Why Sanjay Parekh Avoids IT & FMCG Despite Valuation Correction | Market Strategy For FY27

Hinzugefügt: 2026-05-25

[00:00:00]Let's get the big conversation on Sanjaya Parekh, founder and CIO of Sohum Asset Managers in the studios with us this morning. Sanjaya, always great to have you on. Welcome to the NDTV Profit studios.

[00:00:10]>> Good morning. And it is indeed a good morning, isn't it?

[00:00:13]You know, just as we were starting, I was looking at a report which claimed that a UAE-flagged tanker carrying LNG to India has switched on its signal in the Strait of Hormuz. I do not know if it's correct or not, but they're they're quoting Kepler. So, maybe it is.

[00:00:31]Once this opens up, and it's a matter of when rather than if, >> Yes. what is the extent of reversal we see? And are we just seeing a sneak peek of it today?

[00:00:41]Yeah, I mean, see, we had false alarms, so we That's why the market's a little more apprehensive. I mean, we've gone up 200 points, but I think It's a jittery welcome.

[00:00:51]>> certainly, because, you know, we still don't know exactly you know, this has to It's not only MOU, it has to really decisively And uh there is damage done because we import 5 million barrels a day into 40 at least $40. So, $200 million check we'll cut for last 2 months. Uh from here, certainly, if it gets better, the crude was the biggest issue.

[00:01:18]Crude gets easier, it has impact on currency and hence then markets. And then also the cost of equity goes down because the pressure on tenure also eases.

[00:01:27]So, it's very, very important that crude eases off. Uh government has now increased 7 and 1/2 rupees, but there's much more to go in diesel. The gap in petrol is reduced now. There's still loss, but diesel is still the gap is larger, so they we will have to continue with that and navigate through this, you know. Uh and if this gets easy, that's great, but if this gets prolonged, then we may have to do something to attract capital flows. How are you looking at portfolio positioning right now though?

[00:01:59]If you think about the various sectors and opportunities available to you, on a technical basis it's been pointed out that banks are now looking relatively better, right?

[00:02:09]Our technical analyst in the morning looks at Nifty Bank, but in your portfolio on the earnings front, are you also thinking that banking is something to focus on? Yeah, so we were we were predominantly a large cap product, so 70% always should be large cap. We were at 72% in February. We moved today to 83%.

[00:02:26]>> Wow, okay. So first is we said which are the ones which will get less affected.

[00:02:32]And then of course larger caps is the first criteria, and then we said can we have the leaders which are reasonably available. So we moved into Adani Group stocks more, then we moved into Bharti. Um Dilip Sun Pharma is what we increased our exposure because that made sense to be a little more defensive. Um Even Reliance we increased our weight. Um Maruti and M&M we always have weights.

[00:02:59]These are all leaders and they are strong balance sheets or the larger banks, you know, or DLF in real estate.

[00:03:07]So each of the leaders or Samvardhana Motherson in auto. Um so we realized that these are the leaders and businesses which will navigate this pain. We will have pain.

[00:03:18]And that's how we looked at it, and then larger caps will be better off. So it's worked for us for now because it's really given us a lot of outperformance.

[00:03:26]You know, Sanjay, I'm just looking at your heavyweight sectors.

[00:03:31]Two of them which are a miss right now is IT. Yes. And FMCG is something I know you've been talking in the past as well.

[00:03:38]You absolutely don't like that sector with the way valuations pan out, but currently you have valuations which have come off quite a bit in terms of consumption as a space. And I think from an earnings perspective as well, there is some bit of a tailwind that we're seeing right now. Right. Do you think that could be a sector which you would look at in terms of the next, say, a year or two? Yeah, so FMCG wins zero for four years. Yeah. And our problem was, you see the historical growth rate, it was weak. Valuations were at 45, 50, 55 times. Mhm. And then we said we want to play consumption, but in a different way. So, can we have consumption through Bharti or retail banks or tele or telecom, of course, and then Maruti. And we thought that is a better proxy to have Maruti at a much reasonable valuation than HUL at a much steeper valuation. So, that worked well for us. Our representation to consumption is high. But FMCG, we're still not because the moat is also getting attacked. The distribution piece is getting attacked. The QC will eventually ask for a bigger pie of the margins. So, that's how we are. And then now we participated through a small way into Zomato because we found it at a reasonable >> I was just going to ask you. So, are you now betting big on the QC space or that platform space? No, not big. So, we just we just do our valuation and we said, "Okay, even if QC grows at 60% on F530 with our assumptions, you know, we get it to net present value." And we said, "We'll make 16 to 18% return at the price we bought." So, we bought in a small way and kept space to buy more.

[00:05:14]But we we like that model. They are leaders. They have net cash. There is intense competition. But I think it it has, you know, they have a right to win.

[00:05:24]Have you by any chance had a look at Zepto? And you know, there's a lot of word about where this is going to be priced.

[00:05:32]Would you be interested in looking at it at IPO? Would you wait for a little bit?

[00:05:36]No, we will only have money on and that's Zomato because, you know, the losses on Zepto from 85 rupees to it's come down to 49 rupees and they will get the capital. I believe they will get the capital. And it is intense competitive space. There are six large players with deep pockets. Amazon, Flipkart, everyone is there.

[00:05:55]>> them. Even Reliance is coming back, you know. So, you'll see all of them coming and trying to get the share of the pie.

[00:06:02]So, I don't think competition is going to subside and I really believe even Zepto will get the capital. I believe so. But I think within that also, you know, Zomato is really ahead in terms of even EBITDA per order on QC, much ahead. Mhm. Uh you mentioned earlier and standard disclaimers here, but you mentioned earlier in your conversation about, you know, taking positions in Adani group stocks and there has been huge development from perspective of how risk was perceived and regulatory issues and what has happened in the US. What is the view right now?

[00:06:38]Well, I think, you know, I've been following the group from 2008. I think none of very few people would have followed.

[00:06:45]I I really believe each of the companies, the risk is really managed well.

[00:06:51]Um you know, if you at company level, each of them, the financial leverage is well in control and it clearly the execution focus is very very good.

[00:07:02]Um and I we really like a lot of businesses in the group, but you know, because of the group exposure, we have chose to be in port and Ambuja. These are the businesses we like. Of course, we really are positive on Adani Enterprise as well and Adani Green, but we would want to have a risk management of weight being limited. I don't want to ask about and ports look, ports a lot of people speak about. So, let me not ask about ports. I want to ask about Ambuja because we've been speaking about the price increases that some of these players have taken and the the goal to bring, if I'm not mistaken, 1,300 rupees EBITDA per ton is the goal.

[00:07:40]And you want to take it to 1,500, right?

[00:07:42]So so but what do you think about Ambuja vis-a-vis peers?

[00:07:45]>> No, I think they've yet to deliver.

[00:07:48]They certainly there is scope for improvement. From the ambitious goal of 1500 and in the interim moving 1300, they're still far off. But I really believe that they'll get it.

[00:08:00]They in the last two quarters have been weak. Even next quarter could be weak.

[00:08:04]But I I really believe the valuations now at 10 times on a lower EBITDA per ton. Most of the analysts now don't factor 1300 and 1400 rupees per ton. So that's the best part. So at that if you are getting at 10 times 10 10 and a half times on FY27, it's fine. So we are we are absolutely comfortable. But the near-term cost inflation will reflect in the cement companies in the Q1. Okay. Uh Sanjay, you know, you have that four-year exit kind of a strategy that you've been following as well.

[00:08:36]Any exits that you have made so far right now if you have to look at 20 FY26 or looking at 27 where you're saying that okay, now you're not seeing any moat in those segments in those kind of stocks, number one. And two, your view when it comes to IT because that again is a sector which you've avoided.

[00:08:54]>> Yeah, no. IT we've been again underweight and we've been really talking about this AI risk almost 1 and 1/2 year back. And but we didn't want to be zero because of the overall portfolio construction framework. So we don't we do own Infosys and we got out hit. We have little less than 4% on the weight. But I really believe IT could be it's reasonably optically looking reasonable on valuation, but the growth is missing.

[00:09:20]And the next three-year growth also I believe will be very very low. And hence there could be a dead cat bounce. Some of the players may do well who are really better off on the AI side. But I really I'm quite cautious and we will not increase our underweight right now.

[00:09:37]You have an opinion, since we're talking about IT, on the larger AI theme globally? Because the contention that certain people have made is that you're piling money into companies that are spending a lot of money on capex without the idea of when the revenues will come through and how much revenue will come through. It's the perfect recipe for something that could blow up down the line. Nobody's saying it will.

[00:10:01]It may actually be the opportunity of a lifetime, but there's a risk, right?

[00:10:05]Yeah, no, it is your valid. So, it's evolving. It's really tough to take a call. The the amount of, you know, money they're guzzling is like $1 trillion put together. So, it's serious money for somebody who is really asset light.

[00:10:19]>> And it's debt. Yeah, and and and so so it we see really don't know, and we have to see whether the revenue models are established. There is competition there as well. You can't have a moat of you being a single player. So, it is competitive as well. So, who will be the leader there? You know, some of them can really go through big write-offs as well, but it's too early I believe that, you know, the verdict is yet to be out there. Interesting.

[00:10:47]Okay. I think you know, we could go on for quite a while, and it's an