We will have a time correction and a price correction for sure: Sanjay H Parekh
ADVERTISEMENT Are you comfortable with the market valuations and levels?
Sanjay H Parekh: Yes, I mean, we are not cheap at all. Earnings have been benign. We had a very weak Q4. We have yet to get the preview for all the sectors. But Q1 also is quite benign as I see initial estimates of some of the sectors are out. But on a bottom-up basis, we see that Q1 will be quite benign, and it could even percolate to Q2.
A Bala explains how dialing up risk and taking a leap of faith paid off In the overall economy also, take IIP. Like any of the core industries, the growth rate has been quite tepid. Credit growth is also less than 10%. The household balance sheet is in the mid and the top end. Rate cuts will help revive the economy, but we are yet to see growth. So, this could be a very slow recovery. I do not expect even Q2 to have a better recovery and very possibly because of the rate cuts and the tax benefits, Q3, Q4 onwards we should see recovery in earnings as well. So that is where we are.
But even if we take next year earnings, which are consensus for Nifty at 1300 to 1320, I do not think India is more than 20 times I think chances of 20 times outperformance in the next 12 months is much less. Then, we are talking of a 4-5% return from here. So, we will have a time correction and a price correction for sure.
You must be betting on some bottom-up stories. Help us understand which themes are looking good to you right now and which themes are reasonably valued at this point in time?
Sanjay H Parekh: Stocks are not cheap, I will be very honest. Of course, when we bought them, they were reasonable and hence we do trim also where it is getting overdone. But our whole construction has been around domestic overweight, global underweight. We are almost zero on oil and gas, zero on FMCG which is domestic but their growth is missing. We are underweight on IT and mildly overweight on pharma, We are also overweight on consumer discretionary and on financials, we are mildly underweight on balance, but overall overweight because of our NBFC capital market exposure. In telecom, we are overweight with Bharti. In real estate, we have the largest player DLF. In consumer durables, we have Polycab. And in EMS, we have Syrma. In port, we have Adani Ports. This is where we are in each of the sectors we have bought –leaders or niche. It is largely leaders at reasonable valuation and where we are comfortable with growth. That is how we are positioned and the average price earning of the portfolio is still 15 times on 27, which is at a good discount to Nifty and ours is a largecap dominated portfolio with 72% largecap.
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