Dipan Mehta on sectors you should keep out of now

Lighten up positions in businesses which rely on crowds to come into their premises and commodity stocks, says Dipan Mehta, Founder & Director, Elixir Equities. Where was the rally a little exuberant and you would want to profit-take if you haven’t already done so in the last three days?Commodities are losing a bit of their lustre, especially steel and other non-ferrous metals which are seeing headwinds. In steel, Chinese production has revved up and even Indian secondary steel volumes have started to move up and those kinds of prices are not sustainable. That is one sector one would like to be a bit cautious on. Also, I am still a bit cautious about businesses which require crowds to come into their premises like PVR, Inox, retail companies or for that matter aviation. So although these stocks have run up significantly on the hope of vaccines and renewed volumes taking place at their establishments, I am not that optimistic over given the valuations. So broadly, businesses which rely on crowds to come into their premises and commodity stocks are where one needs to get a bit cautious and should not be entering at these levels. One should be looking at lightening up their positions over there. A lot of largecaps are coming out with results today -- Dr Reddy’s, Tata Motors, Cipla, IOC, Tech Mahindra, IndusInd Bank, UPL. Anything in particular that you are watching out for?Pharma and banks should come up with a stable set of numbers as per the Street expectation. The only thing as far as banks are concerned, all eyes will be on the NPA management and what further bad loans have incurred during the quarter and how much provisioning has been made and how the pre provisioning profits have shaped up. IndusInd has a new CEO and it will be the second quarter and so there’s a lot of hopes there as far as investors are concerned. Pharma, by and large, is on a very stable wicket and we have not heard of any major negative news flow in terms of regulatory action or further price discount in the US market. These companies have been steadily launching new products and we are very positive on both Cipla and Dr Reddy’s and Sun Pharma. We will all be looking at how the speciality portfolio is shaping up for the company and the sentiment in the stock depends on how that particular segment is doing for the company. These are great companies and great stocks to be invested in and corrections like this give a good opportunity to increase exposure to pharma or maybe even software and to an extent good quality banks.

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