Business have become a bit shallow on the largecap side as focus has spread more to the broader marketplaces, says Sandip Sabharwal, specialist, asksandipsabharwal.com. At a occasion when there is a view that FII spurts may not be as robust as what they have been for a long time, FII reigned stocks which are not cheap which are not a clear bet on cyclical or the economic recovery have been the outperformers. Yesterday, there was a strong price action in Kotak Bank and HDFC Bank.I would not read too much into it. In my view, some sort of rotation is taking place if some stock does not perform for some time and then some fund comes in there. In fact, the markets have become a bit shoal especially on the largecap side as focus has spread more to the broader groceries. A small amount of buying or F& O activity in these inventories can take them up. No specific progress has happened which could be positive for them except for the fact that there is a general belief that when interest rates bottom out and start moving up, some of these banks with high costs on resource character, actually is conducive to that. They have a high CASA ratio and their costs do not go up as much, whereas on the credit side, they can be priced higher as the RBI starts stiffening. Low interest rates and high affordability had given rise to a revitalization in the residence sell. You can play that by buying real estate properties furnishes or residence increase stocks. How are you approaching this? What have you added there last? In the home improvement side, there are many categories of corporations. On one back, we have the decorate companies which did well in the initial date and now they have subsided because there are some input cost stress etc. Then there are business which cater to houses being built or improved. This includes sanitaryware corporations like Kajaria Ceramics etc. Kajaria Ceramics is a brilliant company and they have given very strong guidance for next year and that has been something which I have been positive about for several years. The quality of management is very good and they are debt free. They should do well near period again. The challenge is that in the near term, the valuations has now become higher because everyone is focusing on these companies and they are not correcting when marketplaces chastise. The best strategy is to accumulate slowly and keep on accumulating these companies on every dip. There are some other companionships on the plywood line-up but I have not really looked at them. ET Now: You ought to have optimistic on amber for over a year and a half now. Do you think the trend is still intact after the recent correction? Or is a large part of the additions behind us? Sandip Sabharwal: At around $1,850, golden rates should have peaked out for the near term but the target buying range is between $ 1,600 to $1,650 per ounce. That will be a good price level to get into gold because longer term, inflationary concerns are being underestimated at this stage just because inflation has not been there for some time. It does not mean inflation would not come back. It will come back because of the behavior the easy money policies and gigantic fiscal stimulation are being put in place and are sure to generate a lot of inflation. Gold commonly does very well in high inflation periods. The timing is slightly difficult to predict but over the next two-three years, golden should do is a good one. Coming to real estate properties, we have got Godrej Owned. The QIP is in the news but that apart, we have been hearing positive things on the segment. In periods of return capability in the near term or even with an annual outlook, how much scope is there in some of these counters? Some of the regional dallies — the Bangalore-based and Mumbai-based developers have had a strong up move. So, a good deal of the positives are in. I would think that the best capital at this stage in this segment is the largest real estate company — DLF. It still examines undervalued relative to the improved fundamentals. Their strategy has been in terms of deleveraging their balance sheets and what kind of potential growth they might be able to show. There is still some upside left. Some of the regional musicians can be bought on troughs because real estate is a long-term cycle and formerly the revival cycle starts , usually it previous a few years. The opportunity will come. It is still a awfully under owned segment of the market. Most funds do not own many of these assets or even though they are they own, it is in very small proportion. As the results start coming out, the whole sector will still work better. So, beings have to look for opportunities both in terms of like corporations like Godrej Property or firms from Bangalore like Sobha Developers or look at Oberoi Realty in the premium segment or even some of the companies which take up contracts to make real estate assignments. This part segment will do well over the next two, three years but we need to look at entry point because many of these inventories have run up very sharply.
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