defence stocks: Don’t fear Tesla; add defence, railways stocks post market correction: Deven Choksey

One pocket where there is going to be an opportunity in the short term is this entire Tesla ka bhoot (fear of Tesla ). Everyone is worried about Tesla but nobody is focusing on when will Tesla come, if they will come, which are the companies where the price war will start, and how many Teslas would be sold in three years. Auto stocks are going down as if Tesla’s entry is going to be death knell for them.
Deven Choksey: Yes, it is a very pertinent point. Look at how it has happened in China. In China, Tesla entered into the market with Model 3, selling at $35,000 to $40,000 and came BYD with its premium proposition and they started selling that premium car, equivalent to Mercedes S class at somewhere around $35,000. Tesla had to rewind strategy over there and they had to possibly do the corrective course as far as the selling strategy in China is concerned.

Out here in India too, suppose if they bring Model 3 and if it is sold at around Rs 35, 40, 45 lakh against which there are plenty of cars available in EV segment at entry level at around Rs 15 to 25 lakh. In my viewpoint, it is not going to be as easy for somebody as even at zero duty, it is not going to be easy for somebody to get into the market and start selling.

Do not forget one thing that apart from electric vehicles, Tesla is basically selling the software, which is not going to be sold within India because that is not going to happen immediately, at least I think we do not see that situation happening. So, from the perspective of simply a Tesla kind of company entering into the market and disrupting the entire equation in the OEM space, the market has probably tried to search too many negatives in the process.

Defence and railway stocks have become a trend of the past or could this be a trend in making going forward now?
Deven Choksey: The fundamentals remain absolutely strong and convincing. In fact, all these companies which you just now mentioned including HAL, are offering a good amount of visibility for like three to five years as far as the business is concerned. So, there is no question of going back on this kind of business. Of course, the valuations were frothy and that is where one could refrain from buying into these companies at higher valuation. But having seen the correction, maybe the chance to look into these companies once again afresh cannot be ruled out.

Today the market is in churning mode, so as a result of which even the good gets finished along with the bad and that is where probably we are seeing the kind of victimisation in some of the stocks. But in my viewpoint, the valuations are right now becoming more attractive. We are pricing them at around 26-27 valuation and against having 27-28 or 28-29 valuation earlier, and they become slightly more attractive than before. Need to look at some of them to add into the portfolios.Tata Capital is going public, will issue fresh 23 crore shares. Why is Tata Capital going public?
Deven Choksey: I have not gone into details at this point of time.There are very few things you do not track.
Deven Choksey: I have chosen to remain selective these days because there are too many opportunities floating around and unless you concentrate on your portfolio, you will lose out everywhere. This probably is a reason for which we remain very selective in holding a portfolio so that we can prevent the downfall as much as possible.

What are your top five holdings and where are you adding in those holdings?
Deven Choksey: We continue to like Tata Technology, which we will add further in this particular fall. We like Bajaj Housing Finance, which has significantly corrected and appears to be a very good opportunity with around 25% CAGR growth already continuing that.

Even in the hospitality segment, ITC Hotel looks interestingly positioned from an investment point of view. Even companies like the Minda Industries, it looks really interesting at current levels in the corrected market valuations given the kind of presence that they have been creating, including in EV portfolios. Selectively, these are some companies where we believe there are opportunities in the midcap space.

Some of the largecap companies like Kotak Bank, Bajaj Finance or Bajaj Finserv are looking equally interesting at current levels.