We remain reasonably overweight on housing finance space within real estate sector: Deven Choksey

“We are likely to see relatively better margin performance from the companies which are consuming commodities and that could include the likes of autos, the auto ancillaries, even FMCG companies and so on and so forth,” says Deven Choksey, MD, KRChoksey Holdings Pvt. Ltd.

Do you think we are on course to make a new high and stay above that new high?
Well, I think the fabric is set, as I see. On one side, the corporate results have come up very well. The guidance for the current year is reasonably good. For the commodity segment the certainty is not around but the good news is that the consumption of commodity is very high because the cost of commodity remains lower, both industrial commodity as well as the food grade commodities. In such situation, we are likely to see relatively better margin performance from the companies which are consuming commodities and that could include the likes of autos, the auto ancillaries, even FMCG companies and so on and so forth.

But it may not be so great news for the commodity producers per se. However, I think they may probably stabilise on the margin front maybe after a quarter or two. So, I would think that current financial year looks reasonably set for growth including the IT which was a suspect at the end of the last quarter of the last financial year.

I guess the IT is showing the distinct signs of growth. So, there also we remain reasonably more confident. And the banking credit is also reasonably good as far as the corporate side is concerned, housing financer is concerned and the retail side is concerned.

So, overall, if you look at the sectors, I guess more or less all the sectors are showing the signs of growth and that is why I said the fabric is set. Fortunately, the global funds have also started coming into the market and that is keeping the market stable at this point of time. So, maybe if market runs up ahead of time, then you might see corrections of some degree, but otherwise we should see the gradual upside in the market going forward.

The one space which is really springing up is the entire realty pack. Any stocks that you like here to buy afresh right now?
Well, I guess most of the companies are showing reasonably good size of the projects and the execution thereafter. Fortunately, the inventories are not remaining with the companies for a longer period of time. The bookings are completed for many of the companies, at least in the metros we are experiencing this trend. So, where the affordable housing business is there in the smaller cities, there too one is experiencing the higher amount of bookings coming from the customers and that is getting validated also from the housing finance companies which are growing the loan book by about 20% or so.

So, overall housing sector as a space and housing finance along with, remain reasonably good on the track as far as the growth is concerned. Now whether one would buy any of these companies immediately, my preference is always remain with housing finance companies largely because of the fact that if one has to grow steadily in their investment, then probably 20% rate of kind of staggered growth which is promised by the housing finance company is reasonably good compared to the real estate companies per se, who may have their ups and downs in the respective quarters and so would be the impact of the prices. So, we remain reasonably more overweight on the housing finance space within the real estate sector.

What to your mind is going to snap Reliance’s under performance?
Well, I guess largely the market has been experiencing the participation in last one and two months from the foreign investors and it has probably gone into the side stocks more than getting into the mainline stocks.The fundamentals of the company are definitely strong and very convincing. The consumer of businesses like Jio and the retail, both of them are growing at a steady pace of growth and which is fundamentally very good because those businesses when they start moving at an exponential pace, then probably you might see a situation of some kind of degrowth in subsequent period.

But here the company is growing very steadily at around 15% to 20% growth in their respective space, retail and Jio. So, I find that it is a very steady growth continuing. At the same time, with the 5G rollout and the wireline connectivity improving for Jio, I would think that the higher amount of business is expected to come up in the coming quarters and so forth. So, I remain positive about the consumer facing business and at the same time the industrial business both refining and petrochemical, they again grow at a steady pace of growth. They have taken the full advantage of the lower crude oil prices last year and they continue to do so even in the current year. I believe that the company would continue to produce relatively steady set of growth, maybe 23-24 you are also going to see some amount of progress on the renewable segment of business where the company has started showing some amount of progress on the implementation side.

I would think that somewhere in the end of the financial year, we will be seeing some higher amount coming in. Ahead of that, maybe I think you should see the actions happening in the market and the accumulation also happening in the portfolios.