Fund management is also about selling. We tend to focus on what you buy. But what are you selling? Where are you making space for new stocks? Where are you saying you are going to take 15%, 20%, maybe 25% profits off the table?
Buying and selling is probably happening in the same sectors because the sector themes do not change. For example, real estate stocks have done reasonably well over the last two months and in two months you get 30-40-50% kind of moves. These are the pockets where we try to take some money off the table, not the entire money off the table, because the whole setup is good for another few years. So, we just try to churn a little bit here and there that stocks which have gone up too much and where the delivery is yet to happen in terms of numbers, we tend to book some profits.
From real estate, maybe you move to building materials or to some housing finance companies. But the point is you do not let go of the sector; within that, if stocks have done too well or something, for example, in microfinance, a few stocks like CreditAccess or Arman have really done very well and despite giving whatever numbers they can, in the next one or two years, you are not going make large money.
So, there are opportunities which are slightly down the pecking order. Not the leaders, but maybe one rung lower and you have to shift capital, as there is no other choice in this market. Buying and selling is probably happening in the same sectors. We are not selling real estate and going into chemicals or going into Whirlpools of the world because we still want that the sector should be good and there should be good revenue visibility in the sector.
What has been your experience? Markets always tend to rally ahead of elections. It is historical data, but that is history. Do you think history will repeat itself this time?
I would say that probability is not very high because India and India-centric things are really doing well. In the US and Europe, things are not exactly rosy in those large economies. How much we may praise or like India, the large fund flows still come from those two continents. Till those fund flows reverse in a very meaningful way, it is difficult for the largecap index to do well.
If you ask me, some select largecaps and select smallcaps and midcaps are already at levels where we can say that, okay, it is equivalent to a Nifty level of 25,000, 26,000. As far as the index is concerned, definitely a bottom seems to have been made and we will do better from here but building in large numbers at the index level does not look like an easy event to us.
Stock specific, there are so many opportunities that one can conveniently not care too much about what levels the index will be at and if these FII flows reverse meaningfully, then who is to say that 24,000 will not be breached?But then, looking at US and Europe, looking at the way inflation is getting stickier and stickier in those economies, it is difficult to think that we may have a runaway rally when FIIs even if they want to allocate to India, are forced by compulsions in their home countries and that is why we are seeing so little commitment by FIIs even after the election results.