Independence Day | Independence Day Ideas: 3 Areas That Can Give You Peace of Mind This Independence Day

Siddhartha KhemkaHead Retail Research, MOFSLsays there is very strong liquidity from the domestic flows – be it the DIIs, HNIs, retail investors and we see that in some of the IPOs that have happened. We also see the interest from the institutional side, both domestic and foreign, in the bulk of the OFS or BLOGs that have been sold by promoters or PE funds. There is a huge demand for some of these papers. That just goes to show that there is quite a lot of interest in the right quality of companies and the right business in the market. Why are we seeing so much strength? Everyone is saying valuations are expensive, valuations are stretched, don't invest, save, don't invest, sit on cash, but the markets aren't coming down.
Siddhartha Khemka: If you look at the markets, yes, definitely strong liquidity is supporting sentiment and also the indices. But what has also been supportive so far has been the strong macros that have withstood the global headwinds and that will continue to be the case, which is a positive for the future as well.

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It's a very strong liquidity from domestic flows, be it from the DIIs, be it from the HNIs, be it from the retail investors and we are seeing that in some of the new papers, the IPOs that have come out. You are also seeing the interest from the institutional side, both domestic and foreign, in the bulk of the OFS or blogs that have been sold by promoters or PE funds. We have seen a huge demand for some of these papers. That just goes to show that there is quite a lot of interest in the right quality of companies and the right business in the market.

What looks interesting? If I were to ask you about your pecking order in industries, stocks, etc., would you give us some Independence Day ideas, if possible, or some topics you're keeping an eye on over the next few months or weeks.
Siddhartha Khemka: From a broader industry perspective, the pharmaceutical sector stands out after earnings season. Some of the big names have delivered very strong numbers and we have now seen two to three consecutive quarters where numbers have improved significantly. Overall, our healthcare sector has delivered over 20% net income growth, so we think this is a sector that we believe could continue to do well.

Apart from that, there are a lot of comments in the FMCG sector that the rural sector is picking up and growth is better than the urban sector. That is another area.

The automotive sector is the third area where we believe demand is good. With the stabilization of some raw material prices, margins have also improved.

We like some names in the broader markets. Recently, we have introduced new ideas in the broader market. On the real estate side, we have introduced Signature Global. The company has emerged as a leading real estate developer in the Delhi-NCR market and focuses on the affordable, low-cost and mid-priced housing segment. It has shown strong execution capabilities and has a strong project pipeline of 30 million sq ft to be launched in the next two years. Hence, we expect a stable CAGR of 35% in bookings. The company is also looking to enter the premium housing segment, which should contribute to overall business growth. Hence, we have a very positive view with a target price of 2000.

On Wednesday, we presented a new idea from Gravita India. It is a bet on recycling, so that area is also doing well. Gravita is a leading player in the recycling space, especially with a strong focus on the electric vehicle side, lead batteries and other batteries are coming into the market. So the company is about to make 88% of its business from battery recycling, about 8% from aluminum and a very small part from plastics.

We believe this company has the potential to continue to be successful. We expect 26% CAGR and 30% CAGR over the next two years and have a price target of $2350 for Gravita India.

The whole space that is on everyone's radar right now has to be the new age tech stock companies, the new age companies or the class of 2021. All of them have actually made a good comeback, be it Nykaa, be it Policybazaar, or actually Paytm has also come back from the lows. Zomato has been winning all along. What do you think about this space? Do you think a re-look is warranted?
Siddhartha Khemka: Yes, this is an area where there is constant excitement and rightly so. If you look at some of the numbers, Zomato has been doing very well. Even PB Fintech and Policybazaar have been doing well. Nykaa is now showing some improvement in its numbers after a few weak quarters.

These companies have realized that sooner or later they have to focus on the path to profitability. At least the e-commerce companies have considered increasing platform fees, which leads to an improvement in overall operating profitability. On this path, we like Zomato, we have a target price of Rs 300. We have raised the target price after the recent results, Q1, way above expectations.

If you look at the core food delivery business, it is pretty stable. But what surprised us on the positive side was the Blinkit business where gross order value grew by 100%. We believe these high growth opportunities are golden opportunities to invest and participate in, especially in retail, grocery and e-commerce. This should lead to healthy profitability over the next few years and the re-rating of companies like Zomato should continue. So I would say we like Zomato within this pack with a target price of Rs 300.

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