What will be the big trade in the run-up to the Budget? Here’s what Rahul Shah has to say

Rahul Shah, V-P, Equity Advisory, MOFSL, says PSU banks have a lot of value to offer from current levels and will continue to outperform in terms of growth what they have been able to do in the last two quarters or so. So, PSU banks will continue, that is what Shah believes should be the trade if one is looking to play for next couple of quarters.

Would you be a fresh buyer in fertilisers?
Rahul Shah: After a long time, we have seen that all these fertiliser stocks are back in momentum and most of the stocks have moved up 25% to 30% in a month or maybe more in some cases. So, I would rather wait from the current levels the way these stocks have run up and I would see the progress of monsoon and then would like to invest in these stocks.

Of late, we have seen a slew of block deals happening and private equity clearly taking the money off the table. The number of IPOs has increased – five are underway at the moment and of course, the big ones are lined up as well and a lot of fundraising activity too. What do you make of all of this? Is it any sign of the over-exuberance and the fact that even institutional players are just rushing into kind of put in the money when it comes to the IPOs and the anchor investment and even the exits?
Rahul Shah: It is a trend of the markets historically that when there is a serious supply or maybe the way the markets keep on moving higher and higher and we see a lot of IPOs hitting the markets, probably more of the block deals, more of investors trying to cash out and so on and on. And this is the time where a lot of private equity gets exited in such a market.

When we have serious demand for stocks, we see a lot of people are trying to raise money through it or maybe exit at this juncture or point. It is a normal thing and we might be talking about that kind of money, but if we look at the market size which has grown in the last five or six years or maybe more, we have been seeing that investors or the private equity guys have been encashing at this juncture.

In the run-up to the Budget, what do you think is the big trade?
Rahul Shah: There is no other trade, but I think as a house we have been positive about financial and PSUs as a theme. Most of the pockets have moved up and we saw the PSUs outperforming also in the last one year and then took a breather. And I think again from here it is ready to take off. I feel that PSU banks have a lot of value to offer from current levels and will continue to outperform in terms of growth what they have been able to do in the last two quarters or so. So, PSU banks will continue, that is what we believe that should be the trade if one is looking to play for next couple of quarters.

In the next three months, what will outperform – SBI or HDFC Bank?
Rahul Shah: HDFC Bank has not performed well for the last so many months and we all know that there is a speculation on MSCI weightage and all so on and on. If it happens, then my gut feeling is that HDFC will outperform. But if it does not happen, then SBI will definitely outperform the HDFC.