When do you think this flip will happen where investors are considering stocks with PE multiple of 60 and ignoring a value stock of juts PE in multiples of 6? Are you asking your clients to do the same? What’s your opinion on not buying Britannia or a Titan but investing in BHEL or NMDC for the matter?
In a typical market, it plays out well in certain phases of the market, where investors make money. Another scenario is a broad-based bull market, where there is a much higher risk as there could be a turnaround story from the next phase only.
The trends of standard investors which we are analysing since the last few days have been ferocious but the risk appetite has yet to come back. Investors want to save a higher portion of their portfolio by investing in bigger reputed firms, the business which are performing well even in these hard times and which are debt-free or with zero debt issue. So in general, if you look out for getting into something which seems cheap, it is not the market rule anymore. This value buying or comparative numbers etc is not something that can give you comfort anymore. Yes, in this so broad world, there might be some companies with strong nice or visibility. Its something one must look in.
It is showing a large variety in the FMCG sector especially. Unlike auto sectors where trading is happening at blankets of multiple in PE ratio. Each and every other FMCG company is showing a different story and is quoting at multiples variations differently. Within FMCG, where are you finding the most comfort to buy afresh?
Some companies have delivered unrealistic good volume growth even in this hard time. For ex, Britannia has a 24% volume growth, Marico has reported reasonable good volume growth too. Of course with some disappointments like Dabur. If the trend shows up in growth volume for the month of May-June in comparison to the growth in April-May and if it seems like a larger growth in the coming time, people would go for these overpriced FMCG companies rather than going for something that looks cheap. In the given market situation, investors may like to go with HUL, Nestle, Marico. Britannia could be in the list too but this entire inter-corporate deposit issue caused some discomfort even after reporting good numbers.