Mumbai: In a chat, Anand Tandon, Independent Analyst, shares his views on Railway Budget. Excerpts:
Do you play into defence or Railway-linked stocks?
Anand Tandon: I have been proponents of those two sectors for a while now. We have seen many companies over the last few days rally almost 30-40% after already having established a fairly strong run over the last few months. So, I am not sure that from a valuation perspective, any of these businesses are now looking like being very attractive.
That said, if you are really a long-term investor, then these businesses will eventually catch up because the numbers can be very dramatic. You look at $30-40 billion of defence expenditure that is budgeted for every year and even if you assume that over a period of next 10 years, let us say half of it were to move to India, you are looking at $20 billion move every year from then on.
So, it is very large industry that will get created and this is a thing that should have been done much earlier. Railways is certainly an area where it is lot more difficult to play given the fact that there are only a few levers that the government can press in terms of infrastructure and so on and here again we find that most of the companies whether they are container companies or wagon manufacturers have already done very well.
Some of the other equipment manufacturers are actually going to go to private foreign companies. Even though they may be made in India but they are not going to be made for the Indian investor.
Right now if you are trying to play for the budget, it is a bit too late and the best way would be to actually move out of the way because the best expectations you can get have probably been priced in, maybe you will get another 5% up as far as the budget sectors are concerned.
More disappointment is likely because at the end of the day, not everything that you wish for can be given to you and therefore some of these sectors may see significant cooling off post budget statement.
While you broadly touched upon the railway budget but the rally that we saw in Titagarh Wagons yesterday was a bit of a sentiment rub off across some of these railway related stories, what do you think the market is expecting from the budget because even when you talk to investors they are really looking for an investment opportunity in the space?
Anand Tandon: The wagon orders that have come out from railways for the last two years have been more or less non-exciting. The expectation is that you will get back to a certain size of orders over the next couple of years and you have reason to believe that with the good minister handling railways who has a good track record in earlier government and the fact these prime minister has gone on record to say that he expects to see the railways as a driver of GDP growth, you would expect that there will be significant investment coming through.
So, it is not surprising that some of the companies which are directly or indirectly related to railways are doing well. Container Corp has been doing quite well over the last few days. Therefore, the valuations at some time have to catch up.