stocks to buy: AMCs are a long-term bet; playing the dynamic in the hotel industry, aeronautical values: Dilip Bhat
Equity markets are extremely buoyant given the kind of surge we’ve seen in mutual funds over the past month. Would you say that companies like Enam India, HDFC AMC, etc. are more attractive from an investment point of view?
The welfare factor is back in force and we can see that there is increased traction in terms of demand for most items of the economy, although in the GDP data for the first quarter we have seen that private consumption had fallen and that could possibly be one of the things to worry about but the pent-up demand of the last 12-14 months could be huge and then we are entering the holiday season and then the season weddings.
Some of those things that have been missed in the past 12-14 months will have an extremely aggravating impact and could be doubly positive. So the economy and the feel-good factor as well as the optimism in the stock market may continue for some time to come. Coming to your question about asset management companies, without a doubt AMCs are something to own for the long haul and we know that has nothing to do with short term aberrations here and there. But perhaps in the long run, as choices tighten as the number of investors increases, AMCs will continue to be the choice of the lot as they will continue to provide good stability to the portfolio and will also experience continuous long-term development. appreciation because the ROE will be very high for most of these companies.
The focus of attention will be on interest rate sensitivities. The Kotak Mahindra Bank has cut mortgage rates to the lowest levels. How do you approach this?
I think rate sensitive sectors continue to gain ground. As momentum builds after the pandemic, we are seeing a surge in real estate and related industries. There is a lot of confidence in how some of these real estate companies have started reporting their sales figures. This activity alone can have a huge multiplier impact on the economy as the real estate industry is today one of the biggest employers in India and their success can have a phenomenal increase in the overall economy.
Some stocks look pretty good. DLF, Kolte Patil have very good balance sheets without any baggage or debts. Indiabulls Real Estate is going through an adjustment process, but over the long term it looks to be pretty solid without a doubt. As far as home finance companies are concerned, there will be some squeeze on NIMs as lower interest rates will certainly weigh on profitability. Otherwise, I’m not sure that overall it can inspire a huge demand for home loans.
Home loans are probably more a function of what’s in the real estate and also the size of the ticket for each particular apartment. But banks as a discretionary game come into play as well and maybe private sector banks also have very strong verticals and some of those banks will get a lot of attention.
Are we finally witnessing a renewal of the entire hotel and aviation industry?
A lot. People are talking about revenge vacations internationally and even nationally, it really plays out in a big way. I think the travel, tourism and recreation industry is something that’s going to be easily developed over the next maybe one, one and a half, two years. In all of this we can see a lot of momentum playing because basically we expect decent returns on their capital or assets. It’s still a long way off because they’re all still very bad at the process, but surely over the next and a half years this tourism industry will go very well.
Within the hotel industry, there are very few companies where you can make a big bet. Indian hotels are one of them.
is another with a very good business model, but it will be a bit more in the long run for them.
Even the aviation industry will also see a good push in the coming months and maybe for the next six to eight months. Perhaps until March-June 2022, we can expect all three sectors – travel and tourism, hospitality and aviation – to do extremely well. We must play the momentum on some of these stocks, rather than focusing on the long term.