At this point in time, you are looking at safe havens, you are looking at financial pockets where there are no major surprises. That is where banks come in. That is why I said, banks FDs first and bank stocks later Ajay Srivastava, MD, Dimensions Consulting said
Unfazed by the massive plunge in the stock markets on October 11, Ajay Srivastava, MD, Dimensions Consulting in an interview with CNBC-TV18 said it is not going to be as bad as it was in the last few weeks. He suggested investors to stay put with banking and IT stocks as they are going to be clear winners. Edited excerpts:
Q. Nifty is down in pre-opening by about 200 points. What are your views on it?
A. Well, luckily you know we have become so used to huge negatives, 200 points don't sound to be a great calamity for the Indian markets. I think we have seen much worse. And that's what gives us a little more comfort compared to the rest of the world. I believe we have sold off so badly in the last one week or so that we are far better able to handle this downturn than perhaps you could have been in a normal setup.
So I am not too worried today as to what's going to happen. Yeah, maybe, we give up 100-200 points but it's not going to be as bad as it was in the last few weeks we have seen in the markets.
So yes, it is a problem and it also tells you very clearly that RBI will have to come out very quickly and raise the interest rates. There is no way RBI cannot raise the rates very soon. Within a week or two weeks of the policy, they will have to come back and change the rates. I think a rate increase is on the cards in the immediate horizon.
Q. So much in terms of gains have been wiped out in such a short while recently that the sentiment is down especially in the retail fraternity. What is your advice for the investors now?
A. See, at this point of time just sit with your positions. There is nothing to be done. If you sell out, you are going to have seller’s remorse very soon. If you buy, you have buyer’s remorse immediately. So, I think, you have a choice between having a deferred seller’s remorse and immediate buying (remorse).
So, I think, just stay put, stay quiet. Sit with your positions. And, let the market do its own stuff for the time being.
Q. What should investors be doing, especially the ones who have bought at the highest level. Is this still the good time to put more money into declines or should the strategy be different now?
A. I don't think you should be putting more money. Look at the world market, look at what is happening to the US dollar. Look at what is happening to India's GDP growth. IMF has already said world growth has been cut. So, there is no compelling case to buy today.
I don't think it is a good time. You are getting 8 percent as bank FD rates, sit quite with it, let this whole thing settle down, because India' festive season is also not looking very good at this point in time. So the triggers which were to buy are absent in this market.
Only other thing I must say is, if you have got banks (stocks), do not sell out. I think banks are going to come out clear winners in this chaos. Therefore, if you don't have banks, buy banks, if you have banks, stay put.
Q. How much should investors switch from NBFCs to banks?
A. If you are really in a bad shape and you hope to recover, the banks will give you 20 percent returns. They won't make you 30-40 percent.
A re-rating NBFCs in a manner of merger and acquisitions, I think that could be a big trigger. Some of the NBFCs are applying for banking licences which could be another big trigger. So, I am going to say wait with NBFCs because the triggers might give you a decent rate of returns compared to getting out now and getting into banks.
Q. What about other spaces, maybe something like autos. All stocks are at 52-week lows now. Demand has softened but it has not gone away entirely. You think some of these stocks are good buys.
A. I think, for the time being, what we are seeing from the demand side in the market, it's very bad. It's not looking good at all. So, I think, let's stay clear of autos for the time being because the environment is very hostile to them.
Interest rates (for auto loans) are spiking. That's becoming a problem today. So, you are going to see higher EMIs and therefore I think people will not really get tempted to buy at this stage because EMIs are going to go up in the next 30 days.
Q. So the strategy should be to put part of your money in bank FDs and a part of your money in bank shares.
A. Both ways, it works. At this point in time, you are looking at safe havens, you are looking at financial pockets where there are no major surprises. That is where banks come in. That is why I said, banks FDs first and bank stocks later.
Q. TCS has corrected by 10 percent rather swiftly. It comes out with Q2 results on October 11. You reckon it is going to correct further or is it going to be safe haven in current environment?
A. I think it is a safe haven. I think it has corrected because a lot of people sold off their best holding for profit given margin calls etc. So there is deleveraging process, there is sell off process and there is a profit booking process.
You know, when you need to pay margin, you don't care what stocks you are selling, you sell what best stock you got in your portfolio and what gets the best price. So what is happening in the last 10 days, IT stocks have seen a major shift due to this.
So I would say keep holding on to IT stocks. If you see a major correction, buy it back, they will give you crunchy returns.
Q. So you also said earlier that keep cash in hand as there are no triggers to buy. So is this officially the start of a bear market or are we still in a bull market?A. Of course, we are not in a bull market by any measure. Not only look at the stock market, look at the real economy. Nobody is feeling bullish. Auto numbers, cement numbers, steel numbers—nothing is bullish. The volume increase is 2 perecnt and thereabouts. I am not sure where GDP growth numbers are coming from, but I am sure that the real economy is in a bear market, forget the financial economy.