Why banking & real Estate are Rahul Shah’s top bets amid market correction

"Looking at the management's commentary, poor quarterly performance, and hefty valuation, so maybe like just to give a perspective 1-2% quarter on quarter growth with most of them trading at 50-55 times earning, so I do not think this can remain for a longer time and the management's commentary has also been discouraging," says Rahul Shah, MOFSL.


What are you doing about Dhanteras today, buying gold and silver via the Blinkits and Zeptos of the world or you are going to the traditional mom and pop shop?
Rahul Shah: So, combination of both and I look at the way the markets have been, definitely makes more sense shopping on the equity side rather than going to the traditional side. So, I feel that equities still remain and with this correction and the way what we have seen the steep correction in last 15 days to 20 days and that offers a good value and individual stock specific approach from here rather than just looking at the index level.

So, what we feel that the stock specific should be the year from this 2081 and looks like continue to do well and enough select pockets and just to avoid fewer stocks which has moved up and which were irrational but it was just markets were doing well, those stocks were doing well.


Wanted to understand if you have to be stock specific, then which are these stocks that you should watch out for, from which sectors do they belong?
Rahul Shah: So, if you look at it where this earning season has been two-three things to relate from it. One is obviously the markets have been punishing the sectors which are underperforming. So, where there is no growth that is one thing is very clear that consumer as a pack is a clear avoid in a near term.

Looking at the management's commentary, poor quarterly performance, and hefty valuation, so maybe like just to give a perspective 1-2% quarter on quarter growth with most of them trading at 50-55 times earning, so I do not think this can remain for a longer time and the management's commentary has also been discouraging.

FMCG remains not to buy and the sector which has done well and which has been cheap and it has not done well in terms of the returns that is financials.

If I look at financials the numbers have been pretty decent and large as well as the PSU banks most of them have done reasonably well.

If I look at 15% credit growth and most of the things there are less misses and more to the balance sheet side. So, financials remains our top bets in this kind of a scenario.

So, what we like in there is a mix of large and small banks in terms of private and PSU. So, HDFC and ICICI both reported good numbers and HDFC specifically has not given a specific return in last two years versus the Nifty where it has. Now, risk versus reward is quite favourable.

Obviously, ICICI Bank strong numbers for it. And thirdly, if I look at a few PSU baskets, whatever has been reported, in mix of say, if I look at likes of Canara Bank or like a Union Bank, both looks quite interesting with reasonable valuations and the way the stocks have corrected in last three-four months.

Banking remains a clear winner, what we can identify and rest here are the few pockets in real estates, which again, other than overall if I look at pan-India and few select pockets like Bombay Real Estate, the numbers have been quite good. So, if I look at Godrej’s numbers, again a blockbuster quarter and again, the guidance have been pretty strong, so that so the story of the real estate sector continue to remain strong in next one year or so.

A few selects stocks and as I said that I think this will be more of a stock specific rather than entire markets at this time.


You have mentioned that you are actually bullish on the financial space, given the fact that the underperformance in the market, but what is your take coming in the auto pack? How are you viewing this particular sector and between four-wheelers and two-wheelers, which side of the fence are you on?
Rahul Shah: So, the way auto stocks, which had reported their numbers in near term, a little bit below the expectations what the street was estimating and what we believe is what we have seen in the last two-three years, the way the auto numbers have been, and relatively two-three things for auto companies.

One is obviously, the RM cost was low and which was benefiting for their margins. Second that there was a chip shortage and that has augured well for the sales.

Now, what has happened is everything is in line and the RM costs have gone higher and if we look at the launches of most of them, no new launches at least from the four-wheeler space.

So, my sense, valuations looks okay now post corrections. So, maybe there will be again a stock specific, as I said, where the play has been good.

Something like play like say Mahindra & Mahindra, obviously the stock had corrected and obviously a strong launches on the booking, so that will do well in a four-wheeler space and something in a two-wheeler space, post Bajaj Auto's number, we have seen some sell off.

So, again, in that space, Hero or something like a premium segment like an Eicher so, I think those, again, a stock specific will do well again in the auto player rather than an entire sector, which did very well in last six months, maybe it could be a some breather from here.



You think days like yesterday are actually opportunities to buy into InterGlobe Aviation? I mean, because for all practical purposes, this is the biggest market share leader in the aviation space and perhaps the only listed play as well.
Rahul Shah: I agree with you. On days like this, I think if you have a longer-term view, maybe one or two quarters here or there, this gives an opportunity in stocks like InterGlobe Aviation to build it for a long-term portfolio with a large market share and operating with such a high base with as good as if I look at it in a listed space, I do not think so any near competitor is there for them and obviously, in terms of their base also, in terms of market share as well.
So, my sense, maybe you do not have to look at one quarter or so for companies like InterGlobe Aviation. If you have a longer-term view of two-three years definitely such selloffs gives opportunity to build it for a longer term view.


Let me ask you about the metal counters and how is the metal sector looking to you given the fact that you had the China stimulus as well and they keep announcing every week something new. You also see that sort of an excitement on the metal counters as well. But what is your take? Do you think that this is a sustainable run for the space in the longer run?
Rahul Shah: So, metals as a sector, if I look at it, again the way the markets have corrected, these stocks have also corrected. But I feel that I think select pockets again will have a value and will be picked up as a basket to build it up. So, steel remains one of the best bet in that and so maybe what we like is JSW Steel in that pack, the numbers were in line with what we were estimating and the commentary was forward looking. So, JSW is one of the preferred bet and maybe something like the stocks like say in a PSU basket, NMDC, where again the valuations are quite compelling and I think recent corrections augurs well and it looks like that steel will continue to do well.

So, in that pocket, that is one thing. Again, in aluminium space Hindalco looks quite interesting. The stock has done quite well in this entire year and I feel that still there is upside and there is going to be a reasonably upside in Hindalco as well from here. So, select pockets from metals can do well from here.