There was a bit of a scare. Market is elevated and it was a shakeout of sorts because I am sure some short-term traders would have been shaken out of their stop losses, etc. What are you assigning to your clients on these kinds of sharp cuts?
We continue to be secularly and structurally positive on the market. And we are getting into that frothy space where we could see some kind of correction come in and which is very natural after the market rallied over a thousand points. My reading is that where we have seen substantial runs in the market is where froth has built up. One needs to book profits because we are dealing with midcap and smallcap stocks which have gone up and we should not forget that inflation is very sticky globally and yields have started hardening. Portfolio rotation should now go from a very aggressive strategy to more of neutral on risk and focus should be more on largecaps and midcaps because that is how the rotation of the market will continue to happen.
There was a bit of a scare in ITC. It is also one hell of an underperformer. Would you be a buyer in at these levels?
At every level. People underestimate the kind of results that ITC would be showing over the next few quarters. Just what we have seen happen in
will eventually play out in ITC because it is a very strong consumption story. FMCG margins are going to expand marginally but EBITDA has the potential to double from here and that will take the stock in the limelight.
If we look at the other segments, paper stocks are doing really well. Prices of paper are up. Hotels are on an upswing with revenge trade. Agro sector is also becoming a booming export industry for India. So all sectors are firing on all cylinders. Cigarette business continues to be the cash cow for ITC and it is a monopoly situation out there.
A lot of the selling pressure is coming from sources that we thought would never happen and that is getting absorbed. The consensus among people who are making memes on ITC is that now ITC is getting its mojo back.
The stock is scared out of shape. It is 5% down today. It has run up from 200 to 250. At 250 you are saying there is value in it. But are there any chances that between now and the Budget, it may go sideways and underperform?
It is always very difficult to predict what the stock will do on a near term basis. But having said that, we are convinced buyers on ITC on two counts. I believe that the ESG problem with tobacco trade and the deep pocketed investors who are sellers in these counters — all that has been absorbed. There is no incremental selling coming in. All the tired patient holders have also sold out and there is a new breed of investors who believe in the growth story of the…
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