Sanjeev Zarbade’s top 5 real estate and cement stock picks
This will be a challenging year for the entire IT sector.
Infosys is all slated to come out with their numbers tomorrow. How do you expect the stock to shape up?
So far as the IT sector earnings are concerned, we have seen that in FY19 they had the benefit of good growth on the BFSI segment. Also, there was some rupee depreciation which was a tailwind for the IT sector.
In the first quarter, benefit is not available for the sector. At the same time, there has been some reduction or some challenges for discretionary spending, especially in the BFSI sector, partly because of the US-China trade tensions. This will be a challenging year for the entire sector and we are expecting constant currency growth in the high single digit for Infosys.
What about the banking space? Do you think private banks will have issues but some will get rerated?
Yes. We are positive on the banking sector, more so on the corporate banks. As I said, the worst in terms of the asset quality has been behind and FY19 was one of the first years where we really saw that the gross NPAs peaking out. Going forward, we believe that the banking sector will be one of the biggest contributors to the Nifty profits in the current fiscal and we are expecting good numbers from the banking sector although the loan growth in the first quarter has been a bit muted.
Definitely, there will be lower loan loss provisions and that will result in good profit growth for the entire banking sector.
We have started to see a little bit more of a pick up at least in stock price movement when it comes to some of the real estate names. Cement continues to be quite a strong favourite. Would there be any specific names that you are looking at within the basket?
In the real estate sector, we believe that the recent provisions from the government in the Union Budget have been positive. Also certain geographies in India have continued to show good growth especially in the southern market and within the overall stocks under our coverage in the real estate sector. We are most positive on the Brigade Enterprises followed by we have a moderate kind of a positive outlook on Oberoi Constructions.
So far as the cement sector is concerned, we are expecting good profit growth numbers from the sector because the realisations have been quite firm and the cost pressures have been low for the cement sector so we are positive on the midcap cement companies like Dalmia and JK Lakshmi and within the largecaps Grasim Industries looks interesting so far as the cement sector is concerned.