Is it as good as it gets for this year or will the party continue? Anand Tandon answers

"If we look for where growth will come from, that will dominate over a longer period of time and therefore we will have to go back to companies like banking and auto and so on for the current year," says independent market analyst Anand Tandon.

It has been a 13% decline from the recent low, 9% decline if I add up the absolute gains of July and August. Will the party continue or is this as good as it gets for this year?
For the near term, the market has recovered fairly significantly and you are likely to see some kind of headwinds from here. We are basically oscillating between worrying about inflation and worrying about economic growth at least in the US. What is happening is that there is an overall tilt towards looking for where growth is and that is why we have begun to see money coming back into emerging markets including India.

From that perspective, maybe India will develop some kind of cushion so that it cannot fall too far. But at the current level, it is looking a little stretched. So what we are seeing essentially is just sector rotation. That would likely continue.

Finally, if we look for where growth will come from, that will dominate over a longer period of time and therefore we will have to go back to companies like banking and auto and so on for the current year.

Apart from Zomato, some of these consumption companies have been reporting very good sets of numbers.and I am talking about Barbeque Nation, Jubilant Food, Westlife Development and Devyani International. Which are the stocks from this space that you like the most?
All of them are reasonably expensive, but within that category, one will look for those which are still growing well. Westlife gave a chance of getting in and it is relatively cheap compared to many of the others. So, QSR space is something that you may want to consider as something to hold on to.

Most of the restaurants have taken a price hike because of inflation. Now that palm oil prices, vegetable oil prices, wheat, egg, milk and dairy product prices have come down, none of the restaurants are talking about a rate cut. Once the core of the margins go higher, they get retained. Do you agree with me?
Yes, but restaurants are a very tough business. If you look at fine dining restaurants, they are basically a fashion. Unless you have a chef of great repute backing it, by and large, over a period of time, people look for new places to eat and new food to try out and fine dining restaurants have to reinvent themselves. It is very rare to find one that will last over a decade.

If you are looking for QSR on the other hand, that is a fast moving space, the ticket size is less, the number of people coming in is much more. The only issue that Zomato has is that they are charging almost such that for anyone who is acquiring a customer through Zomato, do not end up make any money on it in the sense that it is at a marginal cost because the amount they have to give to Zomato is way too much and that is the reason why you keep hearing every now and then that the restaurant owners association want to get together and set up their own app and so on and so forth.

So unless you are assuming that Zomato will remain the only player in the game, I think there is still a way to go for Zomato to be able to sustain the kind of margins they are currently making.

What is your view on sugar as a commodity?
I do not track it closely but one of the key drivers for that is now the fact that we are looking at alcohol as a more stable business because it is now going into fuel mixing and with the demand likely to remain fairly strong because of the target reaching 20%, it will mean that sugar will now be able to generate revenues even in bad seasons because one can perhaps get revenues from alcohol which are far more substantial than perhaps what we are getting and more regular. So, from that point of view, it can now be treated as an industry. I do not really have a view on the stock right now.

Is there a complete no-no right now for these new-age internet companies?
Different companies have different models. For example, a company like CarTrade has actually reported profits for the year. So from that point of view, it is a business which just because it is new in terms of the company, it does not mean that the business is new. We have actually managed to use the fact that internet opens up a large market to broad base the business to increase the number of transactions and so on in a meaningful manner without necessarily having to go pay nore in terms of either the transaction costs or the cost of client acquisition. So those are the companies that I would like but otherwise by and large unless you stop bleeding, the secondary market is going to have trouble funding businesses like this where the constant requirement of cash is there.