What is the sense you are getting, is the correction over, have we firmly put a bottom or do you think this market will be in jitters up until pre-Budget rally sometime in late January?
A: In our opinion most of the correction is now over. The correction which happened in the Indian market is mainly on account of the global changes; the uncertainties which we witnessed over there. If you look back at the situation, now the things are stabilising globally particularly the emerging economies. The fear which people had that some of the countries might default or might run out of steam that fear now seems to be subsiding. The US Fed through its comment has given the kind of statement which seems that at least for the next six months we do not see an interest rate hike. In this context if you look back into India, the manner in which we handled our currency and the inflation; the combination of the two, the interest of the overseas investors particularly the foreign institutional investors (FIIs) in the Indian market is likely to rise. So, we believe that now we are set for a pre-Budget rally; may not start immediately, it probably will start sometime in the month of January and February because the FIIs are not present in the market in significant number at this point in time. However, it looks like the worst is over for the market.
If an investor want to ride this pre Budget rally and put money now, where do you suggest he puts money because last week was interesting; we saw lot of bluechip names see buying interest – HDFC, ICICI Bank, Infosys were all up about 3-4 percent?
A: The best way to participate in the market in our opinion is through the mutual fund route but which segment of the market is going to do well if you look at, we believe that now the capex is just 2 quarters away because the kind of raw material price corrections which has taken place in the economy and you haven’t seen any subsequent price corrections on the part of the end product which is manufactured so the entire inflation decline in the economy has taken place only on the primary goods side and if you combine the two factors the pricing power has come back to the corporate, so we are expecting capex to start in two-three quarters and if you keep that in mind, its obviously the industrials, the financials and those kind of segments where you will see a substantial outperformance which will be generated and that is where the market need to focus on.
When you say industrials and financials – can you drill it down to more specific sectors. Would you mean public sector banks when you say financials, would you mean NBFCs likewise industrials?
A: As far as the banking system is concerned with the margin recovery which we are seeing in the economy, it is the non-banking financials companies (NBFCs) and the public sector which are likely to do very well because private sectors banks were anyhow better and they were getting very good valuations. Now, there is a catching up game which needs to take place. As far as industrials are concerned, the initial recovery on the industrial side starts with the auto ancillaries and which will escalate further to the levels where the capital goods and the various sectors whether it is infrastructure, whether it is related to the mid-sized house construction, etc all those areas will start catching up. So, industrial will be a slightly broader segment. It is very difficult to narrow down to just one or two sectors because the economy revival will take place practically in the entire sector. So we are focusing on all the industrials be it starting from railways and it goes to the extent of house building.
Last week and interesting trend was that the fast moving consumer goods (FMCG) stocks lost out quite a bit. It could be just a one week phenomenon – names like ITC, Hindustan Unilever (HUL) down about 5-7 percent. Would you use every dip as a buying opportunity or now since you are mentioning that cyclical will be in flavour, one could perhaps avoid defensives for a while?
A: As you have been mentioning in the past also on your channel that we are carrying underweight position on FMCG for the simple reason that this particular sector is now trading at a very high valuations and we do not see the growth sustaining to the extent what you will witness in other sectors. So there is going to be a reallocation of other funds which will take place in favour of the other sectors. So keeping that in mind probably this is not the correct time to do the averaging of these stocks and so we will continue to wait for more corrections before we look towards this sector.
A: In our opinion most of the correction is now over. The correction which happened in the Indian market is mainly on account of the global changes; the uncertainties which we witnessed over there. If you look back at the situation, now the things are stabilising globally particularly the emerging economies. The fear which people had that some of the countries might default or might run out of steam that fear now seems to be subsiding. The US Fed through its comment has given the kind of statement which seems that at least for the next six months we do not see an interest rate hike. In this context if you look back into India, the manner in which we handled our currency and the inflation; the combination of the two, the interest of the overseas investors particularly the foreign institutional investors (FIIs) in the Indian market is likely to rise. So, we believe that now we are set for a pre-Budget rally; may not start immediately, it probably will start sometime in the month of January and February because the FIIs are not present in the market in significant number at this point in time. However, it looks like the worst is over for the market.
If an investor want to ride this pre Budget rally and put money now, where do you suggest he puts money because last week was interesting; we saw lot of bluechip names see buying interest – HDFC, ICICI Bank, Infosys were all up about 3-4 percent?
A: The best way to participate in the market in our opinion is through the mutual fund route but which segment of the market is going to do well if you look at, we believe that now the capex is just 2 quarters away because the kind of raw material price corrections which has taken place in the economy and you haven’t seen any subsequent price corrections on the part of the end product which is manufactured so the entire inflation decline in the economy has taken place only on the primary goods side and if you combine the two factors the pricing power has come back to the corporate, so we are expecting capex to start in two-three quarters and if you keep that in mind, its obviously the industrials, the financials and those kind of segments where you will see a substantial outperformance which will be generated and that is where the market need to focus on.
When you say industrials and financials – can you drill it down to more specific sectors. Would you mean public sector banks when you say financials, would you mean NBFCs likewise industrials?
A: As far as the banking system is concerned with the margin recovery which we are seeing in the economy, it is the non-banking financials companies (NBFCs) and the public sector which are likely to do very well because private sectors banks were anyhow better and they were getting very good valuations. Now, there is a catching up game which needs to take place. As far as industrials are concerned, the initial recovery on the industrial side starts with the auto ancillaries and which will escalate further to the levels where the capital goods and the various sectors whether it is infrastructure, whether it is related to the mid-sized house construction, etc all those areas will start catching up. So, industrial will be a slightly broader segment. It is very difficult to narrow down to just one or two sectors because the economy revival will take place practically in the entire sector. So we are focusing on all the industrials be it starting from railways and it goes to the extent of house building.
Last week and interesting trend was that the fast moving consumer goods (FMCG) stocks lost out quite a bit. It could be just a one week phenomenon – names like ITC, Hindustan Unilever (HUL) down about 5-7 percent. Would you use every dip as a buying opportunity or now since you are mentioning that cyclical will be in flavour, one could perhaps avoid defensives for a while?
A: As you have been mentioning in the past also on your channel that we are carrying underweight position on FMCG for the simple reason that this particular sector is now trading at a very high valuations and we do not see the growth sustaining to the extent what you will witness in other sectors. So there is going to be a reallocation of other funds which will take place in favour of the other sectors. So keeping that in mind probably this is not the correct time to do the averaging of these stocks and so we will continue to wait for more corrections before we look towards this sector.
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