What will drive this roaring bull market forward? Daljeet Singh Kohli explains
What do you think of this roaring bull market? What can block it and what will move it forward?
There is nothing to worry about at the moment. The market was able to overcome many of the fears that we felt at the beginning of August. These sectors can move the market forward. a) The BFSI sector did not perform from January to July. It’s probably time for them to catch up and one of them has already done so.
b) The FMCG sector also made a very smart rebound.
The banks have lagged behind, have started to perform, and are not waiting for the Fed’s action to materialize and the end result to tapering. Fed Chairman Powell has yet to give a specific timeline for the reduction and the market has moved very quickly. Banks and other financial institutions have started to perform. Banks make 30% of the index and when they perform, we see this kind of euphoria. In September, the banks still have to catch up and we will therefore see a big movement of the banks as we have already seen with HDFC Bank. The BFSI segment therefore has great potential. also resumes. Reliance has news again on plans to acquire a solar power company and other things. For the past few months, Reliance hasn’t played. He has also started playing now. Since 10% of the index is a stock and is performing well, 30% of the bank is performing, we are obviously seeing high levels on the front line.
On the portfolio side, we may not be as enthusiastic, but the portfolio has not moved as much. But for September, we started reducing our exposure to IT midcap and increasing to Reliance.
Why aren’t the markets revisiting media stocks?
The media still don’t have that clarity on subscription numbers and ad revenue. In addition, there is not a lot of media stocks available. Zee is available but there are a lot of issues with the promoters and what they have done in the past.
In other actions, people always want to see what the trajectory is on the advertising part because when we talk to the management of various companies, the place where they want to cut spending is advertising. Now everyone is talking about saving your money. It used to be travel and employees. Now travel is already reduced, employees cannot be reduced much. So the third place where they can cut their spending is in advertising. This trajectory is still not clear.
Plus, it makes sense because we’re still in that lockdown mode everywhere. Businesses also wait for the economy to fully open before spending on advertising. It will take a little longer for these companies to perform well and therefore there is not much visibility on the numbers. Therefore, the media is still not a preferred industry for most people.
What explains the drop from 5,000 to 7,500 Rs in such a short time? NBFCs have suffered, new tech lenders like HDFC Bank and Kotak suffer a time correction, but Bajaj Finance has gone up like a rocket. What are we missing here?
Sometimes it’s not that we’re missing something or that someone is smarter, it’s just that someone took that leap of faith. I have been monitoring Bajaj Finance since 2011. At that time it was Rs 10. It went straight to Rs 800. It was my first recommendation and it was a peak of 52 weeks at the time. Since then we’ve always had a feeling that we were going to come back and probably downgrade the title because it gets more and more expensive. It’s become six times the book value and now it’s nine times the book value, a record high.
Every time, but when you come back you feel that they are doing much better and that they are doing things in the right direction. They’re way ahead of their time and they’ve done a lot of things that are in line with what was required for this business to do. We are talking about fintech these days and so many companies have now appeared. But all of these things Bajaj Finance has already done. They did it in a much better way. I guess that’s what keeps this course of action moving all the time.
In addition, they were not reckless. In times of pandemic, they were very conservative. Now they’ve improved and the latest trigger is from the three apps that are slated to appear in October. And then the AMC case happens. So there are a few triggers at play. In addition, it is more of an assessment. If you want to give every new fintech player a 100x rating, why can’t the same rating happen to this company because here is some traffic playing out. There is also the fear of missing out (FOMO).
But they gave a profit warning last quarter when retail NPAs rose. How come the markets don’t recognize it? They warned that the growth in assets under management will slow down. So if normal business is slowing down, why isn’t the market worried?
The fact that they have recognized it gives them a better place in the eyes of investors. They have recognized the problems and once you recognize them you will obviously take steps to improve them. It is a management that has a lot of credibility.