Want to bet on green energy? These 2 PSUs are still best choices: Rajat Sharma

“We live in a very boring phase of the market and to get any clarity on this, one should wait for what happens with interest rates both in the US and in India. So there is no harm in waiting a month or two months before jumping into technology or any other sector for that matter, ” says Rajat Sharma, CEO, Sana Securities.


We heard out Rakesh Jhunjhunwala talking at the CII Summit and one sector that he was focussed upon was real estate and was talking about how a lot of these companies need to take steps to boost their ROCE. He believes REITS are going to be a big asset and he prefers a REIT listing rather than real estate companies. All in all, he seems to be very bullish on the real estate space. What is your take on real estate?
I am actually pretty negative on the real estate space. The only reason why real estate seems to be doing well is this is not a listed space. I am not talking about listed companies in the real estate space. One has seen a lot of demand for the unsold inventory that we have had for a long time and that is purely because of the liquidity that is there in the market. That is the reason why you see if you go by any of the research reports on real estate, you can see that the demand has picked up, the sales has picked up but you do not see any impact in top real estate companies. The stock prices of those companies have remained where they are.

So, we think there is some merit in what he says in terms of REITs listing because fixed deposits have started delivering low returns and people will be looking at instruments like REITs for making a fixed rate of return but I do not think that has any bearing on real estate companies. So to that extent, we will see a lot more REITs listings now. We do not have any. But yes, there could be some merit in that.

He also touched upon logistics, warehousing and how there is going to be a lot of potential within these spaces. Some of the listed players have had quite a strong run while it does continue. Is this something that you would be bullish on?
I think not at all, because it is really difficult to pick up logistics as a theme and say this is likely to do well. A lot of these new age start-ups who use logistics and delivery services and may be some of those guys will come to the market in the future, but right now I do not see enough players in the listed space in real estate.

There is a lot happening in there but this is primarily start-ups and unlisted companies. I do not think this market has found anything in that space. I will also like to touch upon another point. In these markets, if anything actually does come, first off all it is not going to happen because right now we do not have any DRHP filings for logistics and companies in that space; but even if something comes to the market, right now it will struggle.

Coming to traditional IT companies like TCS, Infosys and specifically the swap that we are seeing in between TCS and Infosys, a lot of analysts believe that what is happening in TCS right now is just the buyback support that we are seeing and once that event is out of picture, we might see a bit of slide. What is your pecking order in the sector?
I think this is purely a factor of a lot of retail interest in TCS because in this time to gain up to 30% because anybody who is holding shares worth up to Rs 2 lakh can tender the shares at a price which is around 30% higher.

Personally, I have always found Infosys to be a much better company in terms of purely what they do as a business. TCS still has a lot of legacy businesses while Infosys is focussing a lot more on acquiring companies overseas which have included the so-called new age businesses and they are developing a lot on the digital front. But having said that, the way Infosys has ran up in the last two years, I would not recommend it. Infosys has been one of my favourite stocks ever since the time they had their biggest problems around four-five years back. But the way it has run up, it is only expected that the stock would cool off a little, particularly if the sentiment around technology stocks becomes a little negative. That may happen if the US Federal Reserve raises interest rates.

Just look at how Nasdaq and tech stocks have performed in the US. India may be a little different as a story but you might as well want to wait before you get into this market. I agree that we live in a very boring phase of the market and to get any clarity on this, one should wait for what happens with interest rates both in the US and in India. So there is no harm in waiting a month or two months before jumping into technology or any other sector for that matter.

Regarding TCS, what would be your recommendation to the retail investors? Currently the stock is trading at Rs 3,800 mark and the buyback price is Rs 4,500. What would be your short term recommendation?
This is a no-brainer – if you have shares worth Rs 2 lakh and you tender in your stocks, you gain an immediate 30% to about Rs 4500. Also, you might want to book a profit in technology as a pack, sell and wait to get back in. This is the perfect time.

Being Devil’s advocate here. But if you sell, you will miss out on the long term opportunity and TCS has been one of those wealth generators which has compounded at over 20% for many many years now?
You can buy back once you get the money in your account. if I have money, I will say whatever money you get buy Infosys, actually hold both of them.

Owing to the kind of volatility that we have witnessed in crude oil prices, how are you looking at some of the companies that are closely linked to the movement of crude oil prices within the oil and gas space and OMCs?
This has been a theme which we have continuously recommended last year and the reason was simple; as the world economy started opening up, it was only expected that crude prices would jump. My Diwali pick, a year and a half back, was ONGC when the stock was around Rs 68-70. If you see the way the crude prices are moving up, the stock may actually continue to outperform for a fair bit and this has happened despite the recent underperformance in the broader markets.

So this is one space which one should definitely have some exposure to in one’s portfolio. The price at which ONGC is available today, one has nothing to lose. It has got a great dividend yield. It is a stock which you should have in your portfolio. I am taking very limited bets in the market and I am adding very little to my portfolio but I would recommend high dividend yielding stocks like ONGC that you can definitely buy with some portion of your money.

Coming to the theme of the shift to renewable energy and green hydrogen and the likes. Is there any stock or company that looks attractive or do you think most of it has already been played out in the likes of Tata Power, Reliance Industries etc?
A lot of the companies that look attractive in the space unfortunately are not listed and that is an event too far. I am talking about the battery companies – -whether it is Exide or Amara Raja and stuff where these companies have not really seen the demand growth that they should if there is a switch to renewable energy.

Before that switch could happen, in my view, there could be two, three cycles of bull markets and bear markets. So that is an event very far away. At this point. the only source of energy in India is coal and petroleum. So one should add up on companies like ONGC. On a lighter note, it would be unfortunate because the big story for ONGC should be if they can find oil somewhere in India. My sense is by the time they will find that out, we would have moved to electric mobility and so that would be unfortunate. But having said that, there’s nothing right now in the renewable space.

The other basket that one can look to is SJVN and an NTPC which is focussing a lot more towards hydroelectric and solar energy; SJVN in particular. Both the companies in particular have extremely good dividend yields of about 7-8%, very safe, good, sound businesses, government run companies and so if you were to play it as a theme for the next 10 years and make returns in way of dividend, you can definitely add these stocks to your portfolio and see when that switch to the renewable energy happens.