While macro conditions remain supportive with domestic stimulus and ample global liquidity, he cautions that near-term returns may be moderate amid a heavy pipeline of new issuances.
In his words, this is a phase to play “singles, not boundaries,” focusing on steady opportunities rather than chasing aggressive moves. Edited Excerpts –
Q) We have seen fresh momentum in markets which pushed benchmark indices higher last week, largely on trade deal hopes. How are you reading all this?
A) We believe markets are broadly in fair value zone. Valuations are not cheap but macro conditions are promising with fiscal and monetary stimulus on domestic side and easy liquidity globally.
We don’t expect near term returns to be very high esp in light of the big supply of IPOs coming up. In cricket parlance it is time for singles not boundaries at this point.
Q) Precious metals, which broke all records, cooled off a bit in the past few weeks. Do you see further weakness, or is it just a pause?
A) Precious metals don’t have any income stream so are generally difficult to value. Having said that generally high levels of government debt globally have led to low interest rates and easy liquidity and from that perspective we believe it makes sense to have reasonable allocation to precious metals.
Q) The US Fed seems to be on an easing spree with the recent 25 bps rate cut. How would that impact RBI policy back home and equity markets?
A) While Indian interest rates do get affected by US rates, we believe the real story for Indian interest rates is the massive improvement in both current account and inflation outlook.
Current account is structurally close to zero now and not only has average inflation come down but the volatility of inflation is also down materially in last decade. So long term interest rates should trend lower in India.
Q) Most of the Nifty50 companies have come out with their results. How are you reading into numbers, management commentary, and revival of earnings?
A) Earnings overall have neither been too great or too weak. The more important issue is with the fiscal and monetary stimulus on the domestic side what kind of medium-term strength we get in consumption.
Clearly there has been some good traction in autos for example. There is hope around issues like US-India tariff coming down, Pay commission, continued rate cuts etc.
Q) Also, do you see any red flags that investors should track or watch out for in the next few quarters from the earnings?
A) The big threat is more from the global side particularly from 2 factors – one is credit spreads globally are at multi decade low and while balance sheets of corporates are in fine shape any mishap in credit can create a risk off environment from such levels and two is the massive AI capex and market cap associated with it – if AI usage doesn’t pick up to expectations lot of investor money is at risk
Q) Which sectors are looking attractive now, post Q2 earnings?
A) We like lending financials (banks/nbfc) where there is lot of concern on credit cost – we expect domestic economy to recover and with value of gold holdings having gone up household balance sheets have improved so credit cost may not go up too much.
We find some tech platforms interesting where market cap vs the addressable market is low. Affluent consumption should continue to be a good structural story. From a tactical perspective metals look interesting.
Q) What is your view on the recent wave of new listings on Dalal Street? Are there any interesting names you’re tracking? Also, given that most IPOs leave little on the table for retail investors, do you think it’s better to look for opportunities in the secondary market?
A) We are open to looking at new listings – there is clearly less information here compared to stocks which have been listed for a long time but if the risk reward is attractive we are ok.
We don’t think a generic view makes sense in terms of primary issues vs secondary market as each issue needs to be evaluated individually.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
