Taher Badshah of Invesco MF
Earnings expectations have not been beaten in the second quarter, Taher Badshah, CIO, Equities, at Invesco Mutual Funds told CNBC-TV18 on November 17. Sharing his thoughts on the market, he said banks can do well if credit growth momentum holds.
On earnings season and investor confidence
“Earnings expectations have not been beaten in this quarter’s earnings. We have just managed to clear the finishing line and seen a marginal upgrade as far as large-caps and Nifty earnings are concerned. But broadly, the mid and small-cap space on average seems to be disappointed compared to what expectations were at the start of the season,” Badshah said.
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He said the festival season has not panned out as the markets would have expected and “we have therefore seen some of those pockets, especially in the consumption space, which have gone through a fair bit of moderation after results season”.
“It has been a decent results season but it has not necessarily led to a scenario where we would hope for significant upgrades from here on,” he said.
Approach on banks
Badshah said banks are “still one place where you can look for a little bit of upside”. He, however, cautioned that deposit growth also needs to catch up.
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“We need to focus and choose banks that can better manage the overall liability and liquidity situation. But in general, this is one of the sectors where the top line probably can still deliver some positive prices. We saw some of that evidenced in the last quarter’s earnings. So, I think that is still a sector we can probably stay a lot more constructive,” he added.
On sanity in valuations
When asked about his views on the last Paytm block deal, and the market direction in such stocks, Badshah said the erosion was more a market function rather than a reflection of the business.
“I think a lot of the erosion that has happened is more a compression of multiples rather than the deterioration in business dynamics of any of these companies. Barring a couple, many of them have done reasonably well under the circumstances and probably moved a little closer to their promised profitability,” he said.
“I think it is more the market function, more the technicalities that are currently going around any of these names. Valuations optically are not something that will be appetising. But you can take confidence from the fact that the businesses are probably delivering as per expectations. There will stage where you can take a lot more confidence, maybe even keep or initiate positions and add to some of these names,” he added.
On his stock picks, Badshah said the area is diverse and “you will have to pick and choose, depending upon each business’s own competitive advantages and how they are positioned with respect to competition and their ability to fend off competition with resources available at their disposal”.
Block deals rock market
The share price of Nykaa’s parent company FSN E-Commerce Ventures tumbled 4 percent Novmeber 17 on heavy volumes after multiple trades took place in the block deal window. According to Bloomberg data, 57.1 million shares, about 2 percent equity, changed hands in five bunched trades.
One block of 18 million shares worth Rs 319.25 crore changed hands on the BSE at an average price of Rs 176.95 a piece. Another block of 12 million shares was sold at an average price of Rs 176.70. There were many more such blocks. Ever since its lock-in expiry on November 9, the counter has seen several trades.
Shares of One97 Communications, owner of Paytm, recorded a series of block deals on November 17 in which around 29.50 million shares, or 4.5 percent stake, in the company changed hands, according to Bloomberg.
Details of the buyers and sellers, however, were not known. Shares of Paytm opened sharply lower after the block deal. The stock dropped 9.3 percent to Rs 545.55 a share, its lowest since July 26.
Bloomberg earlier reported that SoftBank was looking to sell $ 215 million worth of shares in Paytm as the fintech’s lock-in for pre-IPO investors ends. The Japanese investor is offering to sell 29 million shares in the company at Rs 555 to Rs 601.45 apiece, at a discount of up to 7.72 percent to the current market price.
On platform businesses
“In this space, we generally prefer companies that are a lot closer to their profitability. We prefer companies that are well ahead in terms of their competitive positioning because many of these may see fresh competition. So the larger the competitive differential between the next best player is something to look out for. Profitability metrics being met or held up alongside growth is a good combination to have,” he added.
Watch the full interview here
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