Why Deven Choksey is bullish on select auto, insurance stocks
We will have to wait till 23rd May, but do not get panicked into any situation, says Choksey.
What is causing this market mayhem?
You have seen as many numbers of elections and the outcomes as I have seen and probably all of us are of the view that whatever we like, if it happens, then probably we give thumbs up. In this kind of a situation, the market has always been clearly giving a verdict in favour of the current government and they want to see the current government coming back to power and continue with the policy regime that they have already established and accelerate the growth. That is what the industry wants.
Given this kind of a situation, if the current NDA government comes into power, then it would probably be fairly well played in the market. To a certain extent, it might also get discounted and the focus would shift to the other major issues like trade war etc. In my opinion, we will have to wait and see till 23rd May, but do not get panicked into any situation.
Would you buy D-Mart? We have stopped talking about it. Has all that 2018 euphoria for D-Mart or Avenue Supermart in this case died?
My view has not changed since the company existed. It is a good company to own but at the same time, the valuation is not something which is attracting me. I continue to hold the view that valuations are still expensive. The reasons for expensive valuation could be any but at the same time, if you do not get enough amount of return investment, you still do not own a good company. You may probably experience the stores but you may not want to buy when it is expensively traded. I continue to hold that particular view even today.
Where would you find value even if we were to fall further from here? What would you buy at these levels or little lower from here?
I have been observing a few trends in recent times and probably they are quite interesting. On one side, consumer spending is coming down. On the other side, consumer spending in the financial product is increasing. The customer is the same but he is putting his one hand in the pocket and putting money into financial products.
The new business premium for the life insurance segment which has started going up. In fact, in April, the amount of new business premium that the companies have collected have moved up smartly. In some cases, these have grown 50% growth on a year-over-year basis. Similarly, the situation where you are seeing the SIP portfolios in the mutual funds are increasing. You are seeing a similar situation with some of the health insurance related products, driven by the Modi Care Scheme, etc. They are happening.
The consumer is putting more money into financial products. He is putting less money into consumption products and as a result, we are seeing some amount of slowdown/fall in consumption products. One of the themes which I have identified here is that the higher cost of interest is putting off the consumer and that is where the economy will have to do significantly differently if they have to increase the consumption. The cost of interest will have to come down. My take would be that the insurance companies, life insurance particularly, would be a better play along with some of the NBFCs and corporate banks which are basically retail focussed and which are taking care of the larger amount of wallet share of the consumer.
Anything which his really been beaten down and where you think more than fundamentals, technical factors are at play? Compulsive buying is having an impact on the stock. Are you ready to buy anything completely against consensus?
Yes absolutely and I am looking ahead with one or two years in front of me for the businesses that we have selected for investment in the falling market. We continue to like stories in Ashok Leyland where we believe that the traction is going to be on a higher side. BS VI replacement demand will be coming in due to scrappage policy. At the same time, a larger amount of value addition will get created, which is exciting us.
We continue to find favour with companies like Bajaj Auto where the focus remains equally into the export markets and the new generation of vehicles. The company looks good within the auto space. We continue to like and put more money into the insurance businesses and we are getting the validation through the new business premium collection which has increased.
It is increasing now. So the likes of HDFC Life, Bajaj Allianz Life or even for that matter SBI Life are some of the companies where we feel ourselves more comfortable investing money into. Companies like Cipla in pharmaceuticals particularly is working with renewed strategies..