How are you factoring within the impression of the second wave of Covid given that there’s a lot uncertainty round?
It appears to be like just like the variety of new instances might peak over the following 2-3 weeks. Measures like partial lockdowns appear to be working. Numbers are already plateauing in Maharashtra. In the worst affected districts like Mumbai and Thane we’re beginning to see a decline within the variety of new instances.
If you assume that the impression of the lockdown might be restricted this time, it does not likely impression the truthful worth of firms. If they’ve one or two quarters of decrease earnings or money flows, it doesn’t change their truthful worth within the context of discounted money flows. Even although the human toll tragedy is fairly grim, markets are simply wanting by it because the impression on financial system, earnings and money movement might be restricted.
Globally, bond yields are roughly secure now after one spherical of hike. The US markets are factoring in a very robust restoration from an financial standpoint and that’s good information for earnings.
Would you continue to be cyclicals from a barely long term perspective or would you stick to defensives for now?
We have a combine. We have a look at shares extra on a bottom-up foundation. So wherever we predict there may be worth, it doesn’t matter whether or not it’s a development or a worth inventory. But if one’s portfolio is extra in the direction of defensives, then one can take the decision of transferring in the direction of home cyclicals corresponding to financials, capital items, actual property, and so forth. And in case you are already overweight on cyclicals, you could keep overweight. In the following 2-3 weeks, information movement when it comes to day by day new instances might get higher.
Are IT, pharma and metals going to maintain this market?
You have seen some disappointment in IT numbers within the fourth quarter FY21. Some shares have come off fairly sharply. HCL Tech and Tech Mahindra have dissatisfied. Pharma is the one doing a lot higher this time round. The large debate now is whether or not folks need to get overweight on financials. Some folks suppose that there could also be a deeper correction in financials due to worries over collections, enhance in credit score value, and so forth, and that could possibly be a chance as a submit second wave financial restoration play.
Is the agricultural India theme going robust?
The agri a part of rural India is doing superb or no less than did properly during the last 12 months based mostly on very excessive meals costs. We could have to wait and see what occurs to monsoon and meals costs this yr. But non-agri a part of rural India just isn’t doing very properly. Rural incomes are supported by incomes earned in city areas. You have repatriation earnings movement from cities to villages. If the job prospects of migrants endure due to partial lockdowns, it’s going to additionally impression rural India.
How do you have a look at your complete telecom story when it comes to the general subscriber addition, telecom penetration within the nation and the three listed gamers?
The penetration story is basically performed and now the story has shifted to ARPU enhance which isn’t taking part in out. It doesn’t seem like that this business has a pricing energy. There might be no pricing energy until Reliance Jio tweaks the costs. It is in a very robust place so far as the stability sheet is worried. They raised a lot of cash final yr, so there isn’t any actual urgency for Reliance Jio to increase costs. In the following 1-2 years, you might have incremental payouts of each AGR and spectrum liabilities arising which possibly a problem for Vodafone Idea underneath the present circumstances. ARPU will increase is crucial for Vodafone Idea however not a lot for Reliance and Bharti Airtel.