Amnish Aggarwal on where to find value in capital market theme

Economic Times

4 days ago

Live Events
(You can now subscribe to our
(You can now subscribe to our ETMarkets WhatsApp channel
, Head-Research,, says BSE's potential boost from NSE's listing makes it attractive. Capital market themes like AMCs and wealth companies offer steady returns, though significant re-rating is unlikely. Life insurance shows strong numbers and momentum, contrasting with slower growth in non-life.BSE numbers have been reasonably good, but there are also expectations of NSE, which is the bigger exchange, getting listed. Once listed, NSE should command a reasonably good premium and PE multiples given the kind of number, scale it has got. But more importantly, going by technical factors, once NSE gets listed, I believe it is going to have Rs 4-5 lakh crore or more market cap and it will be listed only on BSE because NSE shares cannot be listed on its own exchange.Now, once that bigger stock comes and it is in F&O, in indices and everywhere, the BSE volumes per se will get a boost significantly by the NSE listing . So that is one. Now, as far as value is concerned, till the time we get some listing from the NSE, BSE will continue to attract investors. But looking at the broader capital market themes which will include AMCs, which will include wealth companies, and broking, the markets have been good.The number of investors in the Indian markets has been going up and barring the correction which comes in from time to time, whether it is the wealth space or AMCs, this space can give very secular returns from here on. But if we look at the value of the last couple of years, will any significant re-rating happen in many of these companies including some of the service providers like CAMS? I think many of the stocks are already trading at 30 times, 40 times. So, while a significant re-rating might not happen, many of these stocks still provide a decent opportunity to make secure gains from here on.Yes, that is what I am saying. A BSE or NSE is a very different case altogether, but when it comes to others which includes AMCs, which, even CAMS and all, they have now reached the stage where there would be more secular returns because the re-rating potential in terms of PE is very limited.One has to bifurcate them into two parts. If you look at life insurance companies, whether it is HDFC Life or LIC or even Max, all have reported strong numbers. They seem to be looking pretty decent and that is also getting amply reflected in the way the stock prices are behaving.When it comes to the non-life insurers, particularly the ones which are health insurance companies or companies catering to segments like vehicles and other insurances, the scenario is slightly different if you look at the recent numbers of Star Health or ICICI Lombard. That sort of growth is not visible there. In the last 4-6 months, life insurance has started taking the centre stage. In the last two to three years, there was a long consolidation happening in the life insurance industry and the stocks were moving in the same range for quite some time. Now with the growth revival, they have done well.As of now, life insurance companies in particular have been doing far better and the momentum seems to be on their side. As far as non-life is concerned, we might see some action over there, but as of now the numbers and the trajectory does not suggest that.You can look at them on a relative basis because definitely consumer companies are growing much slower, their PE multiples are higher, but IT services if you look at say recent past, it is a typical value trap kind of a situation. You just strip out a few years in between when they got some booster and they grew faster, otherwise the secular growth in some of these companies has not been that great.One can argue that the PE multiples have corrected more than what they traded in 2022 because after the first wave of COVID everyone thought that work from home is a new normal, their costs have permanently come down, the margins are going to improve. But even Infosys, TCS started work from office and everyone's multiples got re-rated by 30% to 40% which have now been corrected over a period of time.As of now, I see very little scope for any big surprise in terms of numbers because the global turmoil seems to be there both on the tariff side as well as on the growth side. The dividend yields or in the stocks the PE multiples are low. In terms of visibility and overall setup, I want to go for pure growth, then I would not be much keen on many of these IT names.I agree that some of the defence stocks or some of the consumer stocks are definitely expensive, but they are pure contra value stories. Whether they will start growing again and get re-rated is something which I am not very confident about.