ICT | Vodafone Idea: This is a classic bull market, adhere to every correction: Dipan Mehta

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There are many positive aspects of Vodafone-Idea that strategic investors or even private equity may like to examine and if they are able to survive this particular storm, then even if it is a small player, maybe a number three player, he can certainly turn profitable by sizing correctly, says Dipan Mehta, Director, Elixir Actions.

The Sensex has passed 59,000. So what?
We are seeing a classic manual type bull market. It sort of flattens out or experiences a sideways correction for a few days or weeks, and then a little trigger can kick in and push the stock price up. Today’s trigger, of course, was how telecom stocks rose and the kind of relief the government gave that benefited not just telecom stocks but a whole host of them. of banks that have exposure to the telecommunications sector.

Hopes of positive bad bank news for the banking sector also kept banks in the spotlight. Banks have been grossly underperforming in the last few months or so because of Covid and because of rather disappointing earnings for the June quarter. There are some positive news feeds that drive these stocks higher, but I repeat that this is a classic bull market and every correction should be considered. This bull market is supported by rising corporate profits and very high liquidity.



We were fascinated by how ITC moved on Thursday. What’s going on ?
It’s almost time. A lot of bets have been placed on the ITC to progress. This has been a big laggard and investors have finally realized that perhaps this poorly performing low PE stock must have a chance. It is a bull market that lifts all the boats and the ITC is also seeing liquidity entering the stock.

In terms of valuation it was a loud buy, in terms of dividend yield as well there was a lot of reassurance and I hope the street is expecting some action on the companies, in terms of the split of the company in its various activities as an unlocking measure. But let’s wait and watch. When there is a breakout and if it holds and stocks move another 4-5% or so, it could be the start of a very strong bullish move that could push stocks up another 40-50% per. compared to the flat trajectory that was there until about a week ago.

Let’s talk about PSUs. Do you think that once Air India is sold, we will finally see the whole PSU pack that has already started its movement, be it Oil India or NTPC?
It seems that the government is racing in terms of reforms and one aspect that has fallen behind is privatization and divestment. Now, with the problems associated with coVID well behind, the government will examine privatization with renewed vigor. Normalcy has prevailed and now is the right time to consider IPOs like LIC or divestment from privatization like Air India or

Besides. Either way, the excitement will still be generated in the PSU actions.

If any of these events goes successfully, especially privatization, there will be a chorus and a call for more and more companies to be privatized and then it will become a trend. This is no longer a political issue and it is a valuable unlocking opportunity. All stakeholders are happy with this particular move and there is a new kind of interest from many institutional investors, retail investors getting into PSU stocks, as there is no denying that PSUs are trading at extremely attractive valuations compared to the rest of the market.

They are available at a good price relative to earnings multiples and good dividend yields. So there is fundamentally a comfort in valuing these actions. What was missing is the trigger and the trigger in the form of privatization can be very strong and it will energize and electrify the entire PSU pack. It doesn’t matter if that particular power pack is strategic in nature and will never be privatized, but it usually creates a sense of well-being within the power pack. I would say that to some extent the PSUs are under-owned and they can rush to buy these kiosks if they think privatization is here to stay and will pick up more in the next two or three years. , about.

There has been a lot of debate in the market about the Telecom Relief Package and what it really means for Vodafone-Idea. Would you say it’s just short-term relief that we see on Idea?
It’s a short-term relief. It just saves them time. It even gives them a few years to tidy up their homes, raise fresh money, and try to avoid losing subscribers through advertising or better investing in the network or whatever the strategies. that they have.

The interim period is very important for Vodafone-Idea because they are in the market to raise funds and we are in a situation where the liquidity is abundant. There are many positive aspects of Vodafone-Idea that strategic investors or even private equity may like to examine and if they are able to survive this particular storm, then even if it is a small player, maybe a number three player, he can certainly cash in on yourself by sizing correctly.

I’m sure management is thinking about streamlining the regions offering their telecom services to focus on ARPUs and premium customers. There are many strategies that telecom companies can adopt and there are many opportunities opening up for them in the digital space as well. I’m sure the company is evaluating all of these options and at some point in the next 6-12 months we might be looking at a good fundraiser. This will certainly solve a lot of problems at Vodafone-Idea. It will never be a major challenge for Airtel or Jio, but certainly it can be a profitable number three and it would also reduce competitive intensity to some extent and benefit the industry as a whole.

But right now, in terms of investment strategy, the best stock with the usual disclosure that comes to mind is, of course,

. It is one of the highest grossing pure play telecom games available in the world and I will definitely recommend it over Vodafone from a longer term perspective.


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