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Nitin Raheja discusses challenges faced by OMCs, the pressure on HDFC Bank, re-rating of defence stocks, performance of upstream oil companies, and the positive outlook for the pharma sector. Coming to HDFC Bank, he says we are getting to that stage where there is clearly value sitting there. It is only a question of when you start seeing the flow ease off and I think that will happen sooner than later.
Nitin Raheja discusses the valuations of defence stocks and railway stocks, emphasizing the lumpiness of these businesses and the potential for big variances in quarterly performance. He also mentions the signs of revival in the rural economy and the expected increase in spending as the elections approach. Raheja expects better results from FMCG players due to benign inflation in some commodities.
Nitin Raheja says: “The consumer companies are great businesses with great cash flows and great returns. But growth is missing. Typically we look at businesses in high growth mode. We like to invest in businesses where we believe earnings can grow and double at almost 15% to 16% compounded over the next five years. We do not find that in some of these businesses.”
Nitin Raheja says: “Six months down the road or in the second half of this year, you were to see rate cuts actually transpire. At that period of time, some of these larger banks will have superior return on asset and return on equity standing there would actually get re-rated from where they stand today. It all portends very well for some of the large banks now.”