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Which stocks will be the next outperformers?

In the future, HDFC Bank should outperform due to the fact that it is gaining market share. Look at the 16% credit growth, while the system-wide credit growth is just 6.7%, says Sandip Sabharwal.

HDFC Bank came out with solid numbers. Asset quality is strong, but could ICICI Bank and SBI, which are clearly the most sought after, lead?

HDFC Bank could have started a performance cycle outperforming the rest of the banking space. The main reason was that there was a leadership transition and people were concerned that there was a problem with the credit card technology that led to the poor performance of the bank. Meanwhile, many other comparable financial stocks have recovered and the price has risen to the written valuation scale. So in general, in the future, HDFC Bank should outperform due to the fact that it has been gaining market share. Look at the 16% credit growth, while the system-wide credit growth is only 6.7%.

They are making huge gains in market share by volume. When this can be done without compromising asset quality, it is recognized. In any case, HDFC Bank has always been a more defensive bank. Private banks like ICICI, Kotak or Axis tend to be more volatile with the markets, while HDFC Bank tends to have its own cycles. I think there will now be a cycle of superior performance.

In terms of absolute earnings, how much you could earn over the next year will be a function of general market behavior, as well as a recovery in credit growth in the system that is not yet happening despite all the talk of recovery. economical. In short, the slope should be positive but the absolute returns can be 10-12%.

What particular number from the Nifty list are you looking for in particular?

What becomes crucial in these times when everything is going well and everything is going a lot is whether the margin develops as expected. The history of the margin is often compressed across the board. This will be the key to monitoring all the results of the company. Adoption could be a slightly different story because we can get a further revitalization of the margin story rather than squeeze, unlike most other companies on the consumer side. Even some non-integrated steel companies may experience some pressure on margins compared to last quarter. This will be the main feature of these results.

Also recently, Reliance has risen quite a bit and it will be important for them to perform strongly and it will be important to keep an eye on the debt position for Reliance because last year they indicated that they would be debt free, but now they have announced this. New initiatives and corporate acquisitions as part of that. Therefore, the Reliance balance will be the key to follow-up.

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Arriving at Avenue Supermart, is the business scalable? The market certainly thinks so. After this earnings report card, stocks are likely to be in the spotlight today.

This is a recovery operation in the sense that a quarter or two will be more difficult to assess due to the underlying effect. But then they follow the offline retail model and if they add 10-12% new stores each year, then the same store growth is 10-12%, 20-25% or 25-30% optimistic about what long-term growth will end. You can combine that with qualifications. At current valuation, it is trading at 110 times 2024 earnings.
Those are crazy valuations in my opinion. It is not sustainable. It does not fit any evaluation model that we have considered. So unless there is a new valuation model implemented in the markets, I don't think these valuations can continue.

What about the IT department's selection order considering that TCS has always been ranked number one? Will the rest of the IT package catch up with TCS and with the qualification gap narrowing a bit among the top-level IT names?

This was already happening. From the way Wipro and Infosys have performed against TCS both this year and over a slightly longer period of time, we see a much higher performance from Wipro followed by Infosys and TCS was lagging behind.

The main reason was that the performance gap had simply collapsed. There is no performance gap. We could have a short-term scenario where Wipro's earnings in terms of growth could outperform TCS. Wipro was very proprietary and therefore can be reasonably owned now after the kind of return it provided.

It's very difficult to predict the order of clicks in IT right now. It depends on the evaluation at the time and where we see the value. Wipro and Infosys obviously do basically better than TCS at this point, and that's not to say TCS is doing it wrong. Overall, in terms of the evaluation model, IT evaluations have fallen by half of potential long-term performance.

In the short term, they are doing well, and in the long term, it is very difficult to maintain that kind of performance. This is where the risk is greatest. In my opinion, the current earnings season offers negative protection for most large companies. The downside to most large companies is limited, even if the markets are selling big.

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