Edelweiss’s Aditya Narain has a buy on both Zomato & Nykaa. Here’s why

“At a strategy level, generally we would prefer a lower beta. We would prefer largecaps and we are generally underweight as far as small and midcaps are concerned, but a lot of these stories, Instead of being thematic or regional, there are stocks up and we have a bunch of stocks that we like,” he says. Aditya Narayanhead of research, securities.

In the recent fall in the market, there has been a significant decline in companies from newly listed companies till date. Are you seeing any of these names again?
Yes, we recently upgraded Zomato to a buy when it was less than for the simple reason that we believe they are the de facto business model. We were cautious about the prices they were trading at one point in time. In fact, these valuations have come down and business prospects have remained more or less the same. What we have seen with Zomato is that there has also been a slight change in the dynamics of the business, with the focus shifting towards buoyancy or profitability.

This is why we will start to see a certain amount of value in a lot of these stocks. Wherever there is confidence that the business model is strong and wherever we are comfortable with what these managements are talking about and what they are doing, we will add. So out of these stocks we’ve actually bought on Zomato which we recently upgraded and Nykaa, which again is a very consistent model and we don’t see the broader economics changing.

I think the valuation framework changes a little bit as rates have gone up, cost of capital has gone up but otherwise the trajectory of growth and profitability remains the same. The more stability you see there, the more confidence in the market for these companies.

In the small or midcap space, if you see any price emerging or would you say stay away from it and stick to the safe large caps?
At the strategy level, in general we would prefer a lower beta. We would prefer largecaps and we are generally underweight as far as small and midcaps are concerned, but a lot of these stories, rather than being thematic or regional, are stock ups and we have a ton of stocks. group that we like.

, Back to recommendation stories

I don’t want to go into names but a lot of them are basically individual stories and not necessarily sector thematic and that is the nature of smallcap and midcap. One of the challenges we face is actually the potential economic damage of inflation and some of the policy responses to that inflation.

It’s usually small businesses that are a little bit more vulnerable to these broader macro pullbacks and that’s where we have to take a certain amount of extra caution with regards to small businesses because it’s not just about valuation and growth. Is. are affected but occupational risks are also slightly increased for them.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)

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