This analyst steers clear of Adani group cos. Here’s why

It is largely a debt-funded expansion but unlike most other debt-funded groups, these stocks seem to be moving up and people are not concerned about the debt for various reasons, says Sandip Sabharwal of asksandipsabharwal.com.

When it comes to the Adani Group of companies, the market cap is real. In the last one year, if you had participated in these stocks -- a port company, a gas company, a logistics company -- you would have made a killing in the markets. Your view?
That is true. There has been a series of separation of companies and creation of market cap. It is largely a debt-funded expansion but unlike most other debt-funded groups, these stocks seem to be moving up and people are not concerned about the debt for various reasons. I do not participate in this group as I did not participate in the runup of the Indiabulls Group as well as the Anil Ambani Group. So I would just say this and rest my case.

What is the best trade right now which could be an interplay between oil and gold?
There are not too many gold-related direct plays in India. When we looked at the results of , it reflected a slightly different picture from what Muthoot had shown. But overall, the key thing is that as gold prices move up, given that these are very safe lenders because they have collateral in the form of gold, they will do well and still trade much cheaper than most of the banks and NBFCs which have lots of unsecured loans. But somehow they get a higher valuation.
So to that extent some of these moves might be justified. ONGC unfortunately is just a trading play and so it will go up and down because fundamentally it is doing nothing great and because its production is continuously falling. So for gold, I think the sovereign gold bonds are a good option but there is no direct play in stocks there. Sentimentally, the gold financers move with gold prices.

Why is the

Motherson Sumi

stock sulking after results are out? It is down about 7%?
The results in terms of headline numbers do seem good but later it turned out that operationally the numbers are not as great. Secondly, they themselves have talked about risk to growth because of semiconductor and other issues although apparently the debt reduction seems to be a positive thing, as is their balance sheet. The market is adjusting to the stock having run up sharply. The stock was trading at a high while auto stocks corrected from the top because of lockdowns, etc. Some amount of selling post news is happening because there was an expectation that results will be good. I do not think we should read more into a single day move.

What is your outlook on the cement space?
Cement companies have held on pretty well in terms of earnings. Although in the near term there will be some pressure coming up because of input price increases as well as the monsoon being a lean season for them. But directionally, the story is good. I still have some valuation concerns as far as the largecap companies go.