Investment ideas: market likely to be limited by the range; 3 themes to invest in: Chakri Lokapriya

“With the economy opening up and new markets opening up, valuations are still on the side of liquor companies. They look good,” says Chakri LokapriyaDSI and MD, TCG AMC

The market seems to be a bit stuck in limbo and FII sales haven’t declined at all. RBI played along expected lines and there was hawkish commentary. I don’t think the market was expecting anything different and then also this bullish post policy was sold?
Indeed, you know that yesterday’s RBI meeting was quite insightful. Now there is a clear indication that the war will last for some time. The earlier position of central bankers around the world was that the war would be short-lived and after that the fundamentals of economies would take over. Unfortunately, this is not the case and has therefore led to continued inflation with oil above $125.

This leads to a host of emerging market issues. India being an oil importer, there is pressure on the rupiah, there is a lot of pressure on input costs and all of this translates into lower margins for companies and some of the credit draw down which expected to happen will likely be delayed a bit because companies will wait, pause to understand that a cooling economy is normalizing before making investment plans.

Against this, I think we will be limited. The market launched a number of stocks with the lowest valuations of 2008 and 2013.

What would you be looking at long term in a market like this where we are confined to a tight range? The volumes appear to be on the underside. Is there anything you’re looking at?

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The valuations of , United Phosphorous and a number of companies in this sector are extremely attractive. They trade at around 10-12 times. Their outlook continues to remain good and in a good or bad economy, agriculture, pesticide demands remain largely untouched and these companies have also corrected in recent months. Therefore, they appear to be recession proof and external shock proof. The second is information technology and these stocks have corrected significantly but they have a headwind because every time the Nasdaq corrects it puts pressure on IT. However, the IT outlook remains extremely strong.

The third is low-cost consumer discretionary stocks. Whether you’re buying air conditioners, fans, or kitchen appliances, companies like

look carefully.

Voltas was an idea of ​​kitchen appliances. But in the other sectors you mentioned, can you tell us about the companies you particularly like?
PI Industries has a number of products and about half a dozen products that will be released over the next two quarters. On top of that, they have about 30 odd products in the pipeline, which provides extremely solid earnings visibility. It provides margin protection as new products are launched and earnings growth is going to be north of 18% to 24% over the next two to three years.

The fundamentals of the company in terms of valuations are extremely attractive and offer a healthy 25% to 30% or more from current levels. On the other hand, if we look at information technology, if we look at

, or , they are probably all trading at around 17-18 times. The revenue outlook has not changed. So it’s going to go up about 14-15%. Against this backdrop, the correction in margins in this sector has largely occurred due to wage inflation and attrition. So it’s largely done and margins are unlikely to shrink any further. They are healthy 23% or 24%. In this context of intact demand, valuations have been corrected and these are excellent, well-managed companies. I think there’s a good 25-30% advantage for front-line information technology companies.

All is well, I suppose, for the liquor companies. ESG or not ESG, some consumption patterns are hard to beat I guess?
Yes indeed. It’s time for Patiala pegs in the current market conditions. That said, joking aside, rum and whiskey are the most consumed alcohols in India and in this context,

is well positioned because it has the number one brand in the country and liquor volumes have not been this high in the past two years for well-known reasons. So with the economy opening up and new markets opening up, valuations are still on their side, so I think they look good.

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