Dewan suggests that while large private sector banks have performed well, PSU banks present a more compelling investment opportunity. He believes PSU banks haven’t experienced the rally they deserve, considering their valuations. Dewan anticipates stronger numbers from private sector banks like ICICI Bank and HDFC Bank, but favours PSU banks for investment due to their potential.
How are you mapping the realty play? These stocks have begun their move about a month, month-and-a-half back and that is looking good. But within realty, what are your preferences?Neeraj Dewan: In the real estate space, we have seen that the environment has improved with the interest rates, liquidity, and RBI measures. They have definitely improved, especially in the north when we see the prices have run up so much that some consolidation is happening at these levels, so that the increased demand, which was visible last year, is not visible right now. There is a possibility that in a quarter or so, closer to the festive season, demand may pick up. But one should pick stocks which have good potential for a longer term because short-term I am still not sure whether they can run if the demand does not come up by this festival season. So that needs to be watched for the next three-four months.
Beside that, I have been positive on stocks like Max Estates. They have been coming out with projects and they have been executing them quite well. It is a smaller company. They have been growing as per what they have been projecting. The kind of targets that DLF gave last year were easily achieved. This year also the target that they have given for the pre-sale should be easily achieved with the kind of launch that they had for a couple of projects. Now, they are launching a project in Bombay also. However, too much optimism that was there earlier is not seen right now. So, the next two-three months will give a better view of that.
We were just chatting about the EV landscape on the sidelines of the fact that Tesla has finally made its way into India, opening its showroom just yesterday. Who do you think is going to win the EV race because so far it seems like it is M&M all the way?Neeraj Dewan: M&M has done a very good job there. They will continue because even though Tesla has come in, they have committed a very high priced car to start with the model which they will launch also. They will not be able to match the price which M&M is or even Tata Motors have been able to deliver. So, M&M will continue doing that as far as the four-wheeler space is concerned. In two wheelers, it will be fragmented. I do not think there will be any one winner there like we have seen Mahindra & Mahindra in the four-wheeler space. It will be across the big companies and the new entrants. The two-wheeler space will be more spread out.
But M&M should be a portfolio stock. In the last couple of years also, the stock has given you decent returns. It should continue to be the case for M&M with the EV launches and even besides that also as far as commercial vehicles are concerned. Then also there is going to be an uptick because of construction activity picking up and execution picking up. So, M&M should be there in your list as far as investment is concerned.
Given that we have just about started the earning season, it has been a sheer disappointment so far. Where do you think the positive surprises are going to come from?Neeraj Dewan: Banking and NBFC space is one where you can get some positive surprises because the balance sheets are quite good and they would have seen some pick up in the demand for credits in the last quarter or at least in June. Besides the capital goods and infrastructure spaces, one has to see what kind of order win they have got this quarter. The execution will pick up towards the second half of the year, but at least the order wins and the order books will be important to look at .Even the metal and mining space is one where you will see some improvement happening there. These are the kind of sectors I am looking at, mostly domestic focused. There you may see improvement in financials and even the infrastructure, capital good this space.When it comes to private banks, where are you expecting positive surprises? Isn’t it already factored into the stock prices because most of these names are practically sitting at their all-time highs?Neeraj Dewan: You are absolutely right. The large private sector banks have done very well but we have seen HDFC Bank consolidating around these levels. So, I am more positive on the PSU banks than the smaller banks. There you have not seen the kind of rally PSU banks deserve to see, the kind of valuation they are trading at. I would be more positive on the PSU banks and we will see stronger numbers from some of these large private sector banks like ICICI Bank, HDFC Bank. But if I have to pick for investment, PSU banks are better placed.
