Pankaj Pandey, Head Research, ICICIdirect.com, says there are SIP inflows of nearly Rs 19,000 odd crore on a monthly basis. On top of it, there are about Rs 3,000 to 4,000 odd crore of inflows from the ETF perspective. Overall, the domestic liquidity is still quite good and that is where even if there is a bit of a selling there, that is not going to change the market trajectory overall. FPI inflows come and go and which is what we have seen last year also.

We had some interesting data that we were culling out talking about the kind of promoter stakes sales that we have witnessed in the last month or so of Rs 43,000 crore. How are you reading into this? MNCs as well as ITC, IndiGo, TCS, etc, are in that list?
Pankaj Pandey: From FPI perspective, we have seen inflows of about Rs 40,000 odd crore. But our sense is that most are stock specific cases. For example, in IndiGo, one promoter has been continuously paring down his stake. Whereas in the case of ITC, nothing changes structurally because of the high amount of debt and so a stake sale does not really change the overall texture of the company’s growth.

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TCS largely is coming from the perspective that while it will have some impact on Tata Chemicals because that is one stock which was going up largely because of the stake they have been holding in Tata Sons, it looks like that overall with this promoter stake sale, the free float for TCS would go up. But for Tata Sons, a lot of stocks which were riding on that value will take a backseat, especially Tata Chemicals. So, most of them are stock specific cases. I do not think you see a definitive pattern in terms of selling being done or in terms of valuation being very high. So, it is not really an indicator of any kind of a negative trend emerging from this.

We are looking at Rs 40,000 crore getting sucked out. Now, if a TCS stake sale would have not happened, if IndiGo promoters would have not sold out, this 40,000 crore technically would have gone into a different set of stocks. It could have had a different price impact, because that money would have come back into Indian markets. My point is that with Rs 40,000 crore getting knocked out suddenly, could that lead to a liquidity vacuum in the near term?
Pankaj Pandey: Look at it from the perspective that you have got SIP inflows of nearly Rs 19,000 odd crore on a monthly basis. On top of it, you get about Rs 3,000 to 4,000 odd crore of inflows from the ETF perspective. Overall, the domestic liquidity is still quite good and that is where I think even if there is a bit of a selling there, I do not see that is going to change the market trajectory overall. And I think FPI inflows come and go and which is what we have seen last year also.

We have also seen that while the inflows are good, the retail investors tend to book profits at times also. But we have not seen any kind of a major pressure on the market. Domestic liquidity is still quite strong and it is here to stay for some period of time. From that perspective, we are really not that worried.

Deepinder Goyal has gone on record yesterday at the Startup Mahakumbh that Blinkit in a year’s time is going to be bigger than Zomato. Big plans in store?
Pankaj Pandey: New-age companies are something which we have not been tracking for quite some time including Zomato. I think somewhere down the line, we are still waiting for some more period of time where companies give numbers on a more steady basis. Then the business also keeps on changing. We are still not chasing that space. I am sorry, I would not be able to comment on this stock.

You avoided tracking all the new tech companies? I mean, was that a firm conscious call because action toh wahi par hai (all the action is there).
Pankaj Pandey: We have been more traditional in the way that whenever a stock trades at 8 to 10 times sales, somewhere down the line, we still do not get comfort. The one space which was trading at 8 to 10 times sales was something like CRAMS players, the likes of Divi’s and other players. Now, the margin profile is quite good in terms of 40% EBITDA margin and we have seen a decent history of performance of some of these stocks.

Otherwise, if you are closer to the 8 to 10 times sales, I am still sceptical in terms of the business model and how things will evolve. While some section of the people are liking those stocks, we are still yet to form our views on some of these names, even though the opportunity looks good.Every promoter tells us the same thing, do it for passion, do not do it for money. But when I look at the ESOPs, when I look at what they have in terms of the promoter holding, market cap, it matters, right? Very easy to say, do it for passion, money will follow.
Pankaj Pandey: Absolutely and the challenge always is that when the business model keeps evolving and I mean, so that is where the challenge lies that you need to see the business model perform over the next few years to get a sense of the opportunity which is going to unfold. It is very difficult to take a call in a business which is continuously evolving. Naukri was the last new-age business which we had liked and subsequent to that, we have seen a lot of business coming in. Not to say that the businesses are not going to do well, but for us, it is going to take a lot more time to understand.

Like I highlighted in the case of CRAMS, it is a very longish kind of opportunity. But what you see in terms of deal size is that companies or the customer stickiness is quite high for a period of 8 to 10 years. You really do not change your partner in a very short timeframe and which is why you can still take a longer call of business being there for 10 years and beyond and which is why the valuations are higher somewhere. But a lot of businesses need to get it right for most of the parameters to make money for the investors.

What is your stance on the performance of HDFC Bank? What should investors do and do you have any other preferences within private banks?
Pankaj Pandey: For HDFC Bank, we have lowered our target price to Rs 1,800. Our sense is that the margin recovery is going to take time and the kind of historical outperformance the stock has delivered is unlikely to happen even though the valuations are looking attractive. What we are liking is more PSU names like SBI which we think can deliver 14-15% kind of a growth and historically, when the economy does well and if there is a further growth, then in PSU banks the re-rating opportunity is a lot more higher and on top of it, in the second half, whenever a VC interest rate decline is happening, some of these PSU banks would witness an improvement in profitability largely because of the treasury gains. PSUs still look attractive to us within the entire BFSI space.


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