2017 rally to not repeat anytime quickly, go inventory-particular now

Posted On Aug 28, 2019 By admin With Comments Off

In the second half of the year, with the base being low, “youve seen” a turn of sentimentalities on the urban place, says Pankaj Tibrewal, Equity Portfolio Manager- Senior Vice President, Kotak Mutual Fund. Excerpts from an interrogation with ETNOW. Are we in for a turn in the sentiment for the market and their own economies or are we in for a long winter? We will get these stints of volatility, spikes for a couple of days and that is about it? The second one of the purposes of your question are responding. It is a slightly longer grind. The commentary coming out of company managements is not very encouraging in the near term. Also the biggest issue is the transmission of liquidity. We ensure a gradation yesterday where RBI displaced Rs 1.76 lakh crore, a part of which is modesties and a part of which is the one-time reserves which went transferred to the government and will help in transmission. But the biggest issue is that M0( all physical money including coinage) which is Rs 28 lakh crore, is not expanding and the correlation between M0 and M3( money quantity) has broken down. We need to do something both from the government and the RBI side to make sure that credit lending and credit creation start back in the economy. Over the last 10 daylights, as a unit we met a lot of companies across manufactures. I must admit that pessimism is slightly more now. Panic on the Street is slightly more than actual actuality. In a panic statu, the market has ignored two things. One, the monsoons after a long time has been very good and downpour Gods have smiled on us. In the three southern territories which is Karnataka, Tamil Nadu and Telangana, embankments are full after a very long time. What it makes is that part of kharif would be seeing good demand but it commits a good visibility for wintertime crops which is rabi and this was not the case last year. In the second half of the year, with the base being low, there could be a turn of sentiments on the rural place. Second, pockets of manufactures continue to do well. We spoke to a lot of pipe corporations. They seem to suggest that the demand momentum which they watched in the first quarter continues to grow. The contingency is similar in paint and fertiliser business. The pockets of slowdown are the usual suspects which is auto, auto ancillaries, buyer staples. Customer sturdies astonishingly leaved a very strong commentary as well and the first one-fourth numbers of most of the consumer durable actors were very strong and that commentary continues. So on the one entrust, people are deploring of consumers not buying a Rs 5 biscuit containers and on the other hand, anything to do with summertimes flew off the shelves — be it ACs, refrigerators and even a produce like rinse machine examined a very strong growth. One needs to approach this busines from a more bottom-up stock selection perspective. I picture sectoral topics may or may not play out, but we are seeing openings have appeared in individual companies.If you think marketplaces are shaped down and fundamentals are ahead and costs will catch up, how are you maximising it? Are you looking at buying risk, are you looking at high beta calls? Our view is that we would not understand the 2017 rally echoing anytime soon. Also we have been averse to monetary leverage and that logic continues. I believe that investment is not as difficult as it is made out to be. If you invest in good quality companionships with decent sector balance sheets and cash flows over a medium to long term you are reinforced and we do not see that philosophy altering. Likewise, in this environment, the bigger will become bigger and we expect consolidation in many sectors. We have already seen that in telecom, plaster and aviation. We are seeing that in a way in financial services and many other sectors which are represented by mid and smallcaps. You would envision the top three-five guys commanding a larger part of market share. It is not make sense to go and compute data where sector balance sheets and cash flows are ruptured and there may be contests of volatility, they may go up for sometime but if such structures of the business model is not good, they may face accidents again. I suppose the crux of the investment at least at Kotak is “protect the bottom, protect the downside, the wins will take care of themselves. ” We do not see that changing in this environment also. Given the kind of setup you have described, what would you be bullish on currently? What various kinds of approach or strategy would you recommend at a time like this? The sectoral likings are the same — private sector corporate lenders. We have made a slightly different call this time, that financings will outshine intake and hence we are underweight consumer staples but on the financing area we are overweight on plaster, industrial and capital goods. Also we are approaching the pharma area on a stock-specific basis. We continue to have an underweight stance on IT and on the consumer non-discretionary, we continue to have few reputations where we imagine the runway for proliferation is long. That is a mix of our portfolio. On the midcap place, we have been positive on specialty compound opening and we continue to be overweight on it. Also, on the piping back and the home building make line-up, we appreciate the unorganised to organised theme play out very strongly in this environment and we continue to be positive on few honours there. What would you remain underweight on? I noticed you have mentioned IT but you have also mentioned auto. What is the strategy there? We believe that in IT, the pricing persuade continues to be very steep. In autos, the prices have corrected 30 -4 0% from their meridian, but the valuations have not. The stock-take grades continue to be at somewhat elevated levels and the sector is stuck between slowdown in demand and regulatory conversions which will take another six to 12 months in our opinion. We will wait for valuations to become more attractive before jump-start into the sector and covering our underweight. Within the banks, How would you constrict it down further within the private sector names? On the banks side, for a long period of time, our penchant has been with private sector lenders and more so right now with private sector organizations corporate lenders since we are accompany a sharp-worded earnings recovery this year and next year led by lower provisioning and lower approval payment for a few of them. Too, we continue to have an overweight stance on assurance, both life and general and we accept the under penetration story is playing out beautifully out there. On the consumer discretionary line-up, except automobiles, we continue to have some exposure to the labelled retailing feature, the mattress companies and a few of the other lists which are linked to the per capita 2000 GDP. We believe there is a hockey stick playing out in some of those topics. Some of consumer interests durable reputations are part of our portfolios and “weve had” seen these companies report very strong results in the last quarter. We be suggested that the space electrification is going, the demand for a lot of these lists would be there in the coming years.