Everybody is feeling FOMO. But do you think for those who are not getting hit with this FOMO effect, will actually feel JOMO if they do not buy now?
There are people who bought early, so they are not feeling FOMO. That is how we need to see. Now, I will say that the FII flows follow a very structured pattern. So, it was very clear that as the bond yields globally peak out, as the dollar index starts declining, these fund flows will reverse. So, it was a matter of time and it is happening now.
Now, the pace sometimes surprises us. So, obviously, if I have not had the exact number, but you said Rs 30,000 crore in December, obviously it is a huge number and once that happens, it drives the largecap valuations higher and that is the state we are in. But markets are looking to test near-term highs, not only in India but also globally.
So, some giveback is possible. But in bull markets, givebacks typically last a few weeks and corrections are swift but could be restricted to 4%, 5%, 2%, maybe 7%. So, as that happens, people who are feeling FOMO now should be ready to invest because the people who are feeling FOMO today, will not feel FOMO when the market corrects. When it corrects, they want the market to go down further before they buy.
I have a limited point. All I am saying is that, okay right now everybody is feeling FOMO. Over the weekends, when I met friends, every second conversation is centred around the exciting things which are happening in the capital market. My point is, rather than feeling FOMO, just wait it out. After three months, you actually will enjoy the feeling of JOMO, joy of missing out rather than getting hit with the FOMO factor. Is that a better strategy? You missed it, you missed it. Do not jump in now.
So, there are two-three things. One, there is no missing the bus in the stock markets. You miss the bus, another bus comes after some time, you catch that. So, this entire FOMO thing is bad for health. Secondly, I am not predicting a major fall in the market. I do not think that the economic outlook, the interest rate outlook and inflation outlook which is there today represents the possibility of a big selloff, but there will be corrections.
As those corrections play out, that time should be used by people to buy. Secondly, what happens is once such runs come, people lose interest in small and midcaps which are not in the F&O segment and the trader interest shifts to the F&O segment and that could create more opportunities on the broader markets over the next few weeks.
What is your take on what is going on between banks and IT and in particular, the comeback within the entire IT space. There is still headroom for more upside, but perhaps not much money to be made when it comes to some of the largecap stocks. Where do you stand when it comes to the comeback in the IT frontliners?
There could be some more headwinds, but not significantly because finally even in strongly reviving years, these companies are going to grow at 7% to 10%. They are not going to grow at 15-20%. So, to that extent, we need to be cognisant of the valuations which can be given to these companies and they are already trading above historical valuations.I want to take a minute and understand IREDA. What should one do now? Rs 35 became Rs 120, Rs 120 became Rs 108. Is that good enough to warrant entry to IREDA or even at 108 should one avoid it?
This is the meme stock of this current cycle. People do not know why they are buying this. They are just buying it. And we have seen historically many of these companies can halve from the top. So, people should be very careful what they are doing.
What is the outlook when it comes to some of these buzzing stocks within the entire PSU space because that has really seen a pretty phenomenal move this year. Do you believe that next year ahead holds promise?
Selectively, it will but the overall value paradigm has now changed. Now most of these PSUs are valued as growth companies. The issues related to bureaucratic decision making, the way they are run, etc, everything remains. In a nutshell, the upside across the spectrum looks limited but some companies, especially in defence, given the sort of orders which are coming in, are so huge, that they could still hold on and trend higher.
What about the move that is expected to be seen on the entire sugar space given the U-turn now taken by the government and the relief being given to the entire sugar basket. Where do your preferences lie?
I am still not buying fresh. We do have some exposure in Balrampur which we have not sold, but I think these are very incremental moves. What this will do is it will improve the realisations from the ethanol segment, stop the fall of sugar prices to the extent it could have happened if the entire diversion had been banned, but it is still too little because last year 3.8 million tonnes were diverted. This year’s plan was for 4.5. Now, they have been allowed 1.7, so still there is excess and still there are huge unutilised capacities on the ethanol side.
So, we need to see the followup, but I think as the May elections come nearer that might present better opportunities to buy into these stocks because post elections the ethanol programme will be back on track.
The classic wisdom was FIIs will come back and they will buy Reliance with one hand and they will buy HDFC Bank with the other hand. Now, FIIs have come back, markets have gone up, but the two sumo stocks of the market or the Nifty have not gone higher.
It is because there are opportunities across the board now. So, capital goods is an opportunity which was never there, infra companies. FIIs used to allocate very less to a company like L&T, for example, so that is a bet where people are playing. On the banking side, the options are much more now. So, there are preferences for people on other banks, other NBFCs. So, the FII investment basket has got more broadened vis-à-vis what it used to be two years back and that is a phenomenon which could continue.
Up for a seventh straight week, sitting at all-time highs on the Nifty Bank, on the Nifty. You were mentioning last week that you would keep some powder dry at least for whenever there is a dip in the market. At what level would you put fresh money to work?
My view is that and based on historic trends, normally, bull market correction should be around 4% to 7% broadly, depending on the move which has preceded the run up. So, this run up has been around 15%. So, on 5-6% correction, I would be happy to allocate into.
If you have to make a list of largecap stocks – and I mean pretty much part of Nifty 50 or in and around Nifty 50 levels – what would be your three largecap or semi-largecap ideas for 2024?
What I think will outperform and be a contrarian bet would be stocks like Tata Steel and Vedanta. Now, whether I am buying that on dips is the question. I am very reluctant buying into commodity stocks. But I think after so many years of downturn and zero ownership, etc, those stocks could actually come back. Any risk taker can allocate to those stocks. I am not sure whether I am buying or not.
Why are you not buying them if you think they could be outperforming?
I am very reluctant buying into commodity stocks per se, so that is the reason.
Other than commodities, if at all there is a dip in the market, where would you be a buyer?
In the largecap side, we could buy into ICICI Bank, that is the preferred bet and then Maruti. That is one stock which has not performed at all although most of the other stocks have moved up, so that I think still has a decent value.