By Nesil Staney
Domestic consumption themes such as hotels, aviation, building materials, and durables are likely to see strong performance, buoyed by rising rural and urban demand along with a pickup in government spending. In an engaging conversation with Nesil Staney, Sandip Raichura, CEO of Retail Broking and Distribution & Director at PL Capital – Prabhudas Lilladher, bets on Nifty rise, dissects sectoral trends and selects 10 stocks for investors at this juncture. Exerpts:
What is your directional call on the markets at this level?
We remain constructive on markets, especially with President Trump backing down on tariffs, Indian services PMIs showing surprising upside, and now the rate cuts by the RBI. With upgrades on Nifty EPS likely going ahead on the back of soft inflation and a bountiful monsoon, higher levels on the Nifty are likely for the year.
Which sectors are you most interested in?
Domestic consumables, hotels, aviation, building materials and durable sectors are likely to do well, especially with rural and urban demand picking up and momentum from government expenditures picking up. Private capex can add to this momentum further with rates down and, of course, defence, engineering and infrastructure remain key themes. BFSI is relatively insulated from all this, and with cleaner books and stable RBI policies ahead, banks and NBFCs can also do very well and lead from the front.
What are your top ten stock picks?
My top ten picks are: ICICI Bank, HAL HUL, Interglobe Aviation, Max Healthcare, Sun Pharma, Bharti Airtel, Bajaj Finance, Rainbow Childrens Hospital, Crompton Greaves Consumer, Chalet Hotels, Triveni Turbine
The P/E multiples of most stocks have soared. Are you comfortable with valuations?
At current valuations in the SMID space, the selection has to be very stock-focused and not top-down. Within the developing themes, there are many exciting stories still trading below 20 PERs one year forward as they overcome volatility in business and mature into industry leaders. A large capex cycle is behind us, and now some of these stories will start to deliver on their capacities, which could spur profitability non-linearly. We are taking a very story-focused approach, especially where both macro and policy triggers are backing the individual companies.
What are the commissions in the distribution business?
Distribution business commissions on an average have settled around 0.6% annualised, blended basis as AIFs, PMS, and mutual funds have gone into TER-based commissioning. As the fund sizes have grown, telescopic pricing also comes into play and hence we believe this range will sustain for some time to come. Deposit products sometimes offer higher commissions, but those are transaction-based and do not build annual recurring revenues for players.
Which sectors would you avoid in equities?
Sectors heavily reliant on international supply chains—particularly those linked to China or the US—should be approached with caution for now. Analysts remain especially bearish on the IT sector, citing significant demand headwinds amid the evolving geopolitical landscape.
There is a rise in block deals and IPOs. Do you expect this to continue?
Blocks and IPOs are indicative of a return to risk risk-taking appetite. With macros improving domestically, barring a conflict in our region, there is huge scope for earnings improvements in select sectors and therefore liquidity is seeking newer ideas while old money may want to go elsewhere. With indices likely to be healthy this year, a lot of PE-backed firms or firms looking at newer shareholders may continue to be in markets with all kinds of corporate activities, and therefore, yes, we expect this trend to continue.
What fund products are most popular in the HNI segment — AIF/PMS/MF
HNIs are gravitating towards superior products like PMS and AIFs as they do not suffer from the alpha risk that mutual funds have been displaying over the past few years. With the rise of new styles of investing, including quant-based management, unlisted equities, growth funding and of course, fund raises, such vehicles offer far higher risk return propositions and hence seem much more attractive than diversified MF schemes that are more suitable to retail investors who wish to take lower risk to generate a minor alpha over indices. Of course, each category has its outliers and advantages, therefore it is best that the investor looks at her risk profile and return anticipation before venturing into any one specific product.
