Reliance’s Jio and retail businesses priced to perfection: Ajay Bagga
What could be the next trigger for going forward from here?
The stock has been consolidating. The move right now is more because of its oil and gas business. The good numbers from public sector oil marketing companies have led to a re-rating of the entire sector. The expectation is that the oil and gas part should do better. Jio Platforms and the retail business are already valued to perfection. The Jio part will start taking off once there is an industry-wide ARPU hike, which has disappointed the market for the last two quarters. Until that happens, you are not going to see much on that part. E-commerce is still in the early days. There’s no big traction. In retail, they are the biggest in India but that is valued already. So this is more about the waking up of a giant. Oil and gas is leading to this and there is also some good news from the exploratory and production side.
Are we in for another strong month in June?
Right now, the momentum seems to be pointing towards that. May was surprising, but the market factored in the plateauing of numbers in the middle of May. Financials were underperforming, in contrast to most of the world markets. May was a story of financials catching up to a large extent and we are expecting that to continue. There will be pain on the retail side, especially at the lower end. The collections of MFIs and lower-end NBFCs are suffering. Public sector banks have gone overboard on retail lending over the last two years.
We are very much near topping out once more. Of course, people do not like to hear words of caution in a market like this. It is a totally asymptomatic market. It is not displaying symptoms of the economy or the health of the country. It is more about the flows and the hope trades. That should continue in June but we are getting near the top.
Where do you stand on the entire metals debate? Are we in the middle of a structural bull run in metals?
Clearly, the kind of run-up we have had this year has factored in most of the price gains that metals have seen. It is a super cycle. It comes once every few decades and lasts for at least three to five years. So we are not really seeing the end of it. The whole global economy is recovering, supply is not much higher than demand. As the demand increases, metal prices will increase further. I stay quite positive on them. For fresh positions, you can wait for dips to buy. Those holding positions will be well-rewarded after 1-2 years. As the global economy recovers and reopens, metals will be in demand.
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