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CONSUMER STOCKS

In upcoming days we will see very decent volume growth, particularly from the Q4 perspective. Given that we are in a semi lockdown situation, in certain pockets like Britannia, HUL and Marico, the volume growth could be a little better. Overall, though we do not expect a very strict lockdown, this thing really can’t be allowed to go out of hand. But in any case, we have a very positive outlook for companies like Britannia, Tata Consumer and HUL even otherwise. From a one year perspective, these stocks can give a decent amount of upside from current price point.

HIKE IN STEEL STOCKS

This quarter is all about metal and the general Street consensus is that there is going to be a lot of room for a positive surprise. One thing which we have to bear in mind is that in case of metals, for most of the companies, the EBITDA growth will come from higher pricing. The only company which would deliver a very strong double digit volume growth would be JSW Steel. But we think that from a short-term perspective, Tata Steel can give a good amount of positive surprise but from investment perspective, we prefer SAIL, JSPL and JSW Steel because these companies have a larger story in terms of debt repayment and much better upgrades post Q4, the overall environment being better in India.

BHARTI AIRTEL & RELIANCE

In case of Reliance we have already seen a big outperformance and it was one of the best performing stocks from April till December 2020. After that, the stock is consolidating as we are not seeing any incremental growth triggers on the telecom part and a large part of the story in terms of retail and the OTC has been known. So the market is just trying to see some sort of a consolidation till we see fresh triggers in terms of the earnings growth for the next one or two quarters.Unlike Reliance, Bharti has not been able to attract any major global investors and it continues to remain a very slow moving telecom play with no price increase. So after some point people have got a little frustrated with the fact that we are not going to see any meaningful earning growth at least in the near term. So the stock has correspondingly underperformed. But we think that telecom is not a short term or two quarter story. So people who have let us say one or two year kind of timeframe should definitely look at allocating a good amount of money into both Reliance and Bharti because a decent amount of growth will come through in earnings over next two years.
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