Tag: Indian stocks

Domestic companies, corporate banks will lead solid earnings growth in coming quarters, says Ridham Desai of Morgan Stanley

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Ridham Desai is head of research and equity strategist at Morgan Stanley India. Desai joined Morgan Stanley in 1997 and has since become one of the most important voices in the Indian finacial market. Desai said India’s growth is picking up and the setbacks due to demonetisation, higher oil prices or weaker currency have mostly played out.  He said domestic companies and corporate banks will lead solid earnings growth in coming quarters.

“Emerging market currencies, bonds, equities, are all looking good and in that context India also should be doing quite well over the course of the next few months,” said Desai.

In an exclusive interview to CNBCTV18, Desai talks about the banking sector, NBFC crisis, and upcoming election, among a raft of other topics.

Watch the full interview here:

Edited Excerpts:

The last time you told us that from a global top-down perspective you were waiting for your emerging market (em) global strategists to come out with their view for 2019 and we have that view now. The view is that in 2019 the developed markets may underperform emerging markets and they will be the outperformers. Does this tie-in with what you are picking up locally?

Growth in India was picking up and we have seen that now for several quarters the revenue growth is putting successive highs. We are at a 4-year high on revenue growth for the quarter that just ended and I think the revenue growth will accelerate further in this quarter.

Corporate margins have been all over the place for various reasons, we got setback from demonetisation, GST implementation, some idiosyncratic factors, then from oil and rupee. A lot of that is settled and our view is that we are heading into the start of a new earnings cycle.

I have been saying this for a while but it has not borne fruition but I think we have now come to the moment where the headline earnings growth for the Nifty or the Sensex will show robust numbers led largely by domestic companies and corporate banks.

We should be ready for some solid earnings growth in the coming quarters. That is really the story behind our EM call as well, which is that relative growth in emerging markets will exceed that of developed markets. Valuations in the emerging world are far more supportive than they have been in a while and we also see a rise in the dollar.

So, emerging market currencies, bonds, equities, all looking good and in that context, India also should be doing quite well over the course of the next few months.

Your thoughts in terms of the India specific risks, which would come in from the elections? How much of a risk would it pose to your outperformance thesis?

Elections are always a binary thing, very hard to judge ahead and we know we have seen a lot of surprises in expected outcomes, so very difficult to tell in advance but it will clearly be a source of volatility. Had they not been around, we would have had a very strong 2019 but given that we are going to have elections, I think what investors should expect a fair bit of volatility depending on how the electorate decides to vote in the next government.

The key risk for the Indian market is that we get a minority government and the market gives off some of its gain. However, a minority government is not necessarily a risk to the economy but does present risk to stock prices.

That is how I would view elections. To my mind, equities being a longer duration asset class, people need to look beyond these events which generate volatility and at these current levels valuations are offering an opportunity for investors to do long-term investing and that is what I would remain focused on.

Due to the problems in the debt market some people are extrapolating it to in terms of growth for consumer goods, growth in real estate, construction – do you think that can have a negative impact? Are you rolling back any of the EPS (earnings per share) numbers because of that?

There is a temporary issue around that. I think the market is behaving quite well contrary to expectations. Last month, when a lot of people thought there would be a lot of problems in November but it went through smoothly. I don’t think we are still out of woods. I think the next couple of months are still tentative and it is an opportunity for large banks to grab share from non-banking financial companies (NBFC), which is already happening. You can see credit growth posting multiyear highs and I think that trend may persist over the next few months.

So, I did not see any meaningful impact on credit growth. Idiosyncratically, in certain sectors where there was heavy risk-taking, there may be some temporary impact. The overall theme here is that maybe the NBFCs will give up some share to large banks. And Large banks are further supported by our view that the NPL (nonperforming loan ) cycle has ended.

So, this is quite a sweet moment for large banks – they are collecting deposits, they are collecting assets and they are seeing worst of NPL behind them. So, you can expect, especially the corporate banks to report very strong earnings progression over the next few quarters. The impact on consumption and construction is temporary and probably will get over in the next couple of months.

So what you are saying is that the providers of finance will not be NBFCs but banks and basically growth is not going to be stymied because of that?

Not to a great extent, a few basis points here and there. We have trimmed our GDP growth number by 10 basis points, so that is our view on the impact.

One basis point is a hundredth of a percentage point.

We have taken down our earnings growth estimate by about 1 percentage point. So, that is the impact in our view, it is not a very large impact in my view.

Just to go back to global growth versus local growth and earnings growth, not GDP growth. For the last couple of years we were seeing global earnings growth, especially in the US at multiyear highs, margins have been very strong but that has failed to reflect in our numbers, in Indian companies, Indian corporates. Now if we are heading into 2019 and we are saying that global growth, earnings growth is going to start to come off, it is peaked off and may trail off, is there no implication to how well earnings may pick up because you said we will expect solid earnings growth going forward, is there no correlation or you think it is sort of overblown?

No, there is a correlation. There are two things about earnings, there is revenue growth and there are margins. So, the correlation is much higher at the revenue growth level than at margins; margins are far more idiosyncratic, far more country specific.

Just to take your example forward, corporate earnings in the US have hit all-time highs. We represent that by share of profits in GDP which are close to 12 percent. In contrast, in India, it is at all-time lows, share of profits in GDP are at 3 percent. So we have seen contrasting trends between the US and India with respect to margins.

However, there is certainly some linkage between revenue growth, and if the US economy would slow down perceptibly next year, then it will have an impact on revenue growth everywhere in the world including India. So there will be an impact on GDP growth. So, the correlation does not break down at the revenue level, but it is very different at the margin level because idiosyncratic factors drive in.

There is some amount of decoupling that has happened because I think India has achieved a lot on the macro front. You can see that in the rate cycle. India has not necessarily synchronised itself with the Fed in this rate cycle. So in all likelihood, for example, the Reserve Bank of India (RBI) may pause in this December, the Fed may continue to hike. Now when did you last see that because ever since India opened its doors to foreign capital in 1993, we have been very synchronised with the Fed rate cycle. However, not this time around.

There has been some breakdown because of India’s own macro achievements, but the topline, headline growth on revenue is pretty correlated, the margins are not.

There is a fear which is emerging in the real estate space in India, there could be a possible default, tier-II, tier-III companies could be more impacted, bond yields are spiking. How worried are you that we are going to see a structural slowdown within the real estate space and that is probably going to augment going into next year?

As I mentioned earlier, some temporary slowdown is in the offing but I do not see a sustained slowdown. I think some stronger real estate companies will step in, some projects may get sold, some valuation opportunities emerge out of such funding issues. There are some pretty good balance sheets around which are capable of taking over these projects.

So, there will be some slowdown, but not a whole lot, not in the mode of a crisis as you are trying to highlight. I do not think that is what I am sensing. I am sensing more of a temporary slowdown rather than a crisis.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

NBFC highly overpopulated space and deserves correction, says GTI Capital

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian stocks languished on Thursday amid mixed global cues and slew of corporate earnings back home. CNBC-TV18 spoke to Madhav Dhar, managing partner of GTI Capital Group, to get a sense of where markets are headed and his views on valuations.

“I tend to be little contrarian and early and we are setting up for some kind of low here both in the S&P and in India particularly which has seen more violence especially in its dollar price of the underlying Sensex,” Dhar said on Thursday.

“I think the economic cycle around the world isn’t over, the US economy is still very strong and you will have one last leg up in the market and it is probably too early to pack it in,” he said.

Talking about India stock valuations, Dhar said, “India is in a slightly different cycle, you could argue even a better cycle, early in the cycle whereas the US is still late cycle. So all in all technical, valuations and prospects are looking better.”

When asked about the capital goods sector, he said, “I do not want to comment on specific stocks but I like the area in general. I think that is where the growth is going to be over the next two-three years and like everything else its better value now than it was. So yes, I like the entire space because the infrastructure area is accelerating.”

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Best time to buy stocks is when there is extreme pessimism, says Mihir Vora of Max Life

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mihir Vora, director and CIO of Max Life Insurance, spoke to CNBC-TV18 about the current trends in stocks market and his views on NBFCs.

“The relative valuation trend has been going around for quite some time. Even in this correction, from 11,500 to 10,200 odd, we did see that the private sector corporate banks especially did manage to outperform. Of course, it was partly because of the fact that we had some leadership changes expectations which we have met and the uncertainties regarding top management were taken care of but having said that, we did start with very low valuations even at the index levels of 11,500 and during this entire correction, we have seen these stocks on the private sector corporate banking side hold on quite nicely. On the other side, we are also seeing a bit of a shift from the retail oriented private banks to the corporate oriented private banks because overall investors and institutions were quite underweight on the corporate banks,” he said.

Speaking about the non-banking financial companies (NBFCs), Vora said, “As far as valuations are concerned, we have seen the markets discount pretty much a bad scenario for many of these players. So the question is who comes out of this unscathed and we have seen the studies of the CP maturities in the refinancing requirements which are likely to peak in the month of November. So I think the next three-four weeks are very crucial. We would rather wait and watch and see how the situation pans out but I don’t think valuations are an issue at all anymore. It is just a question of who comes out of this with the minimum injuries.”

“Given the shock that we saw in the NBFCs space, we might get disappointed in some of the segments like housing loan growth, overall NBFC loan growth and the associated sectors which they were lending to like personal spending, consumer discretionary and autos. Early indications are that Dussehra season has not gone very well for the auto segment. So to that extent, the hopes of a reasonably good recovery in the December quarter probably maybe toned down a little. So to that extent, the markets having corrected so much, we are in a zone where we should wait and watch,” said Vora.

“The midcap and small cap stocks have seen the maximum amount of correction in the last six months anywhere between 30 percent and 40 percent on the indices and of course much more probably at the stock level. So the time to buy is obviously when nobody else is looking at it when there is extreme pessimism,” he said.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Best to wait till November 10-15 before buying in this market, says Ajay Srivastava of Dimensions

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Ajay Srivastava, CEO of Dimensions Corporate Finance Services, spoke to CNBC-TV18 about the current selloff in the Indian equities and shared hiw outlook on specific stocks.

“Conundrum faced by most investors is that currently there are enough reasons to sell in this market but they are not finding triggers to buy. Liquidity is waiting on the sidelines but is unwilling to commit,” Srivastava said on Wednesday.

“The question is not about valuations anymore but in general the earnings so far haven’t been very good and so people would prefer to wait. So the best case would be start to buy not before November 10-15 once big numbers of autos, steel etc come out and then take a call,” said Srivastava.

With regards to Yes Bank stock, he said that they would continue to hold on to the stock but not average up or add up at current levels.

“The problem in this market as an investors is that market is only looking at reasons to sell and not at positives to buy. So although there are reassurances from company management, the uncertainty remains with regards to Yes Bank,” Srivastava said.

“This is not a market which is going to wait for a signal to buy at this point, I think it is waiting for a signal from the regulator, with regards to where it stands on this whole IL&FS issue, the NBFC issue,” said Srivastava.

“So market needs some trigger to buy and need organised institutional trigger to say things are getting under control at least domestically,” he said.

With regards to the banking space, Srivastava said, “The pricing power for them is coming back and they have got transitional advantage now.”

Talking about the sentiment of retail investors, he said, “This onslaught has frozen them out. There is no panic reaction to redeem but would prefer to wait and watch.”

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Currency depreciation not a big worry, infact it’s good for earnings of most sectors: HDFC AMC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Prashant Jain, executive director & CIO at HDFC Asset Management Co (AMC), is of the view that the domestic economy is doing well and there aren’t too many challenges that could hamper growth.

“Currency depreciation is not a big worry, Indian currency is not isolated in its weakness. Moreover, it is good for earnings of most sectors like IT, Pharma, banks and even FMCG,” Jain told CNBC-TV18 on Wednesday.

When asked if the current market situation was anything akin to 2008, he said, “It would not even be fair to compare because there were no parallels at all. Currently, domestic economy, US economy are doing fine, the corporate leverage unlike 2008 is not very high.”

With regards to the current debt issue and less liquidity in debt markets, Jain said, “NBFCs as such are only one small segment of the market and weightages of the stock is not high in the index and the stocks in the index are not facing any problems, so should not worry too much on this account as well.”

“Moreover, those NBFCs that are facing challenges can overcome them through various means like selling assets etc., he said. So don’t see serious challenges to the economy on that account,” added Jain.

Jain is not very optimistic consumption space, especially the consumer discretionary and staples because of higher valuations

“Not only are their valuations expensive but growth rates for them may not materialise. So far growth for them was supported by retail loans by NBFCs but that could now moderate,” he added.

According to him, largecaps are better placed than smallcaps. “Other than consumption stocks most sectors like metals, IT, banks, utilities etc are fairly valued or even undervalued,” he said.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Despite the correction, valuations at headline levels still not cheap: Nilesh Shah of Envision Capital

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Nilesh Shah, MD & CEO of Envision Capital, spoke to CNBC-TV18 about the current trends in the equity market and valuations.

“This is probably the most ferocious and longest period of correction that we have seen over the last 4-5 years. So we still remain in a strong bull market but the correction could be longer than we anticipated because of global headwinds,” said Shah,

“However, it is not yet the time for going out with your shopping back because although one has seen a huge price correction, valuations at headline levels are still not cheap,” said Shah, adding that they are holding on to a fair bit of liquidity.

“We have still not got on to a stage where long term averages in terms of valuations where they are – especially in an environment where interest rates, yields are going up. In that kind of environment there is still case for valuations to compress a bit more than what we are seeing right now,” he said.

According to Shah, there are some spaces where the valuation and price correction has been huge and where long-term fundamentals are strong.

“The paralysis currently seen with regards to lending to NBFCs is unlikely to last for too long. The regulators would take a lot of measures to ensure debt markets do not freeze. However, NBFCs are still not a buy at current levels,” Shah said.

The house is very upbeat on the insurance space post the correction.

“The growth opportunity for the sector is huge and so the current price correction is a chance to buy them for the long-term,” said Shah.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Here is why First Global’s Shankar Sharma is still bullish on mid-and small-cap stocks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Medium and small sized companies, which saw a meltdown last month, are coming back with a vengeance.

Nearly 335 of the 950 stocks in the small and midcap segment have gone up by 20 percent or more from their 52-week lows. But is there room for them to keep running?

The answer is yes, according to Shankar Sharma, co-founder and chief global strategist at First Global. Sharma thinks Indian smallcap stocks are the best asset class in the world.

The 55-year old Sharma is of the view that small-caps hardly get affected by the bear markets because “bull or bear markets are built on the back of the largecaps”.

“A bear market doesn’t really happen in a small segment of the market. Smallcaps are the small part of the market,” Sharma told CNBC-TV18.

At a time when most market experts are wary of investing in mid or small caps, Sharma is looking at smallcaps, which he says will continue to do very well.

“I still continue to be very bullish on smallcaps, they have corrected 50 percent its cost can’t go to zero.”

Sharma, who picked Amazon and Apple in early 2000 and which have turned 100-bagger ever since, believes that smallcaps can have bear markets any time but they are unlikely to move the stocks market in any significant direction.

“They can fall 30-40 percent. You have seen even before this year last year demonetization every time 30 percent cuts, 40 percent cuts in smallcaps happen routinely. You want to call that a bear market or a very rapid correction those are all semantics.”

But it’s the largecaps that bear the maximum brunt in a selloff as they are driven by the economic fundamentals.

“The problem that has emerged in the last two months has been the larger macro of India, which will hit largecaps obviously the most. Because largecaps are totally linked to the macro of the country. Smallcaps have different dynamics, very small dynamics, local dynamics. So, exclude them from that discussion whether it is a bull market or bear market.”

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Closely monitoring financial markets along with Sebi, ready to take action, says RBI

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India and the market regulator Securities and Exchange Board of India are closely monitoring developments in financial markets and are ready to take appropriate steps if needed, a central bank statement said on Sunday.

The statement comes after the Indian stocks, forex and bonds market turned volatile on Friday on worries over weak balance sheets of India’s non-banking finance companies.

The rupee, Asia’s worst performing currency this year against the U.S. dollar, has lost about 12 percent of its value against the U.S. currency so far, hitting successive lows in the past few weeks amid a widening current account deficit and a selloff in emerging markets.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Morgan Stanley says India growth on recovery path; stocks to move higher over next 2 years

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Investment bank, Morgan Stanley, on Tuesday said India is on a growth recovery path and that will translate in to better earnings for the companies.

In an interview to CNBC-TV18, Ridham Desai, India equity strategist, said that over the next two years, Indian stocks to move higher.

Watch: Trade war concerns, high interest rates & oil prices already priced in, says Ridham Desai

According to Desai, there will be a meaningful improvement in earnings for the corporate banks ahead compared to non-banking financial companies (NBFCs).

Edited excerpts:

Q: What has led to this upgrade in Sensex target, what has made you so bullish?

A: I think India is on a growth recovery path, which began a few months ago. It is likely to translate into better earnings growth and I think that is the reason why we think stocks are going higher. We have been in a bull market since 2009, it has been a very long bull market, but it has been a very slow one. We have had several corrections along the way and I think the bull market is now reaching a stage, where it’s going to get backed by strong fundamentals.

Obviously, there are a lot of risks along the way and I think everybody is focused on those risks, which is usually a good time to engage in stocks, when people start disregarding risk, that is when I think you get worried. However for now, I think growth is looking good, likely to surprise on the upside and profit sharing gross domestic product (GDP) is at near all-time lows. So, I think we are going to likely to witness a very sharp recovery in corporate profit margins over the next two-three years.

Q: Since it’s a one year target, I am not speaking about the next five years. 20 percent compounded annual growth rate (CAGR) in earnings that your report talks about, a 7 percent growth country like ours, one would expect this kind of growth in the medium-term. But next year, we are riddled with some problems, interest rates have gone through the roof that we were 8.2, who would have thought a year ago. Are companies prepared for that and even the weaker rupee initially will create disruptions though later on, it might be a big help of both domestic companies and exporters. So do you think political risk as well as interest rate risk can be very big caveats to your Sensex target?

A: There are lots of caveats and I hate to forecast on points and single digit or single numbers, which of course makes a lot of good media, but is very bad way of looking at things and certainly not a good framework to think about investing in stocks. So, the Sensex target is what it’s. I don’t think we should overly focus on this. But I believe you made some really good points. Let us step back for a moment and think about exactly 12 months ago. If somebody had told you that the rupee will be at 72-73 per dollar, that oil will be where it’s right now, that the 10-year will be at 8.2, that we will have all these tariff stuff happening around the world, what do you think you would have done with stocks? That is the point. All this is already in the bag, we already know about this and stock markets are forward-looking animals. They have already baked this in the cake, which is why we are getting such a muted reaction this morning to the additional tariff round, because the market already knew that it was coming.

So, I will make one more comment, which is that the market is usually right. It goes wrong about a couple of occasions out of 20 and when it’s wrong, it’s essentially either over-exuberant or it’s in panic. So, we can recall such things quite easily. January 2008 was over-exuberance, March-2009 was panic or in fact all of the end of 2008 and early 2009 was panic, we had similar panic in August 2013. I think everybody can identify panic and over-exuberance. The market doesn’t feel like that right now, it doesn’t feel like it’s in panic or it’s in exuberance. So, I would argue that stock prices are more accurately reflecting all these concerns than we can fathom.

Therefore, I wouldn’t worry about these things. The stuff that is going to upset the view on the markets or the performance of stocks is something that we actually don’t know that is going to happen in the next few months. All the stuff that we know that is going to happen, I think, is already baked in the cake.

Certainly, there are risks. Election results can go all wrong for India, we can get a global recession, we can get a mistake by the Fed, we can get mistake by policy-makers in India, so many things can go wrong and that is true about stock markets at any point in time. But I think, we have to weigh those things against what could happen to fundamentals, where the valuations are and on balance, it looks like we are in an uptrending market. Give or take a few points here and there, and will the Nifty correct over the next few days? Quite possible. However, I think over the next year or two, it’s likely that stocks are higher not lower.

Q: You spoke about election results briefly. But how do you approach that event, because if pessimism does rise ahead of or during the election or with the election outcome, would you still believe that it is a buying opportunity?

A: That is going to be a tricky one, because it’s very hard to tell how things will pan out with respect to elections. What our historical analysis shows is that it’s not the nature of the government, but it’s actually the leadership at the top that matters to the economy and therefore to the market. So, we have had fragmented coalition governments in the past and that has had no impact on stock returns, because the economy has done okay and on other occasions, we have had reasonably strong governments, but poor leadership and that has hurt the market.

So, it’s not something that I can forecast with any accuracy, but I think you make a very valid point, which is it’s not about what happens in May next year, but what the market starts believing will happen and that is ultimately what is going to drive share prices over the next few months. So, if the market starts getting too pessimistic, then I think it’s a buying opportunity. If it gets too optimistic, then you sit on the side-lines specially, if you are in the business of timing shares, which I think is the privilege of a very few set of people. But if you get those extreme views that the market takes on the election outcome, then I think we can ponder about it and make a call on the market. But right now, there is no signal that the market is ready to make such an extreme call. I believe it may happen over the next two-three months, but we will have to wait and watch.

Q: The issue is 70-80 percent of our audience is in that business of timing it. For longest, the trouble with this market was that it was too narrow. There was a handful – just a set of 7-8 stocks, the Bajaj twins, the HDFC twins, which was taking the market higher and the market breadth was getting very narrow. Now, we have seen the leadership stocks correct quite a bit, consumption for example has corrected, the retail banks have corrected. Your thoughts on the kind of leadership shift that we have witnessed over the last three-four months?

A: You have raised two points, so let me make two points. First about timing, so again, I will use another old maxim in the stock market, which is ‘time is more important than timing’. We did this analysis on the Indian stock markets going back 25 years. 100 days of returns account for almost two-thirds of the aggregate index returns. So, there have been about 6,000 trading days in the last 25 years and a 100 days, which is less than two percent of the total time has accounted for more than two-thirds of the total returns that the index has given.

If you are that smart, you could stay in the market for those 100 days and avoid the remaining days. Obviously, you are in the category of a genius and I suspect that there aren’t that many. But for most of us, we would rather miss these 100 days than cash them. I think that is what will happen. So I think it’s important to spend time rather than time it. Even for the most, the biggest experts out there, I think it’s very hard. Warren Buffet has said time and again and I don’t mind repeating that advice that it’s better to spend time than time this. I am using time as a verb and a noun.

Going back to the core issue that you have raised about performance breadth, I think that is one of the important things that we are citing in our report that we wrote last week, which is that we believe that performance breadth will widen from here. So, the winners of the past few months or past few years are going to take a bit of a backseat, relative to the losers, where we think that fundamentals are inflecting.

So for example, take the comparison of the banking financial sector and take non-banking financial companies (NBFCs) versus corporate banks. So very clearly, the trade has been in favour of NBFCs against corporate banks and we think that is going to flip, because we think that the fundamentals for the corporate banks have troughed and there should be a meaningful improvement in earnings.

When I say meaningful improvement, we are not talking about 10-20 percent growth, we are talking about much more magnitude of 40-50 percent growth in earnings and therefore, 40-50 percent rise in share prices given where the valuations of corporate banks are, I think it’s a trade, which represents much muted downside risk versus upside risk. So, it’s a favourable trade for investors.

In contrast, NBFCs are going through a period, where they will face increasing cost of liabilities, valuations are not that attractive, so they may underperform. So, there are several such reversals in performance that we see over the next 12-24 months, largely summarised as follows, which is that the winners of the past few months or past few years may underperform relative to the losers especially, where the fundamentals are turning. So, I give you one such example, the other could be consumer discretionary versus consumer staples, where the performance may move in favour of discretionary stocks versus staples. Some of it’s already playing out in the market, which is the leaders have started faltering and very quietly, the laggards have started gaining performance.

Because the laggards have lost so much share in the indices in terms of weight, they will not tell upon the index performance immediately, over months that will build up. I think a more important thing that we are conveying in our report compared to the index target, which is the underlying nature of the market, which we think is going to change, it’s going to become more like a bull market.

In fact, it has behaved like a bear market thus far. Bear markets have concentrated performance, where a few handful stocks account for everything. If I am not mistaken, the top-5 Nifty stocks have accounted for 105 percent of the Nifty performance this year. So, everything else is down or flat.

So, I think that is about to change and in fact, may already be changing. So, there may be some portfolio shifts that investors may have to make. They have to shed their anchoring towards the winners of the past few years and move towards some of the losers especially, where fundamentals are about to inflect.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

For long-term investors, market correction offers an opportunity to buy: Motilal Oswal AMC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Manish Sonthalia, senior VP and head of equities at Motilal Oswal Asset Management Company, is of the view that the quantum of fall in midcap and smallcaps is more due to panic selling by retail HNI investors but for long-term investors, this is a great time.

“The panic could be on back of the rupee depreciation but the fundamentals are still supportive of valuations at these levels,” Sonthalia told CNBC-TV18 on Wednesday.

“Consumption still remains a long-term positive theme. The earnings growth for some of these companies has been very good, so one can bet on the companies that they have comfort in. The house is very positive on organised retail space – be it grocery retailing, single-brand retailing, footwear retailing, multi-brand, jewellery retailing etc within consumption,” he said.

According to Sonthalia, there is too much hype about consumption names being overvalued. “A serious shift out of consumption will happen only when capex cycle starts to pick up.”

He said oil marketing companies do offer great value but regulations for public companies remains a cause of concern.

According to Sonthalia, “The government is doing the right thing by not cutting excise duty because for them balancing the fiscal math is a challenge.”

With regards to Reliance Industries, he said, “It is a in a sweet spot because retail is firing on all cylinders but one is not sure of how much money is going into the telecom business.”

“Holding cash in a falling market is a good idea but it may not be the right strategy because the fundamentals are still in place for the stocks you want to own,” said Sonthalia.

Disclaimer: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow