Hemang Jani: Market fears overblown, but investors should remain cautious: Hemang Jani

What do you make of the market action? We did see some life of come back in small and midcap stocks yesterday. Do you think we have a bottom in place there?
Hemang Jani: The volatility over the last few months has unnerved lot of investors and what is most surprising is that this has happened without any specific external or domestic event which was out of box. So, definitely, there is a sense of fear and while we may see a little bit of pullbacks here and there, as long as the sell flows from the FIIs continue and whatever excesses were there in the midcaps and smallcaps till we reach a certain stage of capitulation, this may go on.

At the same time, I do feel that in terms of price points, in terms of valuations, things have become far more attractive. At what point it will turn around is anybody’s guess. But if one has a bit of holding capacity and let us say one-year, two-year kind of a time frame, definitely think one should start accumulating rather than trying to look at a specific level of bottom that everybody is looking to have. So, overall, a bit cautious but time to really buy into the market.What do you make of Kotak Bank given that RBI has now lifted off that restrictions ban, they can issue fresh credit cards now, open digital accounts as well? Do you think this is going to be perceived as a big re-rating and also given how cheap the stock is available right now and how just about everyone out there is finding comfort in financials as a hiding space?
Hemang Jani: I do think it is a very big positive. In fact, it has taken a bit longer for this relaxation to come through and what really I found very encouraging is that even without this last quarterly numbers that Kotak Bank reported were really good. So, the bank has managed this entire restrictions quite well. And we must understand that a large part of the new business that is happening today is through digital channels. Credit card, of course, would account for a certain component of the business and it is a highly margin accretive kind of a business, but without digital onboarding, practically it is not possible to do retail business in the country. So, with that relaxation, the bank should be able to post a very strong growth.

Just case in point being Axis Bank, similar kind of restrictions were placed. Once the restrictions were lifted, the operating parameters, operating performance dramatically changed. So, I do think that even Kotak Bank would see a similar kind of growth momentum in the business. The bank has practically underperformed last two-three years.
You are seeing a bit of a pullback. I do think that the outperformance will surely continue.

Why is Jio falling, I mean logically you would say that okay this is a concept but it is an idea which is coming from the stable of Reliance, the owners have a large ownership, they are doing all the right things, they have got Mr Kamath who is running it, but yet markets are losing their faith.
Hemang Jani: Let us look at this in a little different way. You have companies which are delivering a very high growth, names like Trent, Dixon, or Polycab and many more. So, when the companies are delivering growth and in the quarterly concalls they are sounding very optimistic, the stocks are down 30%, 35%, 40%, whereas in case of Jio all we have is a pedigree and management and some story around it.

So, I do not think in a current scenario market would be so pardoning this kind of a thing where you have got a certain market cap and there is only a story which will eventually pan out.

Market wants to see the execution, I think the classic example here would be Bajaj Finance because after underperformance the way the company kind of managed to come back and the way they have demonstrated the numbers and the growth outlook, people would want to be part of that. Jio remains a big hope story. I do not think there is a case for a big re-rating as such unless we see the numbers.