TaMo a compelling buy; time to buy HDFC Bank: Deven Choksey

“It is quite possible that HDFC and HDFC Bank are at a stage where ITC was at some point of time in the recent past. That could be the inflection point. This is a time when this merged entity could be the portfolio choice for most of the investors thereafter,” says Deven Choksey, MD, KRChoksey Holdings Pvt. Ltd

What is happening with FMCG because the near term trigger of the palm oil prices softening is acting as a big kicker? Everything from ITC to a GCPL, have risen from the March lows. But after the recent run up, would you buy any of the FMCG names afresh?
Yes. I am keeping the fingers crossed as far as the raw material prices situation is concerned. They have indeed started giving a good amount of relief to most of the FMCG players now and should it continue and sustain, then it is good news because this particular price rise was affecting the FMCG companies manifold. They were getting affected and the possibility of stability will return.

On the contrary, most of the FMCGs which have been experiencing lower volumes in most of the packages that they have been selling be it in personal care, home care or even in food product cycles, is where probably the softening of the raw material prices could give enough cushion to sustain this particular activity at the current volumes.

Should that happen, then post festive season in September, one could possibly argue for a relatively stable to better times for FMCG companies. The stability in the margins also would return. Most importantly, if the consumer is returning with the volumes that they are asking for, in the second half of the financial year, some of these FMCG companies could once again, possibly see double digit volume growth. So keeping the fingers crossed but there is a possibility that benefits from lower raw material prices are coming in for these companies.

The deck is getting cleared now for the HDFC Bank-HDFC Ltd merger. Will there be an immediate stock market reaction?
The RBI nod coming in clears the path for a complete merger of these companies. If you look at the last month’s data, particularly for HDFC Bank, the loan growth has been moving in the 20% plus of growth which one has not seen in the last so many years as far as HDFC Bank is concerned.

That means the industrial customer or the corporate customer is returning back into the system and that is fundamentally very positive for them. I would like to think that along with the housing portfolio and the banking portfolio, if it grows at a CAGR of 20%, then the possibility of creating around Rs 50 lakh crore AUM in a span of around five years could be extremely high and that is where probably one could argue that such big opportunity should not be missed out.

It is quite possible that HDFC and HDFC Bank are at a stage where ITC was at some point of time in the recent past. That could be the inflection point. This is a time when this merged entity could be the portfolio choice for most of the investors thereafter.

Do you own HDFC Bank? Would you be looking at buying it?
We are holding it and we would like to add further. This is where we believe the opportunity size is becoming bigger. More importantly, the banks are moving very systematically in adapting to the digital framework. That is what I like but the larger banks have inertia and this bank is showing signs of getting into the digital framework and getting ready for complete digital service. I like that particular proposition and hope they succeed in a shorter period of time.

The one stock which could be in focus today is Tata Motors after the 77th AGM where N Chandra said that commercial CVs, PVs including EVs have remained robust and the JLR stood strong despite the ongoing geopolitical supply and inflationary concerns. They are projecting a very strong outlook for the second half of the fiscal. Your view on Tata Motors?
I have a slight bias for Tata Motors. I believe that this company has done whatever it could do to make a comeback. They have corrected their cost structure, they are basically a lean and mean cost structure. They have a corrected portfolio wherein the customer facing products including passenger vehicles are something which are in demand along with some of the MNC brands and that is very impressive.

They have expanded the reach for the distribution of the vehicles which are passenger vehicles particularly. They have expanded the reach that is again I think a good correction in the strategy that they have done. In the JLR portfolio, they have made a gold announcement that they will be going complete EV in a shorter period of time from now on. That again is giving complete direction to them and working on autonomous vehicle platforms with is something the company is getting ready for next 10 years of selling.

Commercial vehicles is one track which I believe hold a significant amount of promise for Tata Motors at this level. This particular area has not been growing for the country as a whole and I think many of the CV companies as well but given the fact that infrastructure led spending is happening in the country, given the fact that vehicle scrappage policy is coming into force and given the fact that I think the entire industrial sector is now talking of expansion in doing the PLI schemes.

All in all put together I would like to think that Tata Motors probably remains a compelling buy at this point of time. One needs to have holding capacity for at least next three years to get rewards out of this vehicle maker. That is what my take would be.

Which are the three stocks which you own from the last three years and you have got no plans to sell irrespective of what is happening in China, what could happen to crude and what will happen in Russia?
In my portfolio I have Reliance. It continues to be there. Also, I have been a firm believer in the commercial vehicles space and that is where I have been holding Ashok Leyland and Tata Motors in my portfolio.

I am holding some of the banking stocks because I believe that if the country has to grow, We are talking about a $5-trillion economy and one cannot miss out on the banking space. Till now, the banks have not been participating largely because the larger participation was always from the retail side.

Now the corporate side of lending has started taking place and the digital play is making all the difference. My conviction is banking stocks would probably perform well and that is probably now showing some kind of reflection. We continue to hold this particular theme and we would like to stay invested in those stocks apart from some of the IT companies in the mid tier space. We believe they are a niche play and probably one could stay invested there.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)