Oil spike over $140/bbl to take mkts down: Dipan Mehta

Q: Is there still enough value you feel or enough upside for those defensives we are talking about pharmaceuticals, IT etc?

A: There is value but the question is that these companies will not get a high Price/Earning (P/E) multiple and that is the real problem in our markets. It is not so much earnings as much as it is the P/E multiples. Those could compare even from these levels because of higher interest rates and technical aspect such as flow of money out of the country. So, this is something, which needs to be understood more than anything else.

The defensives look good but a lot of them have already moved up and are fairly priced. So, it is more like buying into these stocks at corrections. A better strategy would be to gradually shift the entire portfolio from the non-defensives into the defensives, a task more difficult done than actually said. Keeping that in mind, investors are better off if they are prepared for the worst. If you are looking at least six-seven months to a year kind of a bearish trend for our markets then every such decline will not make them panic and if you do panic, mistakes are made. So, that is the kind of mental framework which investors should be trying to get themselves into and perhaps good idea is not to at least put fresh savings in the market and keep that money for times when actually the environment seems to be improving going forward.

Q: In a short while from now we are going to hit earnings again, are you getting a bad feeling in the pit of your stomach on what might happen or you think we will get away with this quarter’s earnings as well with more green than red?

A: We have seen the advance/tax numbers, which have come for corporate India, and those are quite robust. Same time our interactions with the management do not suggest at least that this quarter would be a bit of a disappointment. We could see a few positive surprises in this quarter on account of the rupee depreciating. So, there is not much concern on that front. Reiterate that it is the P/Es, which is causing more of a pain at this point of time.