Siddhartha Khemka portfolio stocks: Siddhartha Khemka on 5 stocks to buy in banking and FMCG space – Blue Barrows

“Any sharp decline because of what is happening in the market can be an opportunity to accumulate stocks within the banking space. We like and within the corporate facing ones and gives a good performance from here given the sharp underperformance that they have seen in the last few months,” says Siddhartha Khemka, Head of Retail Research, MOSL

What are you advising in terms of the outlook on the banking sector? Some of the rate sensitives like , SBI, HDFC, ICICI Bank are all under a bit of pressure as the Bank Nifty is down about 0.5%?
If you look at the overall market structure in the last couple of days, especially after the US Fed became very aggressive in the statement, global markets have overpowered the domestic sentiment. Markets at least in the near term look weak and maybe on the back of the global cues which remain uncertain.

We have the RBI policy tomorrow while our economists suggest that it should be about 35 bps but because of what is happening globally, the RBI might be under pressure to give another 50 bps hike. In this environment, definitely the interest rate sensitives would be under pressure at least in the near term.

If you look at the overall picture, in the near term, the treasury incomes might get impacted because of what is happening in the yields and the interest rates but on the core income that we are seeing, there is steady growth in the systematic credit growth in India, almost 8-9 year high and some of these banks are very diversified within the corporate, SME and retail.

We are asking clients to keep a longer term view. In the near term, there could be volatility and some pressure in some of these large private sector banks. The corporate facing ones have been preferred picks so far and they have also delivered in terms of numbers as well as the stock price performance.

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Any sharp decline because of what is happening in the market can be an opportunity to accumulate stocks within the banking space. We like ICICI Bank and SBI within the corporate facing ones and HDFC gives a good performance from here given the sharp underperformance that they have seen in the last few months.

Within the textile retail plays, some of these multiplexes, hospitality stocks or for that matter going slightly down the run with footwear names – are there any pockets, any stocks that you are bullish on?
If we look at the overall consumption theme, there are several pockets which are looking attractive to us, given that this year after two years of disruption, this will be the first festive season without any restrictions or lockdowns related to Covid and what we hear from management commentary is that the festive demand has been quite upbeat with the beginning of the Ganpati festival and it continues to see strong demand in the ongoing Navratri festival and the Diwali festival.

If you look at some of the pockets, we have been very positive on the hotel space – both

and Lemon Tree. At current valuations, the risk reward is not that favourable, but in terms of results, they would continue to come out with good numbers.

The segment that we like still offers some upside is the retail space.

as well as & Retail (ABFRL). The footfalls have consistently increased and the companies are likely to report strong numbers on their brands and there is still decent upside in that segment.

Footwear has been a huge run up and again the demand side has been pretty good. Some of the companies have leveraged their brands and are aggressively expanding into the tier-2, tier-3 space which is fuelling the growth. So Metro and Campus are the two companies that we like within the footwear space.

What are your top picks in the real estate sector?
If you look at the overall real estate space, after the sharp jump in demand post pandemic, some consolidation took place and now with the interest rates on the rise at the margin, we are seeing some pressure on the overall growth in terms of new bookings.

But if you talk to any management, they are very gung-ho about the new bookings that they are seeing across their projects. The overall demand environment continues to remain strong. Some pockets of concern may be coming in the market because of the interest rate hike that we are going to see or that we are currently seeing in the economy. That is why there is some consolidation.

We like some pockets like the Mumbai as well as the Bangalore region and within that, our preferred picks would be

and Lodha in Mumbai and Prestige as well as Brigade in Bangalore.

What is your outlook when it comes to the cement basket?
The cement space was abuzz because of the consolidation that happened with the entry of the Adani Group into the cement sector. They have made big plans of growing the Ambuja-ACC combine from 68 million tonnes to almost 140 million tonnes over the next five years.

Demand continues to remain pretty steady but the pricing is where the companies are unable to pass on the price hikes and that is where they have got impacted because of the margins. But now, with crude oil prices coming down and some of the raw material prices cooling off and the monsoon season getting over, demand should pick up.

We are not expecting a huge uptick in terms of realisation, maybe a Rs 15-20 per bag kind of hike could be seen in some pockets of South or East but by far we are seeing that volume growth could drive the performance for cement companies.

Larger players like

continue to show strong growth. Ambuja would be in focus because of what the Adani’s are trying to do with the stock with the company in terms of the overall growth and expansion plans. Specifically, in some of the midcap cement names, we like players like or India Cement, which would be a strategic fit in the expected M&A from some of the larger players and could be looked upon as a tactical opportunity.

What are you comfortable buying afresh within FMCG?
The sharp fall that we have seen in the palm oil prices, some of the soap companies, especially the larger ones like

and Godrej Consumers are the two companies where we are very comfortable entering even at current levels. We turned positive on sometime back and the stock had seen the kind of run up especially because of the benefits that it had against some of the traditional FMCG players. But now, with crude oil price softening and palm oil price correcting 45-50% from its highs as well as the monsoon season being better than normal and the festive season coming with strong demand, HUL and Godrej Consumers can be looked at current levels.