At Rs 900, three weeks ago, everybody was dumping Indiabull Housing Finance. Last week buyers were back. So what has changed?
Indiabulls Housing is from a group where the volatility for the group stocks are slightly higher, relative to other stocks in the market. Whenever you are going to see the market going up and especially when we had such a large concern in terms of NBFC sector, any positive news flow is taken very well for the stock.
Coming back for the HFC companies going forward, the kind of growth they were expected to have is unlikely to be there because a large amount of leveraging which these companies were expected to do is not likely to happen going forward.
Money has been neutralised to pay off commercial papers and other short-term liabilities and as a result, the fear about giving more money for lending will continue. The rollover concern is not there now. Most of the players will be able to do it properly over next couple of weeks and there is not much concern on that.
The December as well as the March quarters are likely to see growth rates coming down and for that reason, I do not see these stocks going back to their 52-week highs anytime soon. The multiple is also likely to be cut for these companies. Overall, it is a segment where you should venture only if you are a high-risk guy.
Where are some of the NBFCs headed? Apart from Bajaj Finance, what else would you buy?
Bajaj Finance is one. Shriram Transport is another stock one could consider buying. Though there is some amount of softness, the commercial vehicle sector will continue to be quite robust. In terms of funding mix, a large part of funding is via bonds. Over last couple of years, their mix has been healthier relative to other companies. Valuation-wise it is quite decent relative to other companies and that is one stock that looks good to us.
In addition, stocks like Equitas which have fallen a lot because of RBI telling them to list another company, looks quite good at the current valuation, considering that management is also talking about giving existing shareholders, a stake in Equitas small finance bank.
Over a period of time, considering the valuations, that stock also should do well. The quarterly numbers of Equitas were quite robust and these are the kind of stocks that we would recommend investors to buy within the NBFC space.
How much could be the run up in Axis in the next few days to come after what has been a very impressive quarter?
Axis slippage number was significantly better than what the market was expecting. In NIM also, we see a strong growth momentum going forward and one interesting thing was that most of the slippages were from BB and lower accounts and not coming from the normal standard book.
From that perspective, for next six months at least, we see a 20% upside in Axis. Valuations are significantly cheap relative to historic levels considering the strong growth momentum that is likely to happen. Retail continues to grow at 22% to 23% for the company. We are quite optimistic on banks like Axis going forward in terms of growth over next three to four quarters..
Based on the good numbers from Cummins, L&T, would you be buying any of the machinery engineering or capital good stocks?
We like both Cummins as well as L&T. In case of Cummins, the management has upgraded the guidance for next year from 8% to 10% to 12%. Though the export growth number guidance has now been revised to 3% to 5% from earlier 0% to 5%, we believe that the capacity utilisation is likely to be significantly improved in case of Cummins as we see some improvement happening in the private capex side.
Though exports are going to be little bit soft, we still believe that the currency tailwind will help the company going forward. In case of L&T also, the order book continues to be pretty robust close to 2.8 lakh crores. The last quarter we saw most of the segments doing well except for probably infra.
Going forward, infra should also catch up in the second half. Order inflow has also been pretty good during the quarter. Overall, the L&T numbers look quite robust. From a multiple perspective, it is trading at close to around 19x which from again historical perspective is quite cheap.
The stock has not participated much in terms of rally over last couple of years and I see that stock being one of the best bet going forward considering that because of elections and private sector capex coming back growth momentum is likely to be pretty decent going forward.