Saurabh Mukherjea, Founder, Marcellus Investment Managers, on Thursday, mentioned that demand challenge faced by rural India will take some time to go away. He expects the next 3 quarters to be slow on the rural consumption front.
"It has been said by almost every fast moving consumer goods (FMCG) company and every two-wheeler company that there is a demand challenge in rural India. It will take time to go away. We need normalization of the labor market, as COVID hopefully abates now. There could be one or two soft quarters, perhaps three soft quarters - the third quarter hence will be driven away by the monsoon," he said.
In the IT sector, Mukherjea likes L&T Technology Services due to its focus on engineering and research and development (R&D). He also mentioned that he is bullish on TCS.
"Among consistent compounders, Tata Consultancy Services (TCS) is our main investment. In our midcap portfolio on rising giants, we have L&T Technology Services, which is a very niche player. It's actually more a play on engineering and R&D than it is on IT services," he added.
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In the pharma space, he mentioned that they own just Divi’s Laboratories. He explained the rationale behind owning the stock. He said that the company’s results have been consistent over the last 20 years and hence, they are invested in it.
"Barring Divi’s Laboratories, we don't have any pharma company which is a play on global pharma, and Divi’s Laboratories supplies active pharmaceutical ingredient (API) to the global giants, it doesn't sell anything in India. It's a completely export-driven story. If you see 20 years of numbers for Divi’s, if you see their profit margins and the return on capital (ROC) over 20 years, there isn't that much volatility," he said.
On new-age business stocks like Nykaa, he believes there's a need to focus on business growth and not the stock price.
"I wouldn't lose too much sleep if I was a holder. The share price doesn't tell you anything. Whether the share price has gone up or down, it's a completely meaningless signal. What shareholders of these companies or those looking at these companies need to assess is- do these companies have barriers to entry," he explained.
"So does Nykaa have barriers to entry? Does Nykaa have customer captivity? And if the answers to all of those are yes, then Nykaa is a good stock to buy. It is a good investment and it will make you money. The point I'm trying to convey is that the stock price doesn't tell the investor anything," he mentioned.
Also Read: Should you buy, sell or hold Nykaa shares after Q3 results? Here's what brokerages recommend
In the industrial engineering space, Mukherjea mentioned that they are positive on GMM Pfaudler.
"We continued buying non-stop throughout and even this week, right now, we are continuing to buy GMM Pfaudler," he said.
Watch the video for the full interview.
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First Published: Feb 10, 2022 1:38 PM IST
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