Defiant super-bullishness about HFC and micro-finance stocks
“I am super bullish on housing finance … they are growing at more than 30 percent,” Basant roared with his usual flamboyance in reply to a question from Latha Venkatesh and Sonia Shenoy on whether he was taking counter-evasive measures to tackle the menace of note-bandi.
“… the small finance segment personally I am super bullish and we own almost all of them …. the microfinance segment .. that’s the place to be,” he added, his eyes sparkling in defiance.
“My NBFC Portfolio Has Not Changed Due To #Demonetisation. Its Impact Should Ease In The Next 1-2 Months,” Basant added for good measure.
. @BMTheEquityDesk #OnCNBCTV18:
My NBFC Portfolio Has Not Changed Due To #Demonetisation. Its Impact Should Ease In The Next 1-2 Months.— CNBC-TV18 (@CNBCTV18Live) December 19, 2016
Latha and Sonia gaped at Basant with wide-eyed admiration. However, novice investors were not impressed with Basant’s unbridled bullishness.
The reason for our nervousness was because micro-finance stocks are/were supposed to be the worst affected by NAMO’s demonetisation strike.
According to popular theory, the bulk of the customers of micro-finance companies are daily-wage workers who are dependent on cash for their own business operations. The shortage of cash crippled their operations and adversely affected their ability to repay the loans, leading to fears of soaring NPAs.
Demonetization has become a demon. Microfinance sector hit. Loan repayments down. Women SHGs are in deep trouble. https://t.co/wXGwJb2egF
— Gaurav Gogoi (@GauravGogoiAsm) December 23, 2016
Basant’s confidence stemmed from painstaking scuttlebutt of the ground level situation
However, we need not have worried because Basant knows his stocks like the back of his hand. Also, his confidence stemmed from the fact that he had undertaken a personal inspection of the situation on the ground in the mofussil areas of Bihar and realized that the impact of note-bandi was not as bad as was being feared by the intelligentsia.
“I am optimistic about the increase on withdrawal limits on December 30. I think once that happens we will be back on track …. I was out in rural Bihar last week just to get a sense of what is happening …. economic transactions are not being handicapped right now. If you want to buy vegetables, eggs, wheat and meat, you can get them …. Every day it is improving, I think it should get better. It is just a stoppage …. this is just a passing phase,” Basant said with his customary clarity of thinking.
Been travelling through rural India a)Blind support for @PMOIndia b)Hiccups done – cash available almost business as usual – getting better.
— Basant Maheshwari (@BMTheEquityDesk) December 13, 2016
Basant’s opinion was corroborated by other vigilant observers who also noted that the note-bandi impact on NBFCs was not as severe as was feared.
Bharat Fin to @ETNOWlive
-Collections and disbursements to return to normal very soon
-Expect book to remain at 8500 cr, cant guide PAT— Niraj Shah (@_nirajshah) January 25, 2017
Bharat Fin Q3 Profit At Rs 142.8 Cr Vs CNBC-TV18 Poll Of Rs 111 Cr & Vs `Rs 79.5 Cr (YoY). Calculated NII At Rs 204 Cr Vs Rs 147.8 Cr (YoY) pic.twitter.com/ibkVRdBniT
— CNBC-TV18 (@CNBCTV18Live) January 24, 2017
Basant also sent subtle hints to us to take advantage of the crises situation. “Clarity comes at its own price,” he said implying that if we wait for clarity, we would not enjoy the discounted prices and would have to pay through our noses. He added that “the sector leadership of the market changes only & only when the overall market moves into a complete bear grip,” meaning that temporary events of turbulence would not shake the vice-like grip of the NBFC stocks.
One more day – few more results – > Conclusion 1) DEMONetisation impact more on screen than on ground 2) Clarity comes at its own price.
— Basant Maheshwari (@BMTheEquityDesk) January 25, 2017
The sector leadership of the market changes only & only when the overall market moves into a complete bear ? grip. #TheThoughtfulInvestor
— Basant Maheshwari (@BMTheEquityDesk) January 4, 2017
Golden buying opportunity missed
In hindsight, the note-bandi cries gave a mind-boggling opportunity to us to buy top-quality NBFC stocks at throwaway valuations.
One can see from the chart below, that the stocks had suffered a savage correction. Manappuram, for instance, plunged 41% in just six weeks. The rise has been equally savage. The stock is up 53% in the next six weeks.
| Company | Price on 08.11.2016 | Price on 20.12.2016 | % chg | Price on 03.02.2017 | % chg |
|
Manappuram Fin. |
102.80 | 60.60 | -41.05 | 92 | 53 |
|
Bharat Financial |
824.70 | 559.70 | -32.13 | 836 | 49 |
|
Repco Home Fin |
722.25 | 502.70 | -30.40 | 761 | 51 |
|
Ujjivan Fin.Ser. |
436.00 | 310.35 | -28.82 | 426 | 37 |
|
M & M Fin. Serv. |
345.90 | 249.70 | -27.81 | 293 | 17 |
|
Muthoot Finance |
362.90 | 265.20 | -26.92 | 343 | 28 |
|
Shri.City Union. |
2422.15 | 1783.45 | -26.37 | 1908 | 5 |
|
JM Financial |
87.05 | 64.40 | -26.02 | 75 | 16 |
|
Yamini Invest |
33.00 | 24.80 | -24.85 | 35 | 44 |
|
Dewan Hsg. Fin. |
313.75 | 236.00 | -24.78 | 296 | 25 |
|
Capital First |
689.40 | 526.00 | -23.70 | 686 | 30 |
|
Shriram Trans. |
1054.85 | 810.75 | -23.14 | 963 | 18 |
|
L&T Fin.Holdings |
103.75 | 81.70 | -21.25 | 105 | 27 |
|
Cholaman.Inv.&Fn |
1108.40 | 881.50 | -20.47 | 1043 | 20 |
|
Edelweiss.Fin. |
111.45 | 89.25 | -19.92 | 123 | 33 |
|
GIC Housing Fin |
322.70 | 259.60 | -19.55 | 313 | 22 |
|
Bajaj Fin. |
983.85 | 794.55 | -19.24 | 1047 | 30 |
|
Indiabulls Hous. |
786.90 | 635.50 | -19.24 | 795 | 24 |
|
DCB Bank |
130.00 | 106.85 | -17.81 | 129 | 22 |
|
IDFC |
63.15 | 52.50 | -16.86 | 55 | 4 |
NBFC – back with a bang !!! https://t.co/xEAwtLGwpt
— Basant Maheshwari (@BMTheEquityDesk) February 1, 2017
Cant find better adjective for current NBFC rally other than "reverse-Demonetization". Stocks are recovering as fast as they have fallen
— Subash Nayak (@sunayak1) February 3, 2017
What a massive rally since Dec 27 in some of the stocks especially NBFC … https://t.co/pJvJYIgYtY
— Kapil Jain (@enrichwise) January 25, 2017
Bharat Financial Inclusion +70% From 27-Dec-2016 lows
Dream run@CNBCTV18Live— Nigel D'Souza (@Nigel__DSouza) February 1, 2017
Bharat Fin at 650..was lucky demonetization gave gr8 entry levels sub 520.
— Rajarshi (@rishi_d2003) January 11, 2017
Not too late for us to rush into NBFC stocks even now
IndusInd Bank's revived interest in Bharat Fin could keep the valuations of other MFIs soaring in coming months.
— Jagdesh (@cjrsaaketa) February 3, 2017
It is worth noting that several NBFC stocks have still not attained the levels that they were at prior to the note-bandi crises. This implies that the run up, though spectacular, is a mere recovery of lost ground and that more hefty gains will come on the table in due course.
Also, Basant explained that the reason for his “super bullishness” about NBFC stocks in general, and housing finance stocks in particular, is because lower home prices increases affordability and lower home prices encourages people to go and buy it.
He also pointed out that the crackdown on black money means that the developer and the home buyer will perforce have to come to organized sector lenders for their fund requirements.
“So, it is going to come back with a bang,” Basant proclaimed with his usual flourish, sending the cue to us to grab NBFC stocks without any more hesitation!
I have selected Manappuram fin, Arman fin and Satin creditcare.
Now everybody is saying that NBFC will be the leader of bull run.
Q is if HFC’s will make money and deserve to trade at 5 times book, why should RE developers languish at single digit PEs?
L& T finance and Rel Capital are good bets .
ya y rel cap is not part of this?
So the stocks are almost back to where they were before Demo levels and that makes BM a genius 😉
Market will most of time will rise after fall till India GDP continue to grow around 7%.But very difficult to say when will come the exception.So buy on dips but be careful.