Not Jio, but RIL's O2C biz may drive the stock

After having slept for some time now, RIL's core business of oil and chemicals should start doing well and that should drive the stock going forward, says Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services, in this interview. Edited excerpts:Reliance managed to wake up after underperforming for more than a quarter. Do you think the stock can build on gains further or it appears to be a one-off move?Reliance's retail and telecom segments had plateaued in terms of growth. We saw that in their subscriber's base also. But from now, the expectation is that the core oil-to-chemicals segment should start performing and that should drive the stock from here. So if you look at the overall expectation on economic growth, there has been some speed breakers. But nonetheless, the global demand has been pretty good. Oil prices have been stabilising around $60 per barrel, which is positive for oil producers. So in this environment, the expectation is that after having slept for some time now RIL's core business of oil and chemicals should start doing well and that should drive the stock going forward. What is your take on Bharti Airtel?If you look at it fundamentally, Bharti Airtel's quarterly results have been pretty good. The only ugly factor has been the wait in tariff hikes. Apart from that, their ARPUs have significantly improved sequentially and consistently over the last one-and-a-half years, mainly on back of changes in the mix. Now with the news of 5G testing coming out and growth, I think the overall space in telecom should do well. Nonetheless, there has been some consolidation that is continuing in the overall telecom space. Until there is clarity on the further growth path in terms of 5G rollout, the stock could consolidate for some more time.What is your reading of earnings of IT companies?Overall, the fourth quarter recorded robust sequential revenue growth. Most companies reported a strong deal win which has improved the visibility of growth going forward. Topline growth should continue to be good over the next one year as the deal pipeline remains strong. Overall, we have a positive stance on the sector. Our preferred picks in the tier-1 space is Infosys, followed by HCL Tech. Among the tier-2 players, we like L&T Infotech, L&T Technology, Mphasis and Cyient.Would you be tempted to book profits here or you want to ride the wave?It makes sense to remain a bit cautious although we are in a strong bull run and things have just started opening up. Our overall view is that positional traders should keep booking profits on regular intervals. We have also seen a lot of churn at least in terms of sectoral rotations. For long-term investors, it is always a good thing to buy on dips or accumulate on any declines. Traders should book short-term profits and remain a bit cautious, especially on days when you hit a new high.

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