The overall carnage that we witnessed for the market and it has been days of selling pressure. Of course, yesterday was a lot more pronounced. Where does that take us to from here?
Sandip Sabharwal: So, it is very clear that this money shift from foreign investors is happening from India to China as the Chinese market rallied and there is a FOMO effect playing out among many foreign investors who have obviously missed out that rally because everything happened so suddenly. Now, the valuations on the Chinese markets are still 50% that of India, although the growth prospects are still much slower in China. So, it is a possibility that we could see more allocation shifts from India to China because they are the top two allocation in the emerging market basket today. On top of that, we have the geopolitical issues, which still remain unclear because any impact on Iranian oil facilities could have a far-reaching effect on the overall global set up for equities, not only India. And India, because of its huge dependence on oil imports, obviously gets impacted more. So, it is an uncertain scenario. We should remain cautious, let the markets settle down further and see how it plays out over the next couple of weeks.
What is the take when it comes to DMart, very mixed brokerage view coming in post the kind of Q2 update. Do you actually believe that Q-Commerce could play spoil sport to DMart in the long run?
Sandip Sabharwal: The competitive intensity obviously is increasing in the value space. But I think it is more economy-related slowdown and when slowdown reaches the discount sellers sort of like DMart that indicates significant stress on the consumer’s pockets.
So, it is concerning because it has wide-ranging ramifications on what is happening on the overall consumer sentiments, especially given the quarterly updates we saw from a few other consumer companies also. So, we need to watch out how things play out, whether there is some recovery on the festival season side, but the economy clearly seems to be slowing down. And as such, DMart, obviously the valuations remain excessive. They have been excessive always, but they look even more expensive now given the growth slowdown. So, I would think that there is not much upside in this stock from the current levels.
I was asking you about Reliance, whether after that fall that you had in the stock yesterday, the fact that it is up its 200 DMA, would you at least be looking at nibbling into the stock right away?
Sandip Sabharwal: It is more to do with the overall selling by foreign investors, which could continue over the next couple of weeks also. And to that extent, given that Reliance has a big weightage in the indices.
But then the point is that the largecaps with high weightages will find it very tough to escape when the sell-off is so intense. The key is that does the scenario in the gulf stabilise or not? So, if it does not, then we could see further downside. So, it is not stock specific on the largecap side at this stage. It is more about more widespread selling and as the selling gets absorbed domestically, which are the stocks where the domestic institutions are buying more and where they are not and where they are buying less, those stocks obviously fall more. So, it should be a wait and watch at this stage.
Today seems like it is going to be a day of stability. But again, would you be looking to sell or book profits anywhere or even deploy cash to buy into anything today? What is the strategy?
Sandip Sabharwal: The strategy is to hold around 15% cash because I still believe that the market could correct further because markets have just corrected 3-4% from the top. It is not that it has been a deep sell-off. Even a normal correction could be 6% to 10% at least and that will take out a lot of froth from the market and bring some amount of valuation comfort also because even at these levels the valuations are much higher than historical valuations at a time when growth seems to be slowing down. So, it is wait and watch, not looking to increase cash further because I do not think that we are in a market crash kind of scenario but holding on to the existing cash expecting better values.
Brokerages as well have been quite impressed with the Thar Roxx booking numbers that we have seen in just the first few minutes. A clear winner here has overtaken Tata Motors, but would you say after this dust really settles in the market, you would actually deploy more to Tata Motors as opposed to M&M or do you think this is a significant leadership change and M&M will continue to be number one for a while?
Sandip Sabharwal: We exited out of Tata Motors around 1100 plus levels after the last quarter updates, etc. And mainly because on the JLR issues where growth was slowing down and there could have been margin impacts. On top of that, now we are also seeing domestically because of a lack of new models, etc, their domestic sales are also faltering. And the CV sector also, despite expectations of some sort of revival is not doing so well. So, the story for Tata Motors in the near term seems to be hazy and as such I am not looking to buy Tata Motors again immediately. However, if the stock does end up correcting substantially, then we could take a look. M&M continues to do well, so we hold on to M&M. I am not buying at these prices, but I see no reason to sell because the company is doing very well and there is a potential revival cycle which could play out in the tractors also post good monsoons and improved farm incomes.
On the news that now Swiggy has got the shareholder approval to increase their IPO size to Rs 5000 crore and this is coming at a time when we have seen a lot of new-age companies really make big moves in the quick commerce space. Your thoughts?
Sandip Sabharwal: So, it is better always that the company tries to raise more as primary issuance rather than a secondary sell-off by investors. And most companies are trying to leverage the market conditions, the huge buoyancy in the IPO markets to try and IPO at these levels. However, Swiggy financials are very different from that of Zomato where Zomato has moved into profitability. Swiggy still continues to be under deep losses and to that extent investors need to evaluate what value can be given because at the IPO valuation or the valuation which has been done by some existing investor which came in the papers yesterday at around $13 billion which is more than a lakh of crores and Swiggy continues to make a loss of 2500 crores a year. So, what should be the right valuation, when will they actually end up making a 2500 crore profit even at those levels it will be 40 plus earnings.
So, the valuations are a bit out of whack in this market today and we need to see, like IPOs are getting absorbed very easily but longer-term performance and sustenance is the question.