porinju veliyath: Do not expect any big rally till the elections but a 8-10% rally can happen in a few weeks: Porinju Veliyath

Porinju Veliyath, Founder, Equity Intelligence India, says “India is in a fantastic position. It is a compelling long-term market for the global investing community. It will continue, we will continue but do not expect any big rally in the Sensex and Nifty till the elections but a 8-10% rally is very simple. It does not take time and it also can happen in a few weeks’ time.”I am sure after yesterday’s election verdict, the party is not over yet for you!
I think it is a lot of relief for the market. Many people have been a little sceptical or worried about the general elections in 2024. Those worries have got over thanks to the state election results. The trend is still very strong towards the ruling regime. In any case, it is very important. We all are investors and we are looking at the economy of the nation. We have very stable politics and a strong leader, a committed team on the political front. These things are very important at the current stage of our economic growth.

The way the nation is moving ahead, it is a lot of comfort to the investing community who understand the importance of a higher rate of growth and leading India into the forefront. It is already happening in the global economy.

Historically markets have always rallied in the runup to the central election. We are looking at the last 20 years. Do you think this time it is going to be no different? We are in for maybe a 8-10% rally from December to May?
Definitely, some 8% or 10% rally in the Nifty and Sensex is not a big deal, to be very frank. More important is that now all investors are looking towards a tremendous rally which has gone much beyond the Sensex and Nifty. There are a number of smaller companies, midcaps and smallcaps in India. They are also a very important part of the economy and the market and the valuation gap was very huge. In the last three years, this valuation gap between the smallcaps, midcaps and the largecaps has come down. So there is no excitement overall.

Investors are more worried about whether we can sustain this three-year bull market. What has been happening is definitely unprecedented. It is a bull market no doubt because it is sustaining. Earlier also, we used to have sharp movements in ‘92 or the late 90s, But this time it has been a sustainable bull market. Many times people thought markets will crash and a lot of people were talking like that but it never happened. It has been giving corrections occasionally and that is very much part of this. Otherwise, markets have been very different.

It is supported by the Indian economic outlook and growth. India presents an unparalleled long-term opportunity for equity investors today that conviction is what is making the money flow into the market. We have such numerous structural trends such as young demographics or massive infrastructure built up, digitization, formalization of the economy, growing financial inclusion and alternative sourcing hub India is becoming for the global industries and it is all combined with the ongoing huge historic reforms.

So India is in a fantastic position. It is a compelling long-term market for the global investing community. It will continue, we will continue but do not expect any big rally in the Sensex and Nifty till the elections but a 8-10% rally is very simple. It does not take time also it can happen in a few weeks’ time.

In the overall scheme of things, how do you look at portfolios post the election verdict and in the runup to the central election cycle? Could you be looking at some tactical changes? Maybe go overweight on defence or railways more because if this is a vote for continuation, then defence, railways and the comeback in PSUs trade may just extend itself?
Yes, I think it is a very important question and an important point. We thought that defence, railways, that kind of Make in India strategies by the current regime will now continue. It is almost sure that it is going to create a lot of wealth in that segment for the investing community. Some may feel it is overpriced the way Mazagon Dock moved from 180 to multibagger levels. So of course, it may give time wise correction, nothing can continue to move without fundamental numbers supporting. But those numbers are going to come and that is why there could be time wise corrections but otherwise the government is very serious about these segments. They are doing the right things and in these PSUs they are doing many Acts to reduce corruption by the bureaucrats and make it like a private company.

They want to make it efficient so that the process is on. There may be some disinvestment on the way up so I think that segment is going to create much more wealth maybe after a time correction in general but there could be stocks which are still undervalued in PSUs. I feel some of the state PSUs like GNFC GSFC kind of stocks under the Gujarat government are a few companies which are listed and which have been traded in the market for the last many decades.

Some of them have great value and because they are government controlled, there could be corruption, an efficient profit motive is not there, those kinds of apprehensions could be there in investors’ minds and that are slowly moving away and the government is doing the right thing, managing these PSUs in the best possible way.