2 Hot Stocks|Favourite stocks of Institutional Investors

• Bharti Airtel is a strong and well established player in the India Telecom sector. At present, it seems relatively better placed in comparison to its peer Vodafone Idea.
• It is also the only choice for investors to have a pure telecom sector allocation. Investors can’t obtain a direct allocation in Reliance Jio as they will have to invest in Reliance Industries which is diversified across energy, petrochemicals, textiles, natural resources, retail and telecommunications.
• In October 2020, HDFC AMC made big bets on Bharti Airtel, lapping up Rs260cr worth of the stock. 
• In the last 1 month Bharti Airtel’s share price has rallied by ~22% from Rs.397 to Rs.484, which indicates renewed interest from institutional investors.

Stock Price Movement

Average Revenue Per User (ARPU)

• The company’s ARPU (Average Revenue Per User) has consistently increased sequentially every quarter since September 2019 from Rs. 128 to Rs. 162 in September 2020. This bodes well for the company and is manifested in their earnings growth.

• As a consequence the stock is being re-rated, the share price has thrived after a prolonged period of consolidation streak and there appears a gleam of light at the end of the tunnel for Bharti Airtel.

User migration to 4G

• Bharti Airtel will be a paramount beneficiary in terms of user migration from 2G to 4G and rapid surge in data usage as they have notable pricing power and are all set to avail its advantage once they start charging higher tariffs, thereby boosting earnings as well as profitability.

Planned Capital Expenditure

• The company has a fundamentally sound and well funded balance sheet with sufficient liquidity as compared to the likes of Vodafone Idea.
• There has been a sharp rise of 79% YoY and 71% QoQ in capital expenditure owing to the construction of more towers and mobile stations in Q2FY21.  

• News of Airtel getting a nod to increase its FII limit from 49% to 100% is making rounds, however it is not yet confirmed.
• Once it gets confirmed and is implemented, there can be a rise in weightage in MSCI index leading to higher FII flow to the tune of Rs 2000 – Rs 3000 crore.

Bajaj Finance

• The bull run the market has witnesses in past week is distinctly visible in the stock price of Bajaj Finance . It has experienced a phenomenal ascent and is currently trading in the range if Rs. 4700-4770 inching closer to its life time high of Rs. 4923.
• Similar to Bharti Airtel, there has been a renewed interest of Institutional Investors, especially DIIs. In October 2020, Axis Mutual Fund bought stake in Bajaj Finance.
• Bajaj Finance has seen increased disbursements triggered by improving volumes on account of the mega festival sales particularly for consumer durables and electronics.
• Bajaj Finance has developed a deep rooted and highly reputed franchise. They have a significant market share in across diverse category and is riding the purple patch with strong conversion rates and burgeoning repeat sales.
• The company has demonstrated caution from the beginning by maintaining higher provisions and as a result have reported lower Net NPA of 0.37% in Q2FY21 eluding any major disruption in terms of Asset Liability Mismatch (ALM).
• They have a consolidated Liquidity Buffer of Rs. 24,775 Crore as on October 2020 on their balance sheet which epitomizes healthy liquidity on their balance sheet.
• Also due to the COVID-19 pandemic , a lower base is formed in terms of financials in FY21. Next year, if company manages to even return to normalcy, it can showcase phenomenal growth numbers.
• The lower costs of deposits, optimum use of well built digital technological capabilities and the leadership of Rajeev Jain are all prime factors which have been and will be responsible in taking Bajaj Finance to new highs.