Focus on value, not momentum; play growth via IT, renewable energy: Vinit Bolinjkar

The recent correction makes the market look attractive because EPS cuts have not happened and it is broadly based on what is happening in the global markets?
I personally believe that the Omicron has emerged and while we have got a handful of cases out here, the speed with which this virus is spreading tells us that it could spread viciously globally and there would be a little bit of cautious optimism. Given that Indian markets have rallied so aggressively over the last few months and the strong bout of FII selling continues, we should be cautiously optimistic, rather than taking momentum trades. One should be switching the portfolio in the direction of value stocks.

Which sectors would come under it?
Real estate is very under-owned. We have seen good traction in that segment and the infrastructure theme is really strong and has demonstrated last year that infrastructure withstood Covid 1.0 as well as Covid 2.0. I believe those are the segments which will continue to do well. Food stocks are also looking good because people will be slowly looking at stacking up supplies if the virus spreads out of hand. Food inflation is always good for the food FMCG companies as well as the platform businesses. We like these three sectors going into the next quarter.

In terms of the reopening trade, out of the three sectors that you said, one depends on reopening. Don’t you think it is at risk because of Covid or do you think deliveries would make up for it?
In the real estate segment, the bookings are very strong, especially in Maharashtra, builders are rushing in to take advantage of the limited time window for registering projects. Once they get allocation for projects with their FSI, they are going to be sooner or later putting up these projects. I believe real estate will continue to do well given the fact that we have seen severe drawdown in inventory.

Second, the number of builders who could have withstood the pandemic has sharply come down and interest rates are at such lows that we will continue to see strong momentum in this segment.

How would you look at growth stocks? You are saying that value should be a dominant part but one cannot just ignore growth. So how would you play that?
If you look at metal stocks, EV based metals like aluminium, copper are good plays to look at. I am not very optimistic about the steel pack because China is slowing down and that is going to keep a little bit of pressure on the prices of iron ore as well as on steel prices.

If one would really want to play the metal stocks, these are the stocks to go with. When Covid hits us, growth goes out of the window and everything gets frozen in time. We have seen a very good rally ahead of us and just to ward off any kind of hits to the portfolio, investors should migrate their portfolio where the value is. Sectoral rotation will also come in.

If one really wants to play the growth story, it is going to be the IT stocks. We like Tech Mahindra because 5G is a theme which is going to play out very strongly. Other growth stories are going to be renewable energy and battery plays. These are the growth stocks one must play where the theme of replacement is going to come into play.

In terms of IT, how would you be positioned? What sort of commentary would you like to hear from TCS, Infosys?
The focus will be on volumes and sustenance of margins, given that employee costs have really risen very sharply. We need to see how they mitigate that risk and how the volumes come back. If I were to read the market and if my judgement is right, then they have another strong quarter ahead of them.

What would be your preference? We have seen midcap IT doing better than the large cap names in terms of stock prices. Would you stick with largecaps or the midcap ones?
It will be a mix. Among largecaps, I would go with HCL Tech and Tech Mahindra. In the midcap space, I will go with Mastek.

In terms of new listing, do you expect the IPO market to continue to be so robust?
The IPO space is a little bit tired. With the premiums being very high, one of the stocks which should be doing really really well is going to be Supriya Lifesciences. I am very bullish on that stock. They have got a very strong case. Their backward integrated drive to the basic chemicals and their exposure to the regulated markets is very minimal at 3% of their portfolio. So the value enhancement trade is going to come out from the fact that Supriya Lifesciences will continue to increase its exposure to the regulated markets, particularly, the US.

In terms of FII, DII flow what will you watch out for? FIIs have been selling relentlessly, DIIs have been buying so far.
I do not pay too much attention to what the FIIs do on any given day. December is a time when they would look to take profits and this is what they have done. Typically, there is a Santa Claus rally at the fag end of the year, where we are pre-empting allocations for the New Year; but this time, we have a slightly diabolical situation where the interest rates are expected to rally very sharply and the Fed is doubling up on its repurchases of T bills. As I told you, my entire focus is going to be on value and less on momentum and that is the way I want to play out this segment.