The Indian market has lose around 6 percent in the recently-concluded February series. Against this, the Street witnessed a dream run till January-end. Experts such as Devang Mehta, Head – Equity Advisory at Centrum Wealth Managementbelieve that there is no reason to panic as corrections are a part and parcel of any bull market. “It will, in fact, make valuations look better and help investors sitting on the sidelines to deploy funds gradually,” he said in an interview to Moneycontrol’s Sunil Shankar Matkar. Edited excerpts:
The Indian market did not even correct 10% and it still underperformed global markets. Do you think the current fall is a reason to panic?
There has been a sharp recovery in the global markets, but India has seen huge selling pressure on every rally due to the recent turn of events domestically, one after another.
In hindsight, markets had a dream run till January-end and a correction in valuation was overdue. We don’t see any reason to panic, as corrections are part and parcel of any bull market. It will, in fact, make valuations look better and help investors sitting on the sidelines to deploy funds gradually
Are your year-end Nifty and Sensex targets still the same or have they changed? Could you please explain your decision, either way?
Rather than focusing on the index targets, the more important aspect at this juncture will be to understand the underlying themes which will work for the next two to three years.
There are a number of beneficiaries (read companies) which may or may not be part of the indices, but holds promise due to the strength & fundamentals of the business.
Is this the right time to buy for investors who missed the bus earlier or is it a ‘Sell on Rally’ market?
Yes, it is a right time to have your shopping list ready. It will virtually be impossible to call an exact bottom or time the market perfectly.
Prudence lies in accumulating and buying fundamentally good businesses in tranches so that you don’t miss the bus again! Bottom-up approach in buying good stocks at appropriate valuations and price points will pay rich dividends
What is your view on the PNB fraud case? Are you keen on buying PNB and other PSU bank stocks after this sharp correction or do you want to wait for more fall to happen before jumping on board?
Obviously, the sentiment towards PSU banks has turned a bit negative due to a recent event. We will be more comfortable in buying large private banks as they have been consistent performers in difficult times and have been garnering market shares from their PSU peers.
How do you read third quarter earnings performance of companies in general? Has there been any recovery on the ground, and what is your outlook for Q4 and FY19?
There was a marked recovery in consumption-oriented sectors, with a broad-based volume pick-up in Automobiles, Cement, Discretionary, and Staples.
The strong focus of the government on boosting agri & rural incomes and positive management commentary from company management on rural consumption were some of the highpoints of December quarter results.
The much-awaited resumption in earnings growth seems to be back. The earnings downgrade cycle appears to have come to an end. Earnings growth for the next couple of years can positively surprise the street.
What are the major risks for India going ahead, domestically and globally?
Domestically, this being a politically heavy year in terms of state elections, markets can remain volatile depending upon the predictions and outcomes of these events.
Of course, crude prices going beyond $75/bbl could pose questions on India’s macro environment. Globally, movements on the interest rate front & policies in the US will have to be looked into closely.
After a correction of more than 6% in frontline indices and around 8% in broader markets, what are the five best picks according to you? Can you explain your rationale in 150-200 words?
We like more of domestic themes which would be beneficiaries of growing consumption and focus on infrastructure & construction. Financialization of physical assets, formalisation of the unorganized side of the economy, housing for all & rural/agriculture are the major themes.
Companies which are directly involved in such industries or proxies which benefit due to these themes gaining prominence should be preferred picks for the long term.moneycontrol