Telecom, insurance, and private bank shares set to offer maximum returns; here’s why

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June 26, 2020 11:52 AM

Ayon Mukhopadhyay, Director at Institutional Equities at IIFL Securities, sees three sectors which have potential to pick-up.

Page Industries rating, EBITDA, CAGR,  COVID-19, Page Industries rating targe price, market newsRIL stock has gone up 15% since the point it was in the month of February

BSE Sensex and Nifty 50 have rallied 40 per cent from their March lows to reclaim their crucial levels of 35,000 and 10,500 respectively. Ayon Mukhopadhyay, Director at Institutional Equities at IIFL Securities, sees three sectors which have potential to pick-up and offer decent returns to the investors in the long term investment horizon. In an interview with Surbhi Jain of Financial Express Online, Ayon Mukhopadhyay also explains how Reliance Industries is trying to position itself as a technology behemoth in India. Earlier this week, Reliance Industries more than doubled investor wealth in a span of 3 months taking the market cap to $150bn. He also shed light on why investors should not anticipate another correction to invest in Indian share market. Here are the edited excerpts from the interview:

Amid rising coronavirus cases and the unlock phase in India, where do you see the Indian share market headed from current levels?

The domestic market is in the middle of a global rally. Across the world, markets are betting on the speed of economic recovery being much faster after the phase of unlocking. The market is completely discounting a second lockdown from happening. So because of that, I think we are now in the middle of a bull run.

Is it the right time to invest in the share market or people should wait for further correction?

A further correction would be dependent on a global lockdown coming back. However, the chances of it happening again are very low as countries have understood the economic cost of the lockdown is extremely severe. So a major correction in the markets in the short-term is pretty low. But other than waiting for the correction, I would advise that it might be prudent to look at stock price volatility. Also, start looking at stocks which have meaningful corrections other than waiting for the broad-based correction.

Which sectors do you think have the potential to gain and offer good returns in the long-term?

From a very long term point of view, I think insurance, telecom and private bank sectors have the potential to gain and offer decent returns. In the insurance sector, I feel there is a very low level of penetration. Telecom is a new digital play in India and private banks because they are extremely well-governed and they would continue to gain market share from public players.

What exactly does it mean for Reliance Industries to become net debt-free?

Reliance is positioning itself to be a technology giant in India, We have also used a cliche that Reliance is in a FAANG play. The top technology companies in India among the likes of Apple and Amazon, the thing that really strikes out that they all are cash positive companies and debt-free. So, to be a technology behemoth, if you want to compare Reliance with the leagues of those companies from a financial point of view, it is important to know that company is net debt-free. That way I think it is a very important milestone and a financial metric.

How do you see consumption stocks? Are they well-placed or in a tough position?

Consumption stocks in India are historically stated as non-cyclical stocks. I would say that consumption stocks can be looked at as compounding stories going forward and not as reraters.

RIL doubled investor wealth in just 3 months, is there more steam left in RIL stock?

Reliance Industries has indeed doubled in the last three months but the stock fell a lot. If we look at the stock from a point before it fell, from February to now, it is only up 15%. So the stock fell to 853 levels and then it doubled to 1804 level. So it is slightly illusionary to say that the stock has doubled because the stock also fell 40% before it doubled. The stock has actually gone up 15% since the point it was in the month of February. Also, in the month of February, the company was not net debt-free. As a long term investor, there could be avenues of outperformance in the stock. The most notable could be if the company demerges and lists Jio separately, that could be a value unlocking in the company.

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