Broader market participation signals a stronger rally ahead: Hemang Jani

Touch wood to the market rebound. It has been pretty steady the last three days and seems like we are headed in for some more of a push today. What do you think is going to actually chug along the market higher because in the last three days, one has seen very distinctive moves. You cannot really pinpoint one particular sectoral leadership other than perhaps NBFCs.
Hemang Jani: It is a good thing because having seen a big grind over the last four months, what you are seeing right now is that while the banking and the Bank Nifty is showing leadership of this rally, you are also seeing a very good breadth and participation come through from the broader market be it midcap indices and stocks.

And actually, the midcap stocks are showing a much better upside in the last two or three days. So, I do think that the overall situation is quite conducive for a base formation and could really give you some sort of framework or a structure on which you can build a bigger rally and the leadership can come from multiple themes or sectors be it banks and financials. We had seen a bit of a recovery in the capital market-related plays which were so badly beaten down. At the same time, the cap goods, the cement. So, it would be difficult to pinpoint a specific theme as such. But overall, we do think that this market has a very good foundation in place.I just wanted to understand, yes, there are a lot of sectors and if you look at the way how the market has changed over the last two weeks and now, because two weeks ago we could not find a safe haven or a safe pocket in the market. Now, there are actually opportunities galore. But if you have to actually pinpoint that one sector, apart from banks, which one would it be that you think you can actually look at it and go all out in it right now?
Hemang Jani: Some of the midcap cap goods plays, something like Kirloskar Oil Engine or Kirloskar Pneumatic, KSB Pumps, which were down almost about 40-50% from the top and for no real concerns. Of course, some of these companies had a bit of a slowdown and their previous quarterly numbers were not that great.

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But when you look at the companies, their valuations, and when you look at their growth outlook, I do think that this pocket of capital goods and oil engines, I definitely think that there is a good amount of upside and particularly when you look at something like Cummins, which had corrected for no real reason, the quarterly numbers were so good and the overall outlook that the company has put out is extremely good at about 20% kind of a growth. So, this is one pocket where I am absolutely confident to get into it even at this point of time.

The other big news that we have been tracking today morning is, of course, the Adani Group’s foray into the cables and wire segment. A lot of what is happening in this particular segment, just a while back we have seen UltraTech coming out with a big capex plan and there was a bit of a fear with the investors and some of its peers. But help us understand what is your read through with Adani Group’s foray into the cables and wire segment and how is that expected to impact the overall sentiment as well as the competitive intensity?
Hemang Jani: So, I am also a bit surprised to why all these biggies are trying to enter into this wire and cable segment. It is not as if that it is going to be a big thing in the overall scheme of things for companies like UltraTech or Adani Group as such. No doubt, there is a fair bit of growth which is there and there is a certain degree of margin. And, of course, the consolidation could be a big factor because this is one sector or space where you see a big unorganised segment overall.
So, for incumbents, obviously not great news. But we have to remember that the reaction which was there when UltraTech announced their plans to foray into this, this time the reaction may not be that big. It could be just a knee-jerk thing.

Overall, we do like Polycab in particular because we think that even if these new guys come in, it is going to take quite a bit of time and these stocks have been doing extremely well operationally.

The stock prices are down, but they are doing pretty well and I do not see any headwinds or challenges at least from a growth perspective over the next couple of years. So, if I see any correction in names like Polycab, I would definitely go out and buy.

The other stock in focus today is Avenue Supermarts because the company has come out with an announcement saying that they are going to be investing 175 crores in their e-commerce arm, DMart Ready. But when we look at this particular segment of DMart, then well, DMart Ready has its presence across, but they were not that successful given the intensity or given the capital-intensive nature of the business. But now when the company is planning to go big or rather make fresh investments into their online platform and along with that, the competition is seem to be heating up, give us your sense how do you see the stock headed and what is your take after this announcement?
Hemang Jani: DMart, given the way this entire quick commerce has panned out, has underperformed big time and while at the price point level and the popularity level, people do want to go out there and do the shopping with DMart, but in the new scheme of things, things can be far more disruptive for a player like DMart.

While they had a DMart Ready kind of a concept wherein you can order from your mobile app and you can pick up your stuff, I do not think that was good enough to really counter the kind of offering that we had from this quick commerce people.

So, if they really choose to invest heavily into this, it is going to be some sort of a cash burn for them and it would take a much longer time to see the profitability come through.

So, I am not too positive on DMart at this point of time. I would rather look for the players like Zomato or Swiggy where you see a much better visibility at least for next couple of years.

In the lieu of the extreme heatwave already in the country, in major parts including Mumbai as well, do you think a tactical play could be some of these white good companies? I mean, we have got a couple of brokerages actually upgrading Voltas owing to this peak summer demand.
Hemang Jani: Oh, absolutely. Typically, we have seen over many years that when you have the start of the summer, some of these AC companies tend to do well. Most of this time, because there is an early summer which is set in and also, the fact that the stocks had corrected quite a bit. You look at Voltas, Blue Star, they also had corrected quite a lot in the last four months. Of course, you are seeing a bit of a rebound. But I do think that both fundamentally as well as as a tactical play this is going to be a very good theme to look at.

When you look at the management interactions that your channel itself had with Blue Star and Voltas, they are sounding far more confident about their growth, particularly Blue Star is looking at almost about 30% kind of a growth.