Yogesh Mehta on what to do with Reliance, SBI and ICICI Bank

At Rs 1,550-1,600, Reliance will have very little headroom for the investors. If SBI corrects further from this level, then it could be a good opportunity to buy, says Yogesh Mehta, Founder, Yield Maximiser. Excerpts from an interview with ETNOW.

On Reliance, SBI and ICICI Bank
In case of Reliance, the telecom thrust is getting better. They are coming back to life with a hike in tariffs, but all this is priced in right now with Reliance because the Singapore GRM margins are at the lowest point and Jio thrust will have a compensating effect. At Rs 1,550-1,600, Reliance will have very little headroom for the investors.

In case of SBI, the way NCLT issues are getting resolved and they are also deleveraging their balance sheet by selling stakes in various businesses they have. By December end, we will see SBI Card IPO and they are also hiving off UTI AMC stake. All this put together would be a good opportunity. If SBI corrects further from this level, then it could be a good opportunity to buy.

ICICI overnight is a darling stock and preferred pick of all the broking houses across the world and across India. The retail facing business is doing very well for ICICI Bank and the pre provisioning operating profit they are focussing on.

At 2.5-2.6 times price to book, ICICI has got very little room to correct from here but the upside will also be very slow and gradual. Rather than that, I will look at something like Kotak Bank where there is immense opportunity with the cross verticals are doing very well, all the businesses are firing with strong cylinders. I think Kotak Bank would be a good opportunity, it has not corrected but it has not performed up to the mark as other private sector banks have performed.

On asset quality stress in Q3
In the PSU banks, more or less, everything has been provided for. I do not foresee further disappointment for PSU banks. However, disbursement and credit cost would be a major part to look upon for this quarterly numbers on Q3 as well as Q4.

Putting it together, PSU banks will not have any wonders to show for the next two quarters so far except for SBI. If anybody is looking at any PSU bank exposure, then SBI would be the only stock to have in the portfolio.

On private sector banks, we can see a good thrust over next Q3 numbers where the entire basket of private sector bank will have good financials together with NBFCs. In the combined Nifty 50 profitability, probably 60-65% growth will come from private sector banks and NBFCs.

On midcaps
In the midcap space,we have not seen any performance. The ones that have sone well, have performed individually and not as part of the sector. So, we cannot concentrate on a single sector but individual companies.

The cable business has quite a few opportunities available due to the infrastructure growth in terms of government capex or private capex or household.

There are some pockets available still, where midcap companies can perform like Finolex Cable or KEI Wire or Polycab which has already run up. Overall, one should avoid midcap PSU banks. Yes, small finance banks can be a performer from here, avoid NBFCS. So very selective pockets are there and of course, one should avoid real estate also. So only chemical and cable are two sectors where midcap companies can perform. Last quarter’s numbers were also good. Q3 and Q4 are also projected to be equally good.