Global Events, High Valuations May Hurt Indian Markets Says Dipan Mehta
Dipan Mehta advises investors to focus on businesses ‘selling in India.’
High valuations, negative interest rates globally and unforseen global events are some of the challenges for the Indian equity markets in Samvat 2073 according to Dipan Mehta, member of the Bombay Stock Exchange.
In a conversation with BloombergQuint during the Mahurat Trading session, Mehta says valuations of certain stocks are on the higher side and a slight miss in performance will lead to the stocks getting punished by investors.
Remain Cautious On Commodities
Metals were the biggest gainers in Samvat 2072. Mehta believes that it was governmental action as well as action from the companies that got the them back on their feet. But he remains cautious on the sector.
I am not too positive on commodities. If the slow global growth persists then the commodity prices will get impacted. Positive triggers like the Seventh Pay commission, good monsoons will benefit domestic focused businesses. But investors will have to keep an eye on companies that sell in India. That is my main message to investors this samvat.Dipan Mehta, Member, BSE
Optimism Over Bharat Electronics
Defence oriented public sector company Bharat Electronics is one of Mehta’s top picks for the samvat. According to Mehta, a well-managed company with a good balancesheet like BEL will get price and volume benefits from the government as it is a PSU. A bulging order book spread over almost four years, also holds the company in good stead, he says.
Mehta believes that the company can see a 15-17 percent return over a four to five year period but investors will have to factor in volatility in their quarterly results as it deals in capital goods.
EPC Companies Only Trading Opportunities
EPC companies have seen a revival due to the government’s push towards infrastructure development. Mehta feels that a growing order book will not be enough for these companies to attract premium valuations. They will remain a trading opportunity at best according to him.
However, he was positive on IL&FS Transportation as lowering interest costs along with deleveraging of certain projects may benefit the company for the long-term.
Bullish On INOX Leisure, CARE Ratings
Mehta also sounds bullish on stocks like INOX Leisure and CARE Ratings, both for a longer-term period of 3-5 years. Companies like INOX will be a big beneficiary of the implementation of the Goods and Services Tax, Mehta added.
INOX is a secular growth story. Younger generation despite online streaming love to go to multiplexes which is a positive trade. After online media in the Media and Entertainment space, film production and distribution is the fastest growing sector. Which is why we remain positive exhibition companies like INOX and PVR.Dipan Mehta, Member, BSE
What we like about CARE ratings is the buoyancy in the debt markets, regulatory changes and volume of debt issuance will benefit the company. As they don’t have very high variable costs, they will benefit a great deal from the move of companies towards debt markets.Dipan Mehta, Member, BSE