ETMarkets Smart Talk: Corporate profits & fair valuation boosting markets: Siddharth Oberoi

Markets are gaining traction even though global headwinds with inflation and slowdown remain. What is your take on markets?
The RBI has made it clear that the rate hike is on hold. Bond yields have responded well.

Corporate decision-making would benefit from interest rate stability. I think markets are rising as a result of fair valuations and rising corporate profits.

What is your take on the March quarter earnings? Any standout performers and how do you see earnings pan out in FY24?
Certain companies under our radar posted outstanding results in Q3 FY23 as well, such companies are yet to post results for their fourth quarter. However, my expectation is that the numbers are going to be quite positive.

What is fueling optimism in the Railway sector? Is the optimism around Capex?
Yes, the CAPEX is surprisingly huge this time in the current budget. However, the stock universe benefiting from such is very limited and few large players have had huge order books in the past as well.

Since railways is a monopsonist market, this optimism is derived from short-term fumes and will dissipate.

Have you made any changes to your model portfolio recently?
We are constantly making changes to the portfolio. As and when we find new opportunities, we add them to the portfolio.

With more than Rs 14000 cr getting injected monthly in stock markets via SIPs do you think that over the medium term, the impact of FII buying will be less pronounced as DII investments have substantially increased?
What we have learned since COVID-19 is the power of retail investors. These investors have come in guns blazing and have surprised everyone.Given the FII selling we witnessed in the past, the absence of such investors five years ago would have caused a market crash, but because of them, markets have held on and advanced.

What I have experienced in the past 27 years, once the rate cycle reverses, the interest rate starts to rise investors flock back to fixed-income returns. But the same doesn’t seem to be happening in the current scenario.

What about IPOs? It looks like the retail investor frenzy with respect to IPOs is fizzling out.
In my opinion, a substantial pipeline of businesses is looking for funding. However, the growth will be relatively slow in comparison to the past.

Businesses expected to go public in 2022 haven’t yet done so, and the first quarter of 2023 has already passed. I also don’t believe companies that expected to go public in late 2022, will go public in 2023.

Returns from equities are likely to be robust in the near term as the yield gap between stocks and bonds narrows. What are your views?
FY24 is probably going to be a great year for stocks. In order to ensure growth and increase demand, the RBI has been quite proactive. All in all, the valuation is at acceptable levels. Investors benefit from this combined with earnings growth.

Gujarat state public sector undertakings (PSUs) rallied after the state government announced a new policy for minimum dividend distribution and bonus shares for its PSUs including listed companies. What are your views on this move and does this move put these stocks in a sweet spot?
This appears to be advantageous for investors on the surface. However, from an economic standpoint, this rule means that the company won’t be able to hold onto cash during economic downturns and will instead be forced to declare dividends.

For investors, short-term financial gain results in long-term wealth destruction.

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