Shares to Buy: Hemang Jani has 5 stocks that will benefit from changes in China
Why did ONGC run the way it is? What are the markets so excited about?
The rise in both crude oil and gas prices is definitely a positive trigger for ONGC and Oil India. Unlike previous scenarios where if the price of crude oil had gone up, the government would likely have weighed heavier on companies like ONGC, this time the government has taken a more sensible approach and we’ve seen a revision of gas prices that could add to the findings. There was also better evidence for the oil part of it.
That being said, one has to keep in mind that in a commodities upswing, people tend to prefer some of these names, and while stocks would have really risen in the last six months, they are still looking reasonably reasonable with a decent amount of upgrade -Possibilities given the prices.
So from a dividend yield and valuation standpoint, there is consolation and hope that the government will end up doing nothing that could spoil sentiment for some of these oil companies.
With many changes underway in China, some investors are buying textile stocks and electronics assemblers like Dixon and Amber. Some also buy chemical stocks. What’s your favorite china trade?
The whole topic would revolve around names like specialty chemicals and textiles and perhaps some other small categories that will benefit from either a) higher prices due to the disruption in China and b) China’s restriction on exports. Indian companies could have some volume advantage and within that particular theme we definitely like textiles, although textiles are not a large segment overall.
But exporters like Himatsingka, Welspun and Vardhman Textiles will definitely benefit from higher market share and volume. We also have to remember that raw material prices have also increased. In textiles, for example, cotton prices have skyrocketed, but these two names still look good and within specialty chemicals we like names like
which have also risen sharply in the last few days.
These companies are so well integrated – from finished products to raw materials where reliance on China is virtually non-existent – and the pricing environment can be a little more exciting when it comes to uptrends. So Deepak Nitrite, Clean Science, and even SRF are the companies that would benefit from the current narrative about China.
Which end of the textile industry are you betting on as a house spinner, textile machine manufacturer or pure textile retailer like Aditya Birla Fashion or Trent?
Two textile exporters – Himatsingka and Welspun – are the names we prefer and aside from the fact that the open-up theme is catching up from a retail perspective, Aditya Birla Fashion is something we like, but that’s not a textile play. It’s more of a retail game.
Just as the US natural gas futures are jumping, they are already at a 12-year high. That bodes well for ONGC and Oil India. After the recent surge in ONGC, would you be ready to add more to ONGC or buy new?
Sentiment for stocks like ONGC and Oil India remains positive. What the market is sensing is that oil prices are likely to remain elevated for an extended period of time as we see no signs from OPEC to pick up production and as we enter the winter season, more inventory could build up.
This is happening for ONGC and Oil India. We look at quarterly figures. For the average realization for the quarter, given the current high prices, the market would allow for some incremental positive upgrades. From a tactical or short-term perspective, given the dynamics of pricing, these names would definitely be interesting. However, if you have a medium to long-term perspective, given the commodity nature of these businesses, you should avoid entering the market at the current level. But yes, from a momentum perspective, these companies still look pretty strong.