What is the right way of looking at this market, if I look at the market from the prism of Nifty it is dull, boring, lacks momentum. If I look at the market from the prism of Adani Group of stocks scary, if I look at the market from the prism of banking stocks there is no problem.
We last spoke just before the budget I think the Nifty was 18200 and things were good, it was seeming that we were just 3% to 4% from lifetime highs. Then just prior I think FY24-FY25 this whole Adani saga happened and the Nifty moved from 18200 to something like 17350, so it fell about 5%. But watching the behaviour of the market actually gives me a lot more confidence.
See you had the largest industrial group’s stocks falling 50%-70%, however, the damage on the market was just 5%. It would have been a lot more damage and lot more collateral damage that could have happened and markets have recovered.
Today we are at 18,200 which I think is an important level because if we surpass that then we will say that we have put this chapter behind us. We are about 3% from there so I feel that it is showing immense maturity and immense depth and remember that in this phase if you look at the FII selling, it has been massive. They have been really selling for the last week or 10 days and in spite of all that this damage also has been limited to a few stocks which belong to the family or the group.
Beyond that banking was one place which there could be collateral damage but you will find that even the Bank Nifty is about what 3%-4% from there. So I think that the good part is that this thing has not spread, it has been localised and this particular group or sector is actually now accumulating very well so beyond a point when the moment when we have another headline this would be forgotten.
So all in all I feel very-very positive about the market and continue to do so and this incident as I said these are things nobody can predict but the reaction of the market is what is encouraging. But what happened and what will be the future that nobody knows.
The important part is that if there is news which the market is not prepared for what is the reaction of the market and I think the reaction of the market has been very good. Lot of sectors, lot of stocks still continue to make 52-week high lifetime highs while this whole thing is playing out. So the market breadth still remains good, the damage I do not think is much and I feel that we will recover and this will actually show resilience and the solidity of the bull market.
Markets are markets. When you see a fall as vicious as what we have seen in Adani Group of stocks what is the realistic way of looking at it because you understand trends and momentum and then you can connect it for us?
For me fortunately we did not have any exposure to Adani stocks but a few banks who had this exposure have led to it because that is where the whole chips would have fallen. You realise that the good part is that they came out with very good numbers during that phase but beyond that you will find that the recovery has been good. This thing has not become contagion, it has not spread and then in this phase the opportunity is that you have to see what stocks and sectors are doing well even when this is happening.
Like there were still some banks that did very well you will find that some FMCG stocks continue to make new highs, electrical equipment, capital goods are being talking, they continue to make highs. So even in the phase of adversity when there are stocks and sectors that continue to move up and as I said the sector where the contagion could be highest which should be banking has also held on very well. So this really gets me to understand that where the strength is in the market.
I feel that the market has shown great strength and great character and second is that even in that phase, there have been stocks and sectors that have made new highs. So in the face of said adversity, what you rightly said that if this had happened 5-10 years ago when we did not have these kind of domestic flows, the question was that will the market go in circuit? It was not just a stock. You know, those times things were different and we know how it has happened.
When we spoke to you last, that was before the budget, before the Adani Group of stocks rout your NIFTY target was 21500 any reason for us to believe that you would like to revisit it today?
No, not really. This makes the conviction stronger because nothing moves linear in our market, everything is zigzag and every philosophy, every thought process, every theory gets tested.
You know when the stocks are down circuit, you ask yourself, oh God, is it going to like spread? Is it going to topple the market? But the way the market has performed the reaction that there is and the breadth there is in fact makes me positive. And you know, the biggest cause of positives and which I shared the last time with you also is the way global markets are performing. It is not just India, the kind of move that you are seeing in global markets is phenomenal.
India though in the short run may have underperformed but I feel that when this kind of thing plays out we will still be the best performing market or among the best performing markets.
It is just that we have run up very fast. We broke out early. It is like a race. You break out early, you run early, you need to pause, you need to take some rest in that you also get tested with this whole Adani saga and still you find that you are not tripping, you come back and I feel that India will pull up. In the short term lot of global markets were oversold. In fact, the most oversold spaces like China, etc. which people are talking about they have been dogs of markets for the last three years. It is just that in the last three to six months but that does not take away the belief for conviction in India.
Yes, the investing in market is definitely not a sprint but a marathon and that is what is happening with the Indian markets as well. But before the budget when we spoke you were quite bullish about the entire industrials and manufacturing theme. Post the budget have there been any new pockets or areas that have emerged with respect to the fresh investments?
No, I think that a lot of these stocks even in the phase post budget and this correction have actually gone on and made new lifetime highs and the numbers that have been coming out of them are spectacular. So you are really seeing that, as I said that tough times do not last but tough people do and this was a case in point of some great companies, which I feel that where the trend is, I still reiterate, I feel electrical equipment, cap goods etc., and the industry facing sectors look very good to me and they have really held out very well in this fall. So I think it makes me a little more confident.
Just to take that point further than those industry facing stocks and sectors that you are completely bullish on. What is the view on the entire capital goods space? Would it extend to say defence related stocks, railway or even those closer to real estate and infrastructure?
Defence has been doing very well. In fact, if you see the last one year barring PSU banks, we do not have sectoral indices but we have done some work. The sector that did the best was defence. In fact, defence stocks are going through a bit of a correction but I think that again, it is a longer term theme that is going to play out and I do think that post a correction, you are going to see accumulation happening and they will take off. I mean not just that you look at something like tire stocks, they are also doing very-very well. There are lot of pockets; hotel stocks, hospitality. So the breadth, it is not just linked to banking or it is just not linked to one IT. The breadth you look at banks barring last week, they have done very well. Defence stocks have been doing well, tyre stocks have been doing well, hotel stocks have been doing well, selectively FMCG stocks have done well, fertilisers have done well, cap goods have done well. so the breadth or the sectors, it is not that the market is being driven by any one sector.