Hemang Jani, Independent Market Expert, says The market is going to realign to the reality that in a large sector like BFSI, which is a 35-40% weight, if the actual earnings growth is not in line with the consensus, there is going to be that realignment and readjustment and we will see the sector rotation playing out. I do not think there is a case for a significant correction at the index level. But some of the other numbers which are going to be out are ICICI, Axis, IndusInd are going to be watched more closely.
We never thought that HDFC Bank is going to lead such a decline for the markets. And looking at the ADR price action overnight, it seems like we are headed for another rough day for HDFC Bank and maybe the rest of the banking pack too?
Hemang Jani: After enjoying such a good party for an extended period of time, we have hit a roadblock. And the kind of reaction that we have seen in terms of the HDFC Bank stock price, the Bank Nifty and also Nifty, is something that the market was probably not hoping for. But since we are into earnings season and the markets have run up, people are going with very high expectations. So these kinds of disconnects would happen.
The market is going to realign to the reality that in a large sector like BFSI, which is a 35-40% weight, if the actual earnings growth is not in line with the consensus, there is going to be that realignment and readjustment and we will see the sector rotation playing out. I do not think there is a case for a significant correction at the index level. But some of the other numbers which are going to be out are ICICI, Axis, IndusInd are going to be watched more closely. How soon we go through this kind of a correction depends on the outcome of those numbers.
What you have read into the Q3 numbers so far? Does anything stand out?
Hemang Jani: It is early days but the Specialty Restaurants and the QSR space, which is a part of the discretionary consumption vertical, is definitely showing an element of slowdown. In an environment where we have festival season and the consumption trend looks very strong, this is a pocket which is really not showing that kind of a positivity. We will have to be far more selective about the pockets where we are seeing a better trend and quarterly numbers clearly give us more insights into it.
When it comes to discretionary consumption, we like Titan in terms of other pockets. Auto is fully priced in after four and a half years of outperformance. We would be avoiding auto at this point but stay very selective on the discretionary consumption space.
There seems to be a logic in this point that money will move out of HDFC Bank to Bajaj Finance.
Hemang Jani: I doubt that the money would necessarily move from HDFC Bank to Bajaj Finance only. A part of the money could move into some of the insurance companies like ICICI Lombard or some of the other insurance companies where the trend is better.
Secondly, people may also have to rebalance and realign their allocation to the banking sector. Of course, it is a function of how the rest of the numbers came out. But Bajaj Finance also has been a big underperformer and despite the credentials and the pedigree that it brings, in the current environment, when RBI is trying to slow down the pace of loan growth, I do not think Bajaj Finance will be able to deliver absolute returns in a meaningful way.
Zee Entertainment is in the spotlight and we just highlighted the latest news coming in that despite the grace period having been given to the company, there is still no real conclusion when it comes to the merger talks between Sony and Zee Entertainment. What does this mean for shareholders of Zee Entertainment?
Hemang Jani: Surely the way this entire saga has panned out for more than one-and-a-half, two years now, imagine the kind of delays and the volatility and uncertainty it has brought to the shareholders of Zee. This is more of an issue where one cannot really put any kind of a timeline. I would certainly stay away from the stock. Even if I have to buy 5% or 10% higher from a certain price point, once there is a clarity about the deal and the management issue, only then would it make sense to buy rather than get into an uncertain zone for an extended period of time.
How you are looking at Nazara Tech? They are going to acquire some stake in an influencer platform and Nikhil Kamath’s firms are looking to increase their stake via preferential issue of Rs 250 crore. Given the latest fundraising announcements that have been coming in, do you track Nazara views?
Hemang Jani: I do not track Nazara, but I think given the regulatory uncertainty around the GST and the fact that one will really have to take a very long-term view on a space like Nazara and gaming related companies. So, we would be more focussed on the companies where there is a slightly more handle on the earning visibility. Yes, from a short-term allocation perspective, for certain investors who have a slightly higher risk appetite, some of these companies may make sense.
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