Looking at the tearaway rally that Reliance is on, it seems like there is still a lot of pent up appetite for the stock even at these levels, even after the run up that it has had from the March lows?
Yes, the kind of money that have come in through the rights is one of the highest money raised and even after that, there is so much of appetite for Reliance it keeps surprising us. After this slew of stake sales in Jio Platform, now there is news flows regarding stake sale in the retail business which could keep the interest pretty much very strong in Reliance. There were talks going on for the whole oil and gas business with Saudi Aramco. There are some issues with regards to valuation, nonetheless the news flows will keep a lot of interest in the Street for Reliance, It is very difficult for analysts to predict how things will happen when such kind of news flows come in back to back.
What is your analysis of how the paint sector is likely to perform, if Asian Paints is any benchmark?
The numbers clearly look upbeat on all accounts. There is about Rs 100 crore odd of net profit for the quarter and the beat has been right across the top line and margins. What is encouraging is that the management commentary saying that in June, the volume growth has been almost double digit. We need to understand where this volume growth came from and if this is sustainable. It is a bit difficult for us to see why rushing out in the Covid lockdown, people are getting their houses painted.
So, we need to understand whether this can be sustained or not, but this is a typical quarter where after one of the companies come out results, the entire sector are following suit with a similar kind of numbers and the market started rewarding. We have seen that in the IT companies, we saw that in the banks, recently we are seeing that in the cement companies as well. So yes, the market is starting to expect better numbers from some of the other companies like Berger Paints to beat numbers on all accounts. These stocks will be in focus and we need to understand how the recovery is and whether it is sustainable going forward.
Any stocks that you want to leave us with today as we wind up anything that you are keeping on your radar?
One sector which has done pretty well in this environment is the IT pack. Company after company have reported good numbers, not only the largecaps but a lot of midcap IT players have also come up with pretty strong numbers despite this being a quarter which was impacted by the lockdowns. They have managed to not only get the higher deal wins, they have managed to cut down costs and the guidance has also been pretty strong.
The IT sector generally has been a defensive counter. The valuations are still comfortable, compared to where the market is and hence we believe that this is a pack one should definitely look at in the current environment. Our pecking order of preference would be Infosys in the largecap space followed by Wipro. There we are seeing good commentary. Within the midcap space we like L&T Infotech and MindTree.