The equity strategist at Motilal Oswal says RIL won’t see further significant up-move in the short run unless more clarity comes on demergers.

Clearly, the market seems to be defying all odds. The liquidity-driven rally is pushing the market up from strength to strength. At 10,500 level on Nifty, do you think it is all going to come crashing down one fine day? Or is this momentum here to stay?

The stocks rally is driven, of course, by the global stimulus, and indications that more money could be flowing through. In India, the way the unlock is unfolding and the kind of statements we are hearing from the top corporates about how incrementally things are turning better, are driving stock prices. So yes, most people are surprised by the pace and the intensity of this uptick. It started off with certain themes like telecom, pharma, autos and now you are seeing the participation of the broader market, even the high-beta banking and financial services sectors. Given the momentum, this may go on for some time till we find some news where there is going to be a bit of an incremental negative in terms of either Covid spread or earnings not coming through. Till then, the going is good. It makes sense to really participate in the momentum, rather than say it has run up and we should not really get into it.

What is your view on RIL? It has surely been the newsmaker. In the annual report, they have made some very confident forward-looking statement, saying that they will achieve more in next 10 years than they did in the last four decades. Perhaps that one line that stands out with respect to the progress with Aramco that they are in the process of completing that strategic partnership. Perhaps that would give the market a lot more comfort, because there was already a lot of confidence from the Jio Platform or from retail and other parts of the business.
Absolutely. What a phenomenal move we have seen in the largest company! The stock has run up and now people would really look for incremental triggers in terms of either demerger of Jio and Jio Platforms, and what kind of value creation it can achieve, and of course, the Aramco deal if it comes through. Because the legacy business has been shrinking in terms of SOTP, and one would really look for some triggers from the legacy business to really justify further up-move in the stock. If the Aramco deal comes through, it would definitely be good for the overall sum of parts. The stock has seen a lot and the rerating part is over. Unless we get clarity in terms of demerger, I am not expecting a significant up-move at least in the short run.

Who is buying so much in the two digits and single digit stocks? Yesterday I looked at BHEL; the volumes there were more than that of RIL. What is going on?

The retail is back in the game. Also, when you see high-beta play come through, you will find these stocks come into play. So maybe the story in some of the PSUs or smallcap stocks could be unfolding because of the anti-China rhetoric. I am not sure how it is going to play out, and how soon it is going to play out. But there can be a hypothesis that some of these existing companies may stand to benefit, because a large part of the components are being imported from China and could come back to companies like BHEL now. To be honest, I really do not see too much of a substance in these stories. Yes, there is definitely a momentum, big volume action — as you rightly pointed out — but I think we would stick to the ones where we are more comfortable in terms of larger earnings growth balance sheet. For retail clients, this is an exciting time. One should really play there for 5%, 10%, 15% kind of a move, but needs to be a bit watchful.







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