actually not remunerative. When you want to utilise your facility and to take care of your overheads, you want to go for exports.

    When we go for unlocking, then these companies will look more towards domestic demand and less towards exports. This growth in uptake and the volume numbers probably will not be there in the next quarter onwards when domestic demand will come mainly because of the pricing differential.

    Unlock Leadership Excellence with a Range of CXO Courses

    Offering CollegeCourseWebsite
    IIM LucknowIIML Chief Executive Officer ProgrammeVisit
    IIM LucknowIIML Chief Operations Officer ProgrammeVisit
    Indian School of BusinessISB Chief Digital OfficerVisit

    Now there is this theory going on that because of these issues with China, we might see that the prices remain stable and even buoyant. It is anybody’s guess because pricing will change overnight which will not give you enough time to take care of your portfolio.

    As a theme we do not believe in investing in metal stocks for a portfolio of two-year, three-years but you can take a tactical call at certain point of time, which is right now. Many of these stocks have already factored a lot of positive momentum. I do not know how much more is left to steam there. If somebody has to take a trading bet, probably they can. We are staying away in our portfolio from these stocks.

    Financials has 35%-40% weightage. Banks are underperforming, NBFCs are suffering and with the exception of one or two insurance names, all of them are languishing?
    We have a very small portion of financials in our portfolio. In fact, our portfolio is highly loaded towards chemicals, pharma and other things. There are quite a few names in even consumers.

    We moved out of financials much earlier. There is so much bad news coming in, we thought probably these stocks were too ahead in terms of valuation and following our conservative approach, we thought it is better to get out of them. Right now in financials, we have a few insurance companies still with us in our portfolio. Barring that, none of the private banks and NBFCs we have, We always avoid PSU banks. To a large extent, we are underweight on financials as such.

    Axis Bank is looking at raising Rs 10,000 crore. HDFC is raising Rs 14,000 crore. ICICI Bank wants to raise about Rs 12,000 crore. Between just three names it is $4-5 billion. What will happen to demand for some of these banks?
    There is so much supply overhang coming in. As regards the sucking of liquidity and its rub-off effect, it is not yet conclusive. All these central banks are just putting in money. Everywhere there is so much printing of money going on and continuous money flow is there. So the risk of rub-off on other sectors probably is not as much, but on these particular stocks, there is definitely a supply overhang. That is why we are still waiting on the sidelines. Although these stocks have given good trading momentum and good returns from the March lows but we opted to stay away from them and lose this opportunity rather than be part of this. That is the way we have designed our portfolio.

    Do you monitor the agri-chemicals sector and do you have any view on that?
    This sector is the maximum overweight in our portfolio and in fact most of the stocks in this sector are part of our portfolio, including PI Industries. That is a disclosure. The numbers are fantastic and there is a long way to go for the entire sector.

    Within the sector, this company as well the other two companies that we hold are into CRAMS and doing a lot of custom synthesis business. They are also in good shape. Till now, people wanted to come to India but there was a lack of capacities. They wanted to develop a second or third vendor besides China being the biggest supplier. There was no space and no alternate vendors are available.

    In the last four, five years, many of these companies including PI Industries have all added a lot of capacity and they have built to that scale where these multinationals can actually look at them.

    On top of that, with these issues related to China, people want to develop another base at different geographies and that is also helping them. This story is going to stay for a very long time and there is a lot of potential for all of these companies and they are all doing very well. They are likely to continue as well. We have a positive view on the entire sector and the company also.

    Anything catches your eye in metals?
    We just talked about metals in the previous segment. We believe the up move in metal is a trading move and one can take a tactical call for a very short duration. If you want to play along with the momentum, you can do that but it does not suit our style of portfolio where we have a two or three-year perspective because these metal rallies are very short duration rallies and they turnaround very fast. So, we tend to stay away from these. We have not taken any metal stock in our portfolio but yes, tactically they can be give you 5-10% moves very easily.

    Where within pharmaceuticals do you find fresh opportunity to invest in?
    The entire sector is on fire. It has not left any other stock where you can make fresh entries. It is very difficult because most of the stocks have already moved. If one has to buy something in pharma, you have to wait for retracement in some of these stocks. One, they have moved too sharp, too fast and a retracement is likely to happen. We may have a very positive view for a long term. The sector is coming out after four, five years and there will be a long story to play but it will not be in one direction, you will get opportunities. Those who have missed out will have to wait for some more time.

    I would advise not to rush and buy anything because most of the stocks have already reached their peak valuations or are already trading at demanding valuations.



    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in