Dial up telecom for now, but not during economic upcycle; bullish on realty sector leaders: Mirae Asset

“Our view is, the sector has not done anything for last 10 years. India has been one of the few countries where property prices adjusted for inflation have gone down in the last six, seven years. Affordability is the best it has been, and staying at home because of COVID made realise the need for upgrades. So, there is a fresh upcycle here. The market caps compared to the regional peers are a fraction. One should continue to be with leaders and one would be continuously surprised by the volume and the sales for these leading real estate companies,” he added.

On telecom space, Chadha said, “It can be a good hedge over the next three months, as the market is a bit tentative. However, as one gets signs of strong recovery, as one gets signs of some of this pricing pressure or raw material pressure being mitigated, I think the market would again move away from pure telecom names. In an economic upcycle, one would be underweight on telecom as a sector, as there are better growth opportunities elsewhere and that is how it is being played in our portfolio.”

On the two-wheeler space, he said, “The data points which are reflected in terms of the October-September sales are positive for two-wheelers. The bigger issue is that there is disruption from EVs and we have seen some of the big bang launches and so that is where we would be watching in terms of Bajaj Auto. Moreover, the incumbents have a good strategy, because this is a segment where EVs can disrupt their EBTIDA and that is where we can see profitability coming into pressure in the coming quarters. So, we are not much active in the tool space for the moment.”

: Bajaj Auto sales down 14% YoY at 4.39 lakh units; October reports highest sales this year

On earnings, Chadha said, “For the last couple of quarters, we have been mindful of this margin pressure, which was likely to come because obviously, we have not seen a commensurate growth in supply for most commodities, whereas demand was just going through the roof. ESG (environmental, social and governance) is inflationary in terms of the spends the companies have to do to reduce the carbon footprint, etc. However, as we look forward over the next six, nine months with a bit of a slowdown coming through in China, some of these commodities are going to connect. Moreover, we have already seen the price action from some of the corporates in terms of increasing the end-product prices.”

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Chadha mentioned, “I think what we saw was the worst of the margin pressure and from here on, price performance for stocks will be a function of how much of the margin pressure they are able to mitigate by higher product prices to the end-consumer.”

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