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Updated on March 23, 2023 7:15 pm

Sandip Sabharwal: Any trigger for an upside is absent for two-wheeler stocks: Sandip Sabharwal

“This was known that the issues were there but I think now it has come to a phase where sales are virtually going to a standstill in Nigeria and that will impact the performance of Bajaj Auto at least for the next two quarters,” says Sandip Sabharwal,

Completely unconfirmed the source based story, we do not know whether the investment in Paytm will go from Bharti’s balance sheet or it will be Mr Mittal’s family office. B) the relevance of Airtel Bank is not very large because they do not have a very large touch base sort to speak or a subscriber base or a customer base, customer base I think is the right word, B. C, the good thing here is that we also know that Alibaba and SoftBank they have been reducing their stake in Paytm and if a family office in a sense decides to pick up part of that stake or back that stake in Paytm, the supply overhang in the short term gets distributed, it gets diluted. That has been the problem for a lot of these fintech companies that the anchor investor locking and especially some of the Chinese companies who invested into some of these stocks, they are now selling and they are selling regardless of the underlying price or the market conditions. Sandip Sabharwal, analyse the news for us.
When Paytm itself has declined that any such discussion is on so there is no use discussing this entire thing. I think whenever some large stake sale has to happen in some of these new generation companies all these kind of rumours start floating around which have no basis. So the unfortunate part for retail investors is that in most of these companies the promoter holding is so small and many of these foreign funds or companies or outfits of these companies who bought stakes in these new generation companies themselves are facing a lot of issues and they are looking to sell out and to that extent there is a constant supply of equity so that keeps the lid on the stock performance. What is the take on Bajaj Auto’s reports that they are expected to cut production by about 25% they are saying that there could be three to four months of potentially soft demand in the key international markets is it a huge worry?
Yes, it is especially for Bajaj Auto. The domestic two wheeler market has been going through a tough time because of subdued rural income, inflationary pressures etc. As it is the two wheeler demand has been suppressed. For Bajaj Auto a big driver of earnings always has been exports because their profitability on the export side is always higher. Now one of its key markets is facing issues. This was known that the issues were there but I think now it has come to a phase where sales are virtually going to a standstill in Nigeria and that will impact the performance of Bajaj Auto at least for the next two quarters.

So definitely a negative. So two wheeler stocks are not very old stocks except for TVS Motors where valuations are also high. I think we will see some sell-off but might not be very huge but any trigger for an upside is absent right now.

What is the trade for the month of March? Is it about accumulating the stock which you always wanted to buy and you will get a chance to buy them in the month of March or it is going to be prolonged winter?
Yes, as valuations become cheaper people get more and more scared. They become more and more sceptical and as prices rise they become more confident that we should buy now. So I think actually it should be the inverse. I would say your first comment where whatever stocks you like if they are available cheaper you should be buying more of them is the way to go. I think there is excessive talk about Fed terminal rate, interest rates etc. at a time when actually monetary policy which operates with a lag is actually starting to act and we will see that inflation over the next few months will start falling significantly as the base also comes into play. So I think this is a phase of four to six weeks which I think give opportunity to investors to actually buy rather than get more scared.

Let us talk about Zee because this has become more of a trading stock now?
Yes, Zee is a trading stock because fundamentally long term the issues which surround the broadcasting sector are especially on the general entertainment side are dwindling ad revenue share as ad revenue gets split into more digital formats. And a stagnating subscription which could actually start falling going forward and while the cost of content will not come down so I think it is a double whammy on both sides.

So obviously if stocks get sold out a lot they provide trading opportunities which can come at any time but long term directionally I think it becomes more and more of a value trap.


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