I think if you are a bear, then you need to find new reasons why markets would fall. If you are a bull then you hope that none of these things come up again. So I think we need to look through all of these things and see how the overall setup is. I believe pessimism globally around equities is still very high. Cash positions of investors globally are near panic high level and markets reach panic level.
So people are so scared of investing in equities and Indian markets have underperformed extraordinarily. If you see most markets are now up 10 to 15% for this year except US Dow but NASDAQ is still up and we are not doing well because of the reasons you said.
I think the first Adani-related issues were internal. Bank-related issues were external while Indian banks had no impact but those markets have recovered. In fact, in European markets yesterday again we reached some near all-time highs, some near 52-week highs, and we are still down so it sort of defies logic. And I think it is an opportunity for investors to buy, I would not be too bearish on them.
So would you play for a big, sizable, durable, tactical rally or a bounce let us say for next two-three months?
I think not only tactical, strategically also emerging markets positioning is such that I believe emerging market both in terms of valuations as well as positioning could see a more durable rally also going forward.
Let us look at individual themes then will it be a large cap bounce, will it be a small cap bounce, according to you?
I think it will be across the board. Many small midcaps have got beaten down significantly. Large caps have also got beaten down. And many of them also present opportunities especially I think the large banks. They have not been beaten down so much like they are down 10-15% from the top, some just 5-7%.
But the fact of the matter is that Indian banks today are one of the safest in the world. We do not have any of the issues which many of the global banks are facing and Indian banks have corrected along with the global financial corrections so I believe that it is a good space to be in. Capital goods continues to do well that is a good space to be in. Defence related stocks again new order flows are happening so I think that is a theme where investors should have some exposure. So I think a lot of things are working in India.
Reliance has been a stark underperformer at 2230 thereabouts you think this could act as a trigger?
See for a virtually non-existent company, I do not give value to that. I think it is the job of analysts to start ascribing value to any new business that is started without even knowing where it is going. So I think it will excite a few analysts etc. But I think we have to evaluate the company on core businesses. Non-core businesses, have had issues in the past related to all the businesses like stagnating profits on telecom, retail, profitability stalling and petrochem refining margin etc. but I think all of that has stabilised now. The stock has also corrected nearly 20% from the top. So I would think that at these levels, the stock is decently placed and holds the potential to give 10-15% returns.
Sporadically some renewed interest coming back into pharma but would you advise buying?
I think the view remains the same that stick to some of the large caps if you have to.
I think the pharma companies we only own Sun Pharma. Midcap pharma companies have a lot of issues going for them and that is also reflecting in the stock prices. Some could be coming into value zone but I would still like to wait it out given that many of them have done too much capex and is under pressure. What that does to their balance sheets is something we need to see. The other stock people could potentially look at is Dr Reddy’s which has been doing reasonably well. So I think if at all pharma stocks have to be looked at I would stick to these two at this stage.
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