Why Amit Khurana is ready to allocate 5-8% on this stock

Amit Khurana, head of equities, Dolat Capital Market, likes consumer largecaps and Britannia is one stock 67362703 67376545 where he is ready to allocate 5-8%. In this space, Marico is another stock he likes. Edited excerpts:What is your base case expectation from the markets this year? This year probably will be a tale of two halves. The first half is going to be quite challenging given the fact that we are getting into major global headwinds. We have the political season starting off in India which does not look as certain as was the case a few months back. India has outperformed the emerging markets over the last three-four months, significant premium versus historical averages, premium versus the emerging market basket. I guess it is going to be a little challenging to look out for returns in the first half in the least and then depending upon how the other news flow comes in, we will probably have a better picture for the second half but at this stage.Our view is cautious to say the least because globally the picture is deteriorating. India continues to outperform on the back of valid reasons; crude oil has cooled off; currency has stabilised but how far this will take us in terms of outperformance and to what extent is a challenging question remains to be seen. There are going to be headwinds for India as well over the next few months and therefore we are a little on the cautious side. Given that Brent is still floating around $55 to a barrel, is there an opportunity in aviation or do you think the meaty part of the trade is over? I have never been a fan of aviation as a sector. So my bias remains the same. There are challenges even in good times. The yields keep falling and competitive intensity takes over everything else. In bad times, when crude prices are higher, it becomes a cost pressure. So either ways, these models are not really able to make a sustained return on capital employed. India is one of the biggest aviation markets. I We should have been having an aviation sector which should be generating huge cash flows but that is not the case. So, my take is stay away. I am not a very great fan of these models. It is often said US tech companies are correcting and it will have impact on Indian tech companies. This question will not be asked by institutional investors but some of our retail investors tend to connect the dots here. How would you respond to this? That is a very valid way to look at it. We have also been debating internally for the last few weeks whether it really makes a material impact on the earnings for Indian IT vendors. I guess it is probably early for us to conclude anything but there could be some impact but that will probably play out in the second half FY20. As of now, we are holding on to our estimates for FY20. We had not made any significant revisions to that. But the other important part is Indian vendors do have strong balance sheets. They have strong operating bottles which have helped them to sustain in the last few downturns as well. To that extent, there is an opportunity for some of these vendors to reposition themselves. Valuations are not very demanding for Indian IT vendors. These guys are doing a share buyback which is deploying cash for the better and also helping accretion on the EPS front. I would not take a negative view right now on the Indian IT services. In fact, we believe that over the next few months this will be one of the safer places to have some allocation to the portfolio in specific stocks rather than go all out negative.I am getting increasing consensus that one should revisit power utilities. Why do you think at a time when we are talking about economic recovery, cyclicals, industrials coming back, some of the smartest fund managers are saying buy NTPC, buy PFC, buy REC? Part of the argument I would definitely agree to. The other part which we are more keen to push out for the sector is it is a defensive. The overall stability of earnings is far better and there is a preference amongst investors to move towards safer models and more predictable cash flows and the sector has not been doing much. The reason we are keen to look at that sector and within power, T&D is something that we have been bullish on and we still believe that there is enough opportunity to make money on. On the generation side, while the utilisation levels have marked up, it has not been strong enough for us to make a case to go out and buy. Our case is more as a defensive rather than as an outright buy. Therefore, we are probably on the same page but with a different perspective.Which is one stock from the largecap space where you are happy to allocate 5% to 8% of your total portfolio? We like consumer stocks. Consumer staples are richly valued but if there was one stock which I would still allocate, it will be Britannia. Another stock which will probably have better tailwind scenario is Marico. We have upgraded that and we like that as a name as well.

from Economic Times http://bit.ly/2R7ULBY