Defence: Picking the Right Bets
When asked about the defence sector, Sabharwal highlighted the increasing importance of domestic self-reliance in the face of unreliable global supply chains. “You are right because see what has happened and as we observe global developments, so the external linkages, global linkages are becoming very unreliable, so you do not know when you need something whether you get those supplies or not, so that is why indigenization, self-reliance is building up there. So, like I have always said best company to play the Indian defence side has always been Bharat Electronics, so that is something which we also hold and continue to still do well.”
He added that while many shipyard companies have seen sharp gains, valuations are not cheap, making timing critical. “Most of the shipyard companies went up sharply, have corrected somewhat and they also have lot of earnings visibility but valuations are still not cheap. So, I would keep a lookout on them and look to add them at some stage and then there are a few private sector companies which also do benefit because of defence investments, so there also the valuations are not exactly cheap, so the key is when to buy rather than whether to buy or not.”
Hospitality: Strong H2 Expected
On the hospitality sector, Sabharwal noted robust demand in the second half of the fiscal year, driven by events such as weddings. “Yes, so hospitality will have a very strong second half. In any case, the second half is better with all the demand because of marriages, etc, also coming up. So, there are various plays like you said all these companies which are the booking portals like MakeMyTrip, etc, are obviously there and then you have airlines. So, airline we are just one relevant player which is InterGlobal Aviation which is something which we have held for a long time and will continue to be long-term positive.”
He also shared his view on hotel stocks, mentioning Indian Hotels and budget options like Lemon Tree. “Indian Hotels is something which we have also held for a very long time. The valuations went up substantially. Stock has gone through a long consolidation and so given the valuation it is not a stock which can suddenly double or something, but it will be a steady return stock… I believe that this entire ecosystem is in a good space and should continue to do well.” Food Delivery: Swiggy’s Challenge
Regarding Swiggy, Sabharwal cautioned investors about the unpredictability of cash flows. “See, Swiggy is something which is tough to evaluate. What happens is every time they come out with results, the cash flows, the negative results, etc, create some volatility and then over the quarter till the next result the stock continues to do well and then the results come and then we again see huge cash burn, losses, etc. It is very tough to build a case for any upside from current valuations in my view.”
Auto Sector: Secular Growth Story
Sabharwal was bullish on the auto sector, highlighting the positive impact of GST cuts and lower interest rates. “Auto is going into a secular growth trajectory. In my view, the GST cuts have been substantial, lower rate cuts of these companies on a significant basis, and so lower interest rates. So, lower interest rate, higher disposable income, lower GST, it is a perfect troika sort of for these companies… Typically, these cycles will last two-three years at least and many of these companies have got strong export stories also. So, I would think that whoever holds the auto stocks, they should continue to hold. I do not see a negative coming in on auto anytime soon.”
Gold and Silver: Time for Caution
Turning to precious metals, Sabharwal warned investors about current elevated prices. “I have always advocated for a 10% to 20% allocation depending on the risk profile and that is what I also tend to maintain. However, after gold crossed 3500 I have stopped allocating. I believe that now it is in bubble territory… So for people who are not exposed and because they are reading of gold and silver going up every time and gold and silver becoming the most search words on search engines now, these are the times when you need to be cautious, stay on the sidelines, opportunities will come again eventually and as these prices eventually correct and consolidate go into a longer-term consolidation, there will be opportunities to buy again. So, I do not think people who are underexposed should be jumping in very substantially at these prices.”
With his wide-ranging insights, Sabharwal emphasized strategic buying, long-term positioning, and caution during periods of market exuberance—advice that investors would do well to heed.
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