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Is it time to start chasing the market aggressively because first comes the fall and then the comeback. After the fall in July, August, and September, we can see recovery now. It has been a nightmarish market if you trying to mark the market top and the bottom?
It is not easy to time the market. The logic behind investing is that you have to invest for a longer term and invest in the right kind of companies. Even after you have seen this kind of a runup, you will still get investment opportunities. There are values across pockets — midcaps and smallcaps and even some of the largecap pockets have value, where you can invest if you are a long-term investor. If you are buying for trading, you may get caught because after this rally, you may get a consolidation phase and a small correction.
If you are a long-term investor now, there are opportunities to invest one should be looking at. The main challenge is whether earnings would pick up as also the economy because looking at the numbers from some of the commercial vehicles and construction space, economy still seems to be at the bottom. It is not really showing signs of picking up.
If one is to believe that the economy has bottomed and after this kind of a lull, it may start inching up, then you can even look at economy-related stock for the investment basket.
Given that we are expecting broader participation, Which financial stock is at the top of your radar?
We have seen a good run up and now we have to be very stock specific. Though there are pockets like the corporate lenders, where some move has happened, there is still a decent move can be expected from these levels also. would be looking at corporate lenders as far as the financials are concerned.
Even in the NBFC basket, there are stocks which have good strong managements backed by institutions which are still at a very reasonable valuation and there is an upside potential in some of the NBFCs space also. Even in the capital goods, infrastructure space, I would like to believe that the numbers would pick up a bit as the economy improves. I would be looking at investing in these sectors, though it has to be very stock specific and midcap and small caps is where there is definite value.
You saw a lot of companies coming out with a decent set of results in this quarter and they have been showing good quarter results even in the last five-six quarters. But they were beaten down because of desperate panic selling which happened in August and September. They reached a level where it definitely makes a screaming buy in some of the midcaps as well as the smallcaps.
If I take an optimistic view, we are in for a gradual recovery. So, at current levels, with the Sensex at an all-time high, Nifty nearing an all-time high, 30-40% recovery in mid and smallcap stocks, don’t you think fundamentally this market is pricing in everything?
You are right, for a pocket of the market which is very expensive. Look at some of the names in the financial space also, some of the NBFCs also. There are very expensive stocks there but that is why one has to be stock specific and a bottoms-up approach is required to invest for long term.
A company may pick up slowly, but if one is investing in a company like L&T which in spite of a very challenging environment in the last quarter, has come out with a decent set of numbers, improved margins, order book is also inching up. You will have to find stocks which in the next two years, can be the winners. Of course, across the market, there were opportunities in August-September where if one had invested at that time, could have made money now. But the market is not that simple. In August -September, a lot of people were not looking at buying. They were actually scared and sitting on the sidelines, but now after the runup, there are stocks which are expensive. One needs to have stock picking abilities to pick up the right stock for the next two years. Some pockets have value and so it has to be more stock specific and long-term approach at these levels.
What is it that you are making of the trends within the auto space?
The kind of move that we have seen in the auto space — be it TVS Motors, Maruti — a tremendous move from the bottom there. One has to be careful investing in auto space. There was euphoria getting built up because of the festival season. I do not see that continuing for very long, I do not see the numbers improving drastically in the short term. So, there has to be some pain there if you are investing at higher levels. One needs to be careful and strong companies in the passenger vehicle space, something like a Maruti which has strong international backing of Suzuki, will be able to go through this transformation. For the next two, three years, they would be the strongest as far as the passenger vehicles are concerned in the listed space.
Among the two-wheelers, something like a Bajaj Auto is very well positioned. They can take on this challenge and they will be able to adapt faster. But we have seen a good movement in that category also. Commercial vehicles is one space where I would rather be very cautious because we are not seeing the numbers improving. We need to see the numbers improving or at least the economy improving for someone to start investing in commercial vehicle space.
I would still be on the sidelines and looking for some signs of recovery as far as the economy and the commercial vehicles numbers are concerned.
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