In an interview with ETMarkets, Bhamre said: “Selected stocks in sectors like Paint, IT, FMCG and Banking may be added to the portfolio for Smavat 2081” Edited excerpts:
Thanks for taking the time out. It is turning out to be a volatile October but it looks like Nifty has good support around 24500-25000 levels. What is your take on markets?
After March 2020, which was a Covid fall, October 2024 has so far turned out to be the worst month for the market in terms of percentage fall.
It’s important for markets to hold on to the levels which were seen post general election outcome in the month of June this year for investment sentiments to remain positive.
Though correction in some of the mid cap and small cap names have been baffling, the overall correction is a respite for the value investors. Markets world over do have tendency to overshoot. Mean reversion happens sooner or later.
As far as our markets are concerned, the economic data points indicate India should remain on the path of growth trajectory. In this scenario, when market is correcting, one should adopt bottom-up approach and buy selected stocks if value is on the table.We saw the biggest IPO to hit D-Street this month. History suggests most of the big-ticket IPOs with issue size of more than Rs 10,000 cr have failed to deliver. What are your views?
Yes it seems like that if you see only the listing gains. It’s purely demand supply equation when we assess things from shorter term perspective. However, there have been names that offered good returns over period of time.
With increased participation in capital markets, we are witnessing bigger companies with large IPOs hitting our markets.
This ability to absorb such large issues will only instill confidence among larger players (both funds and companies) to enter into our markets.
What is your take on Gold? The yellow metal is trading near record highs, and we are approaching Dhanteras as well. Time to invest in physical or digital Gold?
Personally, I am not a big fan of gold as a consumer or as an investor. However post the 2007-08 financial crisis, the behaviour of this precious metal has been interesting and the holders of it have been rewarded handsomely.
If utility is not the purpose and one has to be a long-term investor, then I would suggest to invest in Sovereign Gold Bonds.
What are your expectations for Samvat 2081? Any top picks you have on your radar?
Looking at the current scenario we believe markets spending time here and letting earnings catch-up with valuations would be the desirable outcome for Samvat 2081.
Next one year will be a stock pickers market and we may see lot of sector rotation as well.
Among large cap our preferred pick will be Bajaj Auto (Target Price – 12230, upside ~ 18%). This two-wheeler major has multiple growth levers to perform well in coming quarters.
Be it new product launches, premiumisation leading to increase in ASP, comeback of the exports market, we envisage high growth visibility for the company. Even on the margin front we expect EBITDA to remain stable around 20%.
What about sectors – which sectors are looking bullish till the next Diwali?
Though our outlook is that the market should let earnings catch-up with valuations, there are pockets where we believe valuations are attractive and one such space is paints sector.
It’s been 3 years that this sector has not performed well. There were margin pressures due to rise in raw material costs, rural slowdown and rise in competition.
With most of these concerns in the prices and pressure on margins easing, this sector offers good risk adjusted return opportunity.
Among others, selected stocks in sectors like IT, FMCG and Banking may be added to the portfolio.
Any sector which you recommend investors to pare their positions?
Instead of sector, we would suggest reducing exposure in PSU space. In last 18 months the rally in this space has been phenomenal, however earnings have not been on the same page. With market poised for some consolidation if not correction, this space may underperform.
Big ticket IT firms have declared their results for Q2. The BSE IT index has risen more than 20% in the last 6 months. What is the sense you are getting from the management commentary?
IT is our one of the preferred space to be in for two reasons. One that management commentary and quarterly numbers suggest earning visibility with diversification of revenue streams and geographies. This reduces the earnings volatility.
Upward revision of bottom end of the revenue guidance by couple of management only reinforces the clarity in the earnings visibility. Second, despite IT sector being one of the outperformer this year, valuation have not slipped out of hand.
We are getting Rs 24000 SIP every month – a new record from retail investors. Can retail money save us if global slowdown hits D-Street because earnings will take a hit which are already showing signs of slowdown?
Liquidity chases outperformance. Today SIPs are coming because stock markets are performing. If for any reason we see prolonged phase of consolidation or some correction, these SIP figures may change.
So it’s good that such large flows are coming into our markets from domestic participants, but if earnings take a back seat than these flows may only delay the correction for a while and not avoid it completely.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)