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Nitin Raheja, ED, Julius Baer Wealth Advisors, says “oil prices are never fully sort of passed on. The challenge has always been that as far as the OMCs are concerned, cash generation is not a problem. Paying out of the cash, again, is not really an issue. It is really a focus on growing and in terms of fresh discoveries or volume growth, that has always been the challenge that they have faced. I would like to see how that happens rather than just go by that, because it has been talked about for a very long time.”

Do not know what to go first with, the move in SBI or the fact that HDFC Bank continues to reel under pressure and is at a 52-week low. Let us take up HDFC Bank first. Could there be some value buying? Some of the funds have been parking money into it in the last month or so.
Nitin Raheja: HDFC has borne the brunt of it as such but clearly, we are getting to that stage where although the quarterly numbers have gone in line with expectations, the whole liquidity flow that is coming in is keeping them depressed. They are gradually getting to a place where they are getting attractive by the day and it is a matter of time where you start seeing somewhere this whole bottoming out effect because right now again if we look at it from a consensus perspective, the view has again become very negative and even the hope trade that was earlier being played out is not happening.

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So, we are getting to that stage where there is clearly value sitting there. It is only a question of when you start seeing the flow ease off and I think that will happen sooner than later.

What is your take when it comes to defence stocks? Would you still be a buyer in those names?
Nitin Raheja: The whole process of re-rating has already taken place in almost all of them.

What about the upstream oil and gas companies? We were just talking among ourselves that ONGC, for example, has done almost Rs 78,000 crore cash profit in the last 12 months and the word on the Street is that they will be focusing on improving their production. At Rs 3.5 lakh crore m-cap, does it appear fair to you on valuation terms that ONGC or Oil India have not done a whole lot among the PSU pack?
Nitin Raheja: When you talk about the conversation being on improving production, that should always be the case. Why should it be the case today? When you talk about significant discoveries being made and India wanting to become self-resilient, I think that is the stated aim of any company of increasing oil production. As far as the upstream oil companies are concerned, they will be cashed at that time. They have to subsidise it because the OMCs downstream will start losing money because of political considerations.

Oil prices are never fully sort of passed on. The challenge has always been that as far as the OMCs are concerned, cash generation is not a problem. Paying out of the cash, again, is not really an issue. It is really a focus on growing and in terms of fresh discoveries or volume growth, that has always been the challenge that they have faced. I would like to see how that happens rather than just go by that, because it has been talked about for a very long time.What is your view on pharma? How would you dissect the various verticals within pharma?
Nitin Raheja: The pharma vertical that is doing very well is domestic pharma. However, the valuations of domestic pharma are getting into a quasi FMCG sort of valuation mode, if you look at some of the domestic pharma companies. But stable businesses, good margins, brand orientation and so on and so forth. Generic pharma is making a comeback on the back of the fact that there is a shortage of generic medicine in the US and prices have rebounded from the bottom. So, overall, we are positive on pharma as a pack. We think that the uptick that we saw in pharma over the last one year will continue. Also valuations are not terribly expensive, especially for the generic pharma business.

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