Abhishek Basumallick, Chief Equity Advisor,
Reliance which is almost a third of telecom is at life highs, Bharti is at life highs, almost nudging the Rs 700 mark. We are talking about how the 2G area will get transformed once Reliance launches the new phones. A huge amount of debt is owed to the banks. So isn’t the health of the third player also very important?
Telecom is a sector which is very important for the country. As a country we need three, maybe three or four players to be there in the market. The market is also factoring that in. Nobody thinks that Voda Idea is going to go completely off the radar. But having said that, the bulk of the market share is going to reside with Airtel and Reliance Jio. But the trend for the sector for the next many years is going to be positive because there is going to be a huge data consumption and it is a self fulfilling loop that the more data you consume, the more need you have for more and more data.
A few years back, very few people were using mobiles for data. People were using it for calls, SMS and things like that. Now the consumption pattern has completely changed to audio, video, and things like that. It has become all pervasive. It is not only happening in pockets, but if you go down to the villages, in the tier two, tier three cities, to the top tier cities, everywhere data consumption has boomed. There is always going to be a challenge in terms of tariff raises and like you also mentioned, there are downstream impacts of the money the telecom sector owes to banks and other lenders. It is a very crucial sector. As a country, we need the sector to perform well.
How are you maintaining your portfolios? Have you made any changes recently or is there anything you are researching?
We should be looking at a couple of areas. One, is the chemical space. I keep saying that chemicals is in a spot today, where IT was probably in the early 2000 period. It is a long structural secular story that is playing out and it is likely to play out over a significant amount of time. It is not something that is happening today because of China plus one kind of movement. It has been a structural story for at least half a decade or little bit more than that. So chemicals are a good place to look at.
Another very interesting place, although a lot of the stocks have run up, is IT and within IT, specifically look at companies which are working on the banking and the financial sector clients. The reason I say that is if you look around, there is a huge amount of disruption happening with fintech and the neobanks that are coming up. That is going to push the traditional banks into upgrading their softwares, systems and that is where a lot of these banking, financial focused IT companies, especially the ones who are doing some niche work in those areas could benefit over the next few years. So that is another interesting space.
Real estate again is coming out of the woods after many years and that is another very interesting space and obviously if real estate does well, it has a fallout on other sectors.
How are you playing the industries around real estate? A lot of people are preferring ancillaries. Which kind of sectors or stocks do you like there?
A perfect place to play the real estate would be housing finance companies, then the sanitaryware, ceramic tiles players. Paints is a difficult place because valuations are slightly on the upper end but those are some of the things that you can look at.
But these are primary areas — plywood, laminates and that is another good area to look at when one is looking at the real estate space. So broadly, if one focuses on these three, four areas on the uptick of real estate, that should do well.