In your Twitter account, you said the recent rally was all about buying the pessimism that was needed at 15,100? Your vision of the market?
Absolutely. Just two months ago, there was a lot of pessimism in the market when there was constant selling by FIIs and the market was available at very good valuations. Many stocks corrected significantly, this provided a good opportunity for value-oriented investors looking to build portfolios with a long-term perspective and now was the time to invest. It has given pretty decent returns over the past couple of weeks.
See if you would have done this interview in June somewhere where you would have said yes, the sale of FII is at its peak. What do you think of the last 20 days purchase numbers from FII? Is it a total buy number or a consistent buy number and a buy-on-dip scenario?
With stocks going up and the Sensex, Nifty going up, there is an element of risk. Let’s understand that there are some other settings that have been fixed. Inflation has most likely passed its peak. The prices of many commodities have corrected; crude fell. A while ago it was around $92-93 now and it has a chance to drop further.
When inflation is under control, commodity prices fall. It is likely to give an additional boost to the profits of companies that are doing well in terms of productions or sales, both in the domestic market and from the point of view of exports. If this happens, if your numbers are going in the right direction and commodity prices are in good shape, the profitability of the business will remain bullish and this will provide healthy returns over a period of time.
But we can’t expect the same type of feedback that has happened over the past two weeks. We will have to lower our performance expectations. There may be a reduction in terms of returns coming in the next period as we have already seen a significant amount of rallying over the past two weeks.
“ Back to recommendation stories
As newly listed e-commerce companies have seen a decent correction, would you be a long or go with the traditionally free cash flow companies where dividend visibility is high?
We are value investors so we are looking for cash flow, cash is king for us. Fintech or other newly listed companies may provide an opportunity but there is also an element of risk there if they are doing well in terms of revenue numbers which is not enough as you need to generate streams cash and profits over a period of time. It may come later, but at this point it’s not there. So we would like to avoid IT. Even though my partner and I both have a background in IT, we would still like to avoid getting into newly listed tech companies.
Where do you see value in this market? How would you view dividend yield as a component with rising interest rates? How important is this for many businesses?
We are optimistic on several sectors. Some of the sectors’ stocks rose. We may or may not be buying, but some of these sectors are interesting, including capital goods, telecommunications, real estate, finance, private and public banking and educational book publishing is another sector in which we recently entered with the energy. , pharmaceutical and cement. Some of these sectors are quite interesting. There is demand there. The companies are doing quite well and there is a demand coming in after quite a long period in some of these sectors. We should look at it from a longer term perspective and keep holding on.
How about manufacturing and exporting? How would you look at it?
We have both – manufacturing and exporting. Wherever there is an opportunity, we would like to go to these sectors. The capital goods sector in particular is a good example that has performed well both domestically and from an export perspective. So wherever there is consistency in earnings and consistency in demand growth, we need to ensure that. But if the export is there, we would like to prefer that to those two. If I have both stocks in front of me; one is export the second is domestic i would like to go for export oriented companies because if there is domestic demand they would be able to meet but if it is already on the export market, it would give it a lot of stability in terms of operations and in terms of income.