SBI Card will give good returns in mid to long term: Kunj Bansal

What exactly is the approach that one needs to take right now? Is it time to protect your capital or if you have some powder dry, should you start bargain-hunting in the mid- and small-caps in anticipation of market recovery?
We usually have two kinds of participants in the market—one are the short-term traders and second are the medium- and long-term investors. For traders, going back till about 15 days ago when the market was almost steady or range bound, they were getting opportunity to trade in and out. Now that has been severely compromised. It has become very difficult to take a shorter term call on the market direction including if we look at today’s volatility in the markets. They would be well-advised to either stay away for the time being or trade with very strict stop losses; needless to say that even the trading ranges would become smaller. For medium- to long-term investors who are kind of worried about the valuations, this is a good opportunity to start looking at buying some stocks as specifically BFSI good quality companies have corrected anywhere in the range of around 15%. At the same time, it would not be an appropriate strategy to go whole-hog and buy for the full quantity that you are targeting to buy. Even if markets do not go down, there is no harm in buying the remaining part at a higher level because you are comfortable that probably the market has bottomed out; so these are the strategies that should be adopted by the market participants.

What about the SBI Card IPO? Does it seem like all this mayhem in the market is going to eat into its appetite as well?
So, the grey market premium, which is considered a big indicator, has come down. But keep in mind that it is still there and the last numbers that were there indicated about 15% premium to the offer price. Secondly, the caution has set in; the investors have become cautious of applying. Third, while the QIB portion seems to have gone at 3.5-4 times, anchor had already been subscribed earlier and as per my interaction with the lead managers, there was a huge demand in anchor and they could not satisfy all the anchor investors. Now that leaves all the other categories of retail, non-retail, shareholders and employees, which are probably not getting as oversubscribed as they were earlier. But in terms of fundamentals and again related to market, my view is that when this issue lists at the higher end of the offer price, it is about Rs70,000 crore marketcap depending on whether it lists at a premium or a discount. Let us say the marketcap will anyway be in the range of Rs60,000-80,000 crore. There are very few opportunities available to institutional investors, both domestic and global, with this kind of market cap size and hopefully it will reasonably liquid as well for them to buy into the market. To my mind, the issue obviously will sail through if that is the answer we are looking for. I do not think there is any doubt about that. Hopefully in my view, the listing gains will still be there. Of course, with the kind of volatility we have in the market intraday, it is difficult to predict. Over the medium- to long-term, I see a lot of institutional buying coming into this stock and giving good returns.

What will be your view on the auto pack? On one side, there is a shortage as far as components go for certain players; on the other hand, you have the cost increase, demand slump or a growth slowdown. How would you look at auto names?
If we look at the pattern of the market over the last 15 days or so, the auto sector is the one which has been hammered really badly. The auto index is down probably somewhere around 15% and individual stocks, auto OEMs and auto ancillaries are significantly down even more than that. The sector has been seeing negative growth including in the numbers of February that came out over the last two or three days. Now this whole supply chain issue from China has been added. Even if the supply chain gets partly or fully addressed, the whole costing will go up because of the significantly increased freight charges. In terms of performance of these companies, we will probably see quite a lot of performance in their financials for the ongoing quarter; Jan-Feb-March quarter will see a performance issue. Two, share prices have already corrected. Can they correct further? Probably, yes given the kind of negativity that is building around the sector. Should one look at buying? I do not think so. Maybe one can wait. It does not matter even if one has to get in 5% or 10% higher but it is better than some clarity on emerging picture improvement in the financials of the sector. I do not think right now one should get in. The domestic demand anyway has been an issue and will continue to be an issue. Net-net, the sector still remains under a wait and watch mode.