We had a gangbuster July and August. Market gatherings are no less spectacular. What’s next now? Is this as good as possible?
Let me put perspective to that market rally. In the last two months, we have seen the Nifty rise close to 2,500 points but from a valuation perspective, the Nifty PE has moved about 3 points or 3 multiples from about 18-18.5 to 20-21.5. Now 3 times or 3 multiple movements in valuations tells me that unlike Nifty’s relatively sharp move, the rise in valuations is not so sharp partly because Q1 results have been factored in and therefore, when we shift our estimates forward, valuations look like a bit better .
Having said that, after this amazing rally, one should see some moderation in Nifty levels and I wouldn’t be surprised if that moderation continues till this month as well.
Does it make sense to buy cement stocks? Between ACC and Ambuja, which one is better?
Are we buying cement stocks at this time? I would say yes because there are two factors that influence the choice of this cement company; one of them is that capex is coming gradually after Covid, posting better corporate profits and we are looking at projects moving forward, that is one part.
The second part is that we had a big shock in terms of commodity prices at the beginning of this calendar year which is now tapering off and we have commodity prices coming down from their highs and that will definitely help companies like cement companies going forward. We will enter winter in a few months when general construction activities will begin to build. All these factors tell me that yes, cement stocks are something to look at buying. In terms of the ongoing offer from Adani as far as ACC and Ambuja are concerned, my only concern is how it will be integrated into the Adani Group of companies.
« Back to the proposal story
The Adani Group has a high level of debt and these cement companies – ACC and Ambuja – are almost debt free. So from that perspective, it becomes a bit of a problem because one wonders what kind of level of debt they will incur under Adanis ownership. So I’ll be neutral on that. You can choose either.
Piramal Enterprises’ financial business is a cheap NBFC by any yardstick after the DHFL acquisition. It is a low-cost pharmacy business. The stock is off to a good start but despite the fact that the business is going out of business, there are no buyers there?
I think the NBFC business has been the main driver of Piramal shares in the past. It has made its way into the real estate game and that is where opinion is divided because unlike classical NBFCs which are retail-focused, Piramal’s NBFC is largely focused on wholesale and that carries a lot of risk, as the exposure is not necessarily top-notch. or risk-free customers. So I would be very skeptical of this stock.
Why go higher when everything is going down?
It amazes me. Adani Ports has been a defensive stock I reckon in such a market and so what we saw on Friday was a defensive move. There doesn’t seem to be any other fundamental move that we can attribute to the stock’s rise.