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Andrew Holland: I am the latter. The market has run big after the election results and the initial weakness. Banking and IT stocks lead the way. What I think may happen now is that the market may catch up and we may have a higher push into the Budget. Other sectors like FMCG may help the higher market because there may be more government spending to help the rural economy and therefore it will have an effect on other areas as well like affordable housing, affordable housing finance companies.
So, this is a sector that can help the rally because we have been running quite strong for the two big sectors which are IT and banking in the short term. So, I don’t expect a big move from here, but I think we could see another rally to the Budget.
The markets seem to be looking for areas that may not have done well, providing non-performance comfort if you can call it like consumers but with a green tip as we saw in the quarter. If you add the Budget tilt, there is a good trade off. Is that how people see the consumer space?
Andrew Holland: Yes, I think so. You have nailed the terms of the trade. If any sector has forward momentum in terms of what they want in the budget and spend more to keep the rural economy moving forward and of course, the monsoon is looking good. So, that’s going to be the trade we’re going to see. But on a more sustainable basis, I still like the consumer basket which is the beverage sector because I think you’re buying into the story of premiumization that will continue for years. But all consumer stocks are expected to be ahead of budget.
What do you think about power sector financiers? Yes, when the valuation of a renewable investor like IREDA is now questionable after a 6x return for almost six months. But PFC, REC, those pockets have a very strong business model with long-term value. How do you play this space, energy investors?
Andrew Holland: We kind of trade more. We like the power sector as a whole because we feel and what you said is that the government will continue to spend money, this is a global factor in renewable energy and certainly, given the power deficit that we have in India, we will see that. more orders, we think, especially on the windward side of the power order frame. I think energy financing companies should be there to help with financing. I will play more with long term power companies and maybe trade financing companies.
Until now, the focus on the power cable side is real estate or consumer power, RR Kabel and Polycabs worldwide. But now the word is that because of the big push in power generation, the story of high KVA power cables can also come out. Do you play the power cable story in your portfolio?
Andrew Holland: No, we’re not right. I want to see the government’s words first before I start taking such a view. So, no, we haven’t played that side of the cable yet.
