What are you doing with the defence stocks if any right now, what will be the recommendation, book out profits or keep holding them on?
No, I think the entire element in terms of the structural story for the defence space still looks good because the order books are very much evident in terms of giving a new visibility over the next four to five years. Obviously, they have been executing well so far as well. So, I think the only risk that probably happens with a lot of these companies is whether they falter in their execution in a few of the quarters going forward and that might pull down forward multiples if one or two quarters are not up to the mark.
However, even from a valuation standpoint I think they are not too expensive, not too cheap, so they are lying somewhere in the middle. But tailwinds and structural story still lies intact for these stocks. However, I think for markets with India perspective we are very-very light right now, we still like to see over the next couple of days of what transpires on the political front and therefore the initiatives that will be taken over the next few days and specifically in the budget in terms of allocations are going to be extremely critical.
So, again I think any pullbacks becomes opportunities very specifically on these stocks. Anybody holding probably at lower levels can continue holding, but you should have your risk management practices in place. If your moving averages are getting breached, the nearest moving ones with extremely heavy volumes, there is no harm in booking out on at least partially in some of these names.
Just wanted to understand where is it that your position when it comes to IT? But do you think there is any material trigger on ground per se for investors to look at any of the IT names?
Again I think if you look at largecap and midcap, midcap has done phenomenally well over the last few quarters, again in the quarter gone by, results were stunning for a few midcap companies, the expectations in terms of US dollar growth, constant currency growth was good.
Order books were decent as well and the management sounded very-very confident and optimistic on all these parameters put forth.
Now, if one really expects the US economy to stay where it is and the reports that we get from our weekly interactions with our US team is that the US economy is doing reasonably well, so to that extent any rate cut one, in the best case scenario two would be very-very optimistic. But if these rate cuts start coming through, BFSI, retail, manufacturing will benefit and therefore I think order book should start coming back.
There is a huge scope in terms of AI, generative AI, cloud computing, data centres as we speak and therefore I think our company should benefit over the next two to three years if one really has that kind of a view.
So, I think we are keeping our watch list ready for this sector. At this juncture I think largecaps probably look a better bet both in terms of the placement as well as valuations and therefore stocks like Infosys, HCL Tech is something that we are keeping on our watch list but again I think we will wait out for the next few days, maybe the next week as well to see how things settle down at least on the political front.
Did you recommend buying Tuesday’s fall in the market? And if so, what were the top names on your shopping list?
We were a little cautious and again, as I have pointed out, what we would ideally like now to see that over the next day or two, if the market stabilises from the lows that we had made on Tuesday.
We will get into a rally attempt, a phase that we term in markets with India as a good phase to start making your watch list and therefore, as I put forth in the next few days, if everything is sound on the political front, it seems to be sound on the political front and the data points in the market are suggesting that, we will create a watch list.
I think the watch list will primarily be among the domestic cyclicals itself. So, cement would be a big theme as we see it, stocks like UltraTech as an example would remain part of our watch list. BFSI would be a very-very interesting space as well. So, top names like ICICI Bank in the private names will definitely form part of our watch list.
A few of the consumer discretionary stocks as well, because with good monsoons expected this time around I think the second half trajectory should be equally good as well.
So, I think we will just keep our fingers crossed for the next three to four days. I think if everything works well on all these counts and the market does not breach the lows made on Tuesday, I think this watch list may be put into an action.