We would suggest closing any positions or any assets in the metals space if there is any rebound amid this news from China, this would be a good opportunity for investors to weaken their positions in the metals space, said Siddhartha Khemka, head of Retail Research,
ETNOW: Is it possible to make money on rural performances in the former FMCG space?
Siddhartha Khemka: So if you look at the broader spectrum, auto is another sector or space that is directly related to the rural sector, but some of these OEMs have a mixed view of the near term. Thus, car tires have indirect play.
that’s what we like. Brent crude has almost corrected 20% m/m and is below $80/bbl. We are seeing good demand, at least in the Indian business replacement segment, which is gaining momentum. Apollo should also be helped by improved demand in rural areas where you have a lot of two wheelers and four wheelers, but replacement demand comes when they see a good income. Apollo Tires is ideal for both the automotive segment and to benefit from lower commodity prices.
ET Now: I just wanted to know what you think about the real estate sector, and I mean on the ground, does the increase in interest rates have any effect at all? We see buyers coming into the market when they know the real estate market is on the rise or some revival and with the kind of stamp collection you see in Maharashtra at least, there doesn’t seem to be any slowdown. observed. what about real estate shares?
Siddhartha Khemka: There is definitely some impact on interest rate margins, so at the peak of the pandemic, when we saw record low interest rates in India plus, on top of that, several state governments lowered the stamp. registration fees, we saw a surge in demand. Now that interest rates have risen from what we’ve seen in the last couple of months, and with the RBI raising discount rates again today by 35 basis points, overall home loan lending rates are definitely going to rise, and in margins, that’s will have an impact.
But the basic situation is that in some regions, in some pockets, there is definitely a high demand, as can be seen from the record presale booking data that some of these real estate companies announce monthly and quarterly, and the state registration data confirms this fact. that there is a lot of demand.
However, what I find sentimental today is that interest rates have risen and the news that ED has merged a land bank with one of the real estate players has also added to short-term negative real estate sentiment, but if you look at the longer term Looking forward, we believe that demand for housing will improve, and this cycle has just begun.
We have one or two years in the cycle, and this real estate upcycle can continue for another 3-5 years. Some of these players will definitely benefit from the consolidation that has taken place, the implementation of RERA, and now we have a lot more transparency in terms of transactions, so in the short term there may be some weakness due to the interest rate, but I think the overall trend looks very positive for the real estate segment.
ET Now: In terms of the entire metal industry, what kind of reading should we expect after the opening of China? What impact should we expect at home?
Siddhartha Khemka: If you look at the metals market, I think they are pretty much globally linked to the economic outlook. On the one hand, there is positive news coming out of China about the lifting of restrictions and the resumption of the topic, but if you look at the global picture, fears of a recession are only increasing, and this will keep demand, as well as metal prices, lower for at least one or two quarter, so our forecast is not so positive.
We would suggest closing any positions or any assets in the metals space if there is any rebound on this news from China, this would be a good opportunity for investors to weaken their positions in the metals space because these companies are sitting on a very high base where they reported record profits, the margin was quite high and from there we saw commodity prices come down so that will definitely affect the margins but the volume forecast has also softened a bit compared to previous quarters so I think we not as constructively positive on metals, at least over the next few quarters.
ET Now: The only pocket that has performed very well since the beginning of the year has been PSU, including banks and other PSU titles from defense, railroads and all. You find the comfort of buying in this market, including banks.
Siddhartha Khemka: There is a lot of interest in some of these public sector businesses, for several reasons: a) the government’s focus on increasing spending, which has led to a surge in orders for some of these players, be it railway PSUs, defense PSUs or banks like those in general are also seeing a strong surge in credit due to the investment plans that we are seeing after a very long time.
But having said that, going back to the public sector in general, the valuations were very undemanding and they were grossly undervalued. Again at this level of markets where we have already seen that the index has reached the level of 19,000 species and people are looking for value.
So this is a space where people found value, and because they were under-owned, there was a lot of money flowing into those stocks, and some of it definitely went up. If you like where the positive outlook is maintained, I think the defense is a space that we like in the long run. We see that the order book is constantly increasing, and delivery is also improving along with the order book, which is a concern, especially for some state-owned defense enterprises.
and are among the leading defense government PSUs, which have a very strong order book. In addition, they are seeing good results in terms of supplies, and some of these players are also increasingly seeing exports as a key market from the days when we depended on foreign companies to import our defense needs. where we’re going to be exporting defense equipment made in India, so it’s a huge twist on how these companies operate. I think it’s a space where we still feel like it’s really possible to make wealth in the long run.