Focus on private banks, pharma, commodities and select IT stocks: Hemang Jani

"I think though we may see a little bit of volatility here and there, by and large a large part of the damage has already been done," says Hemang Jani, Independent Market Expert.

Let us assess the market because it seems that the exit polls had it way off the mark and investors clearly suffering on account of that with a 6% carnage on the frontline index yesterday. Broader markets had it far worse. What exactly would be the prudent approach now?
No doubt, there was a bit of a shocker the way the election final results came out. But the market would probably come to terms with it. I think sometimes there is always a knee-jerk reaction because of the high agenda narrative that is being built.

But the outcome is not necessarily bad for the country and market, that is how I look at it. I think people would be comfortable once there is clarity on, finally the BJP and Mr Modi becomes the prime minister with the support of some of the allies and the focus will shift to who becomes the finance minister and the other important portfolios.
So, I think though we may see a little bit of volatility here and there, by and large a large part of the damage has already been done.

I think we are undermining what actually happened yesterday. Many stocks were down anywhere from 10% to 25%. So, I think there is not much of a scope for incremental damage except for the sector rotation which may come through.

So, my feel is that it is time to kind of look at the current holding that investors would have and try to make some changes to bring in slightly better quality stocks other than narrative stocks where the numbers are good, where the valuation comfort is there and surely it will give a decent return.

What about the valuation support that we are seeing in private banks? Is that something that you would look at when assessing the entire private banking space?
Absolutely. I think if you see banks as a whole has underperformed the Nifty by a wide margin and within the banks, the private sector banks have underperformed PSU because as we all have seen last one-and-a-half years, it was all about PSU buying the smaller banks, so that I think is surely going to change.

So, I think it makes more sense to go with a larger component of the private sector banks, be it ICICI or Axis. It will be prudent to have some SBI in the portfolio, but the smaller PSU banks is something that I would not be comfortable owning now.

How much of your portfolio you would reorient, move back to defence as percentage?
It depends upon the current composition of the portfolio. But incrementally, I would surely increase the weight for some of the private banks, pharma companies, to some extent commodities because we are seeing globally the data points are encouraging in terms of China, in terms of Eurozone, US.

So, I think commodity as a space should do better. A little bit of IT. Maybe there is not too much of an excitement. It could be more of a tactical play. But surely, some of the IT names would feature there and FMCG, I think, is more like a tactical play because you have seen a major selloff across the PSUs and the narrative stocks that we call, so that money has moved to FMCG.

But whether FMCG by itself will give you exciting returns and growth that I am not too sure about. But if we have a good monsoon and if the data points are indicating that there is a growth, surely FMCG would feature in that portfolio.

What is the advice on the Adani Group of stocks in trade? Yesterday, the market cap erosion was about 3.6 lakh crores. Is it advisable as of now to just steer clear?
The election results we have seen a major spike and the stocks have done very well. So, obviously, because of the election results, there was some sort of a knee-jerk reaction. I think you may see a bit of a correction there. But I think select stocks will present great opportunity because if the NDA forms power with Mr Modi at the helm of that, then I do not see any reason why some of these stocks will go through an extended correction.

So, I think Adani Ports surely would present a great opportunity and to some extent even Adani Enterprise because at the end of the day the focus of the government will remain on the infra play, the solar, the green energy. I do not think that is going away. So, from that perspective, for those investors who have a slightly high-risk appetite should surely look at getting into Adani Ports and some of the other names within Adani Group.

What about the very favoured PSUs? At least in the run-up over the last few months that we have seen, there has been a lot of fervour within this entire space. Does one just sit tight?
I think a large part of the re-rating story and the narrative around the PSU has played out. The market needed an event to kind of correct itself so that people take a reality check on what is the actual growth versus valuations for some of these narrative stocks.

So, I would certainly stay away from some of these names. Maybe defence should surely not have too much of a repercussion, but at least PE compression could surely be there.

But the railways, the typical commodity stocks which are part of PSU, which have got re-rated for no real incremental fundamental reason, so I would certainly look out for booking out from some of the PSU names and move that money into some of the Nifty oriented companies, be it banks, certain commodities, autos, so on and so forth.