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How much more steam does the metals rally have? .
If you look at the LME, the entire pack seems to be on fire. You have to be selective here. So one is catching the commodity cycle right and in this world of easy money with central banks expanding the balance sheet to probably $13 trillion in next one and a half years, commodity will be in a bit of an uptrend. But you have to avoid leveraged balance sheets and ensure that you do not get carried away.
Tata Steel still looks good. If you see their last quarter numbers, there’s about 5.2 million tonnes Indian output, and another 2.1-2.2 million tonnes on the European side. The margins will improve. There have been three-four price hikes. Even in Europe, the hybrid realisation should improve. Already the spot spreads are above $200 per tonne. You will see both operating and financial leverage playing out. They have already done almost a billion dollar debt reduction so that will play out.
What is your take on the IT pack?
IT is looking very, very strong. The best news is it is probably getting priced in from this quarter’s revenue perspective. We continue to like Infosys despite the stellar runup in the largecap space. Now almost 50% revenue of the company is coming from digital. They have a clear Cloud platform in place with the name of Cobalt. The deal win momentum is extremely robust. The TCVs continue to impress and the focus on digital and cyber security is quite heart warming.
In the midcap space, we like MindTree. Their strategy of 4x4x4 which is essentially four verticals, four service lines and four geographies makes it a very focussed player. Post acquisition, there is some stability in the clients as well as the employee front. We are seeing good traction here. Three out of four service lines: customer success, data analytics and Cloud are digital. Microsoft, the largest client, continues to do well. The only risk we see there is client concentration.
What is your take on the IT pack?
IT is looking very, very strong. The best news is it is probably getting priced in from this quarter’s revenue perspective. We continue to like Infosys despite the stellar runup in the largecap space. Now almost 50% revenue of the company is coming from digital. They have a clear Cloud platform in place with the name of Cobalt. The deal win momentum is extremely robust. The TCVs continue to impress and the focus on digital and cyber security is quite heart warming.
In the midcap space, we like MindTree. Their strategy of 4x4x4 which is essentially four verticals, four service lines and four geographies makes it a very focussed player. Post acquisition, there is some stability in the clients as well as the employee front. We are seeing good traction here. Three out of four service lines: customer success, data analytics and Cloud are digital. Microsoft, the largest client, continues to do well. The only risk we see there is client concentration.
One can selectively pick PSUs like
SBI, BPCL. Some of the better run PSUs can be looked at but don’t buy the entire pack, says
Complete Circle Consultants.
Do you think from an investment angle, the PSU theme merits a relook or should one keep it in the trading portfolio?
Selectively some value is emerging in the PSU pockets. SBI Bank is the only bank which has gained market share in the last five years in the PSU pack. Their market share in deposits has gone up from 22 to 24%, their share in advances has gone from 19% to almost 21.5%. The estimates on 1% of the book going for restructuring looks realistic. All the subsidiaries are doing well. SBI Cards has 18% market share,
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