What are you telling your clients? Time to book profits, time to stay invested, what is the house advice?
Rahul Shah: We are not asking clients to book profit but to stay invested. We have seen different themes coming up on the markets and there just has been sector rotation from one sector to another. So, stay invested. PSU is the theme which we have also been since the last couple of months we have also been participating and we have been also advising clients. So, stay invested. It looks like the earning season also has played out well. I think it is just in our range right now. But there could be some more upside from here.

Do you believe in the CLSA’s outlook? They think that after 150% upside in the last one year, it can give you another 45% in the next two years, Zomato.
Rahul Shah: I think what happens is if you look at it, last two-three quarters have been very robust for Zomato. If you look at this quarter also, so I think every quarter-on-quarter post the numbers have been delivered, on the street most of the houses have been revising their targets upwards (13:52). So, as you rightly pointed out, at 40, it was at sub-40 levels and then 60 levels, a lot of guys initiated their coverage and so on and on and I guess if you look at this quarter numbers, you look at delivery business, if you look at Blinkit both things have done well. So, 15-20% upside, most of the thesis says that, so I think the CLSA is more bullish on their stock, so I think it should be. I think it is a structural theme for the next three-four years for Zomato. It is not just a one-year or so. I believe in this story that it could still go on to 20 or odd levels.

What else do you think could be a2-3-year structural story?
Rahul Shah: So, one is obviously, if we look at Blinkit which was bleeding, which is the back into the business and which we see in this quarter also the numbers have been very strong. Second, as I mentioned, the delivery business will keep on going higher and higher and higher.

What else apart from Zomato could be a structural story for you, not specifically for Zomato? Minus Zomato, what else could be a two-three-year structural bet?
Rahul Shah: One thing which we are looking at in the market is the PSU pack. After a long time, the valuations are just getting re-rated. We have been bullish on PSU banks for quite some time. I feel that in the next two-three years, after a long-long time, most of the large or small PSU banks have been able to maintain their earnings momentum, be it a Canara Bank or Bank of Maharashtra, or small banks like Jammu & Kashmir Bank.

So, if what the management says and if they continue to deliver, they will still get re-rated, so that is what is happening in the last couple of months. We are seeing that private banks are not performing and PSUs because of the beats in most of this thing, are just getting it. So, if they continue to deliver, for next two-three years, PSU will deliver as a theme but the banks could do much-much better from here and could be a good driver for the investors.What are you making of this source-based news that Vedanta is in talks with the promoters GQG for a potential stake sale? How do you believe this would weave into the story?
Rahul Shah: Wherever GQG has put their money, most of the stocks have fared very well. Obviously, the market has also done well, but most of the stocks wherever they put money, be it the Adani or be it the JSW or so on, have done well. So, if they are getting into Vedanta, the stock in the near term should do well. Rest, obviously, the businesses and overall will take care of it but near term, the stock can do well because of this story.When it comes to some of the heavyweights within the banking space, while SBI’s weightage stands at a meagre 10% as compared to HDFC Bank’s weightage, given the spate of underperformance from HDFC, the fact is that a lot of fundamentals have been stacking up in favour of SBI. Can SBI, being an outperformer, do perhaps what HDFC Bank could not?
Rahul Shah: So, let us not compare both of them together. As I mentioned, all PSU banks have started getting things back into momentum. If I look at the earnings visibility; second, whatever the management has said they have been delivering into it. Thirdly, most importantly, the credit cost for the SBI is going to remain strong, remain what the management has guided for. So, this quarter obviously the NIMs were a little bit lower, but what the management says that going forward it will be better.

So, SBI, with the subsidiary plus the core book, is still FY26 at a 1.2 time book. So, upside from here is possible. Secondly, compared with HDFC Bank, it is not apple to apple, but there is a lot of value in HDFC Bank as well. I feel that if you are catching an alpha for near-term, short-term, two-three months, six months, then State Bank can do well.

But if you have one-two years, four years or maybe beyond that, then I think HDFC Bank could be better but again the valuations are very compelling for the HDFC Bank core business. It is at 12 times earnings plus the subsidiary valuation at this 1400 sub-level. So, risk versus reward is quite favourable for HDFC Bank. Near term, I have no clue, but if I talk about a year and so, the investor definitely will reward it in HDFC Bank from current levels.

What has changed for BPCL, HPCL? Normally, these stocks tend to underperform in the run-up to the election. For the first time, they are outperforming in the run-up to the election.
Rahul Shah: In the last two-three quarters, the numbers have been great. If I look at last year versus this year, last year two quarters are losses and then there was recovery in the last two quarters and this year again, the last two quarters have been good. This quarter’s numbers were slightly below what the Street was estimating. Valuation is the only one which I feel the markets are chasing and the GRMs have moved up for this company.

So, most have already been priced in. I do not think risk versus reward is much favourable from here. One should look at both the companies on dips.

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