Avoid metals in long term, go for India focused pharma cos: Sudip Bandyopadhyay

Short term trading is okay, but I will keep away from metal counters for the long term, says Sudip Bandyopadhyay, group Chairman, Inditrade Capital. Excerpts from an interview with ETNOW.

What do you make of the market moves?
Normally, we expect a quite second half in December, but we seem to be headed for a very interesting time with the government working towards a lot of interesting announcements. We will see a lot of action. As far as the global markets are concerned, we have seen very good news flow and that is making the market mood positive.

Overall, I am expecting a very interesting second half of December. Let us wait for the Prime Minister’s big meeting towards the end of next week.

Given the macro factors that we have at hand, what does it mean for the Reserve Bank in the upcoming policy?
The Reserve Bank has very little manoeuvrable option at this stage with retail inflation continuously going up, with the foodgrain prices where it is. The action has very clearly shifted to government which has realised that it has to take whatever steps are needed to kickstart growth and bring back the IIP numbers to a respectable level.

The government will need to do the heavylifting and that is what we are seeing now.

The way things are poised, I am not very confident that RBI will be in a position to bring down rates any further in the near future, may be four-five months down the line, things may change but as things stand today, very little manoeuvrability is left with RBI.

With phase one deal between the US and China in the works, do you believe that metals as a pack is something to watch out for?
A couple of things here. Brexit is definitely good news, at least the way it looks for metal companies. Second, we understand that restocking is happening in China and that has been keeping the metal counters excited, but beyond a very, very short window, I am not sure whether that window is going to be weeks or months.

There are uncertainties on the back of the tariff war which I don’t think has ended. It is unlikely to end before the next US presidential election and there are enough and more noises around that. I will be extremely wary of taking a large exposure in the metal counters at this stage. Short term trading yes. but for the long term, I will keep away from metal counters at this stage.

How are you looking at all of these divestment candidates for divestment? How are you reading into the hectic price movements in BPCL, Concor etc.?
I will call it real divestment when a strategic buyer comes in and takes over the management. That will be good news for these companies and for the overall government’s divestment scheme. ETFs and transfers between PSUs bring some money for the budget deficit coverage. Real action will happen and is being planned when BPCL or Concor actually goes to a private buyer. There is excitement and it will be good for the economy, good for these companies and good for the government’s future divestment plans as well.

Having said that, the prices have run up quite a bit in the stocks you have mentioned. May be, at this stage, taking further exposure is not warranted. However, divestment or not, we are liking a whole lot of PSU companies. I am not talking about PSU banks, I am talking about non-banking PSU stocks as well. Looks at NTPC’s current valuation. Bharat Electronics also looks very good at current valuations. Though not a PSU in the strict sense, the gas companies also look good at current prices.

We have been hearing that pharma could be a potential game changer in 2020. Do you agree? If so, is there any particular stock or strategy that you are pursuing?
To an extent, we are focussed on companies which have a significant and expanding market share in India. While global business is excellent and has a lot of upsides, at this stage, US which is the largest market, is going through a whole lot of challenges including regulatory challenges. That is making the companies which are exposed to the US market a bit volatile. That is the reason why we are saying let us look at companies which are India focused.

Torrent Pharma is one company which comes to mind straightaway and which can be looked at current levels. Natco Pharma is another company which has a significant India business in the cancer segment. It is a good company to buy at current levels.

The third company I would like to talk about also is a largecap pharma company; Dr Reddy’s has got a little bit of setback, based on some news flows today. But the fact remains that interesting markets like China which has been penetrated by Dr Reddy’s, should give them excellent results going forward. They also have a decent domestic business and in the pharma sector, these three stocks can be looked at at current levels.