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Markets are waiting for any sign of improvement to put more money in: Prakash Diwan

The veteran investor said that pockets of value will begin to emerge. He is highly optimistic about the USL slump sale

May 30, 2022 / 12:03 PM IST
Manufacturing in India is looking up like never before, said Prakash Diwan.(Photo by Ravi  Roshan/Pexels)

Manufacturing in India is looking up like never before, said Prakash Diwan.(Photo by Ravi Roshan/Pexels)

There is enough money waiting to enter the markets, particularly from domestic investors, said Prakash Diwan.

In an interview with CNBC-TV18, the veteran investment professional also said that, if some of the global headwinds just stabilise, value will emerge. “I think this is a stock picker’s market,” he said, and added that the investor should proceed with caution “since things could turn ugly even now given the geopolitical situation”.

Also Read: Is value investing dead? Not a chance

He believes that the market is just waiting for any sign of a turnaround.

“The market is waiting for some sort of indication of peaking out of the worrisome factors, be it inflation or bond yields. If there is some indication that inflation, and prices of crude and commodities start to stabilise even if they aren't receding, there could be some emergence of value,” he said.

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“My guess is that there is enough money waiting in the wings from smart investors, particularly from domestic investors, where I know for sure that people have been sitting on cash for some time waiting for the right opportunity,” he added.

According to him, if you don’t worry about the precipitous fall in the market, there are businesses that are entering a favourable zone. “They are entering a zone where the risk-reward is fairly favourable,” he said.

Diwan sounded extremely optimistic about the manufacturing sector. “Manufacturing as a sector in India is looking up like never before, and this is just the start,” he said. If the sector continues on this pace of growth, he believes that there will be far more opportunities and even in newer avenues. 

“There is still enough value. Multiples are under 10. Forward P/E are at times 7 and 8 for businesses that are fairly well established and with huge replacement costs will benefit,” Diwan pointed out.

On United Spirits selling 32 of its mass brands to Inbrew, he said it was a great move and added that investors know not to expect results overnight. India’s largest liquor company is selling its popular brands to the Singapore based company for Rs 820 crore, in a slump sale.

Also Read: Global inflation and the perils of making forecasts

Diwan said: “Getting out of lower-end price bands and moving more towards prestige and premium is going to be phenomenal. This is because, in cars, jewellery and some consumption items, the premium segment has not been impacted (by the current headwinds) even when things have been shaky for the entry level and the popular segments.” This goes for the liquor category as well, he said. 

“I have always been positive about this, even when it (United Spirits’ stock) was in the Rs 560-570 zone (in mid 2021). I think it (the stock) is definitely tending to four digits in the next 12 months, which is a pretty decent 40-50% upside from here,” he added. 

 
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first published: May 30, 2022 12:03 pm
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