With the RBI not extending moratorium beyond August 31, September quarterly numbers are what will give a more realistic picture of the NPAs, says Kunj Bansal, Partner & CIO, Sarthi Group.

A lot of talk particularly towards the end of the week on unlock 5.0. What do you read into some of the data and optimism that was being seen in the markets?
What surprises me positively is the benefit of doubt that the market has been giving to the same sectors and same stocks time and again for the same news. Talking of opening of restaurants and multiplexes and theatre, in that expectation, the stocks of this sector and this theme has been rewarded by the market multiple times in the past and so has been the case in the last one or two days. But be that as it may, who is complaining. But if we take a slightly extended view and leave aside the sharp rally, that seems to have been the complete reflection of the global market movement.

Almost, for now, two months in terms of largecap indices, we are in a flattish kind of movement. So that reflects a trend much more extended to me than this week’s rally. While it looks like the market has gone up or we are in the positive zone in the market, for two months, we have been moving here and there. Market has been consolidating, which is good. I am not complaining. In fact it is very good. Recently Nifty hit 10,800 or so, which was 10% down from the peak of 11,700 earlier. So as long as the market remains in a consolidated rangebound movement, the participants will get an opportunity to keep putting in more money. That is why I say, I am positive and I am not complaining. I would actually want that kind of movement. In fact, I would be happier.

At least by the end of the week, we saw a bit of a comeback in financials. IndusInd saw the best week that it has since late August. HDFC, for example, is standing out as well. Even Bajaj Finance. Nifty Bank is finally snapping that four-week losing streak. Would you read into that move? Do you feel it is going to now only pick up from here on?

As of now, it is still a difficult call. The movement did try to give some sentimental strength to the investors towards the BFSI stock. You are right. If we look at it in multiple terms, either year till date or from the point of recovery from March till now post-Covid, in all the terms, BFSI stock and BFSI index has been a laggard. The participation has been completely missing.

I think two things going forward are going to be the critical decider. One is the Supreme Court judgement on this whole issue of interest rate being waived or not, which to me personally does not look like it will be an illogical judgement from the Supreme Court. In fact the Supreme Court also does not know what to do. That is why it has sometimes pushed it on the government and sometimes on the regulators. But that has become an overhang on the sector.

Two, now with RBI not having extended moratorium beyond August 31, September quarterly numbers are what will give a more realistic picture of the NPAs of the asset qualities because of Covid and because of moratorium. Post that, there will be far more clarity in terms of investing. But yes, before that if the stocks move up, then you have missed out on the opportunity. So as I said, even now despite the rise, it is a difficult call. If one has to be really sure, one is to wait for these two triggers to be over. The other option is that one takes part now in the momentum and waits for the other two triggers to pan out to build in the remaining participation.

Come next week and focus shifts back to IT and earnings. So that is going to be on the plate for the next month or so. But beginning off with TCS, what is the expectation?

We are getting into the result season starting next week and I think that will be the trigger for the market to take a direction. If it does take any, the consolidation might continue and the trigger could be more for individual stocks whose results keep coming in. We have already seen a sharp outperformance coming in from IT in the last two to three weeks, which is possibly for multiple reasons. One, of course, money continuing to come into the market and looking for relatively attractively valued sectors; which is where IT comes in after the valuation in automobiles and some others that have moved up very sharply.

Two, the fact of expectation that given the increasing work from home, increasing digitisation trends, increasing technological trends probably the growth rate for these companies should go up. So I do not exactly have the numbers of expectations of TCS but we should be ready with not as much of the September quarter results but more for encouraging commentary going forward from the management.

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