Bottom difficult to call; mkt at attractive level: Alchemy Cap

Indian market is trading at an attractive level for long-term investors, is the word coming in from Hiren Ved of Alchemy Capital Management. Further, he feels it will take a while for the market to bottom out.

During times of such volatility, he says everything works on a day to day basis. "A little bit of better results, global markets are okay, then that adds to confidence because at this point in time there is too much fear on the streets," he told CNBC-TV18.

Ved further adds that better stocks start to outperform in a flattish market.

Going against the tide and the capitulating fall seen in the markets on Wednesday, he told HNIs to add to their investments and while a bottom may be difficult to call, 12- months down the line, investors will be glad they bought at these levels.Below is the verbatim transcript of Hiren Ved's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Should we rejoice that there is green on the screen or should we consider this as having missed the buying opportunity or should we not get troughed by the noise, more downside to come?A: When it is up, compared to previous day, it is always a missed opportunity. I think we were especially after yesterday's dramatic fall in the second half it specially felt like we were now reaching levels, which were quite attractive from a market perspective and you can never time the market for an absolute bottom but those were levels that certainly long-term investors would have ventured out and started to buy. I think that we have seen 11-12 days of downside in the market.So even if the market is to bottom out, it is probably going to take a while in the sense that it will go up, it will probably try and test the bottom again and we don’t know whether we will not know until a few weeks or months down the line whether that was indeed the bottom.On days like this, everything works on a day-to-day basis, right? A little bit of better results if global markets are okay then that all adds to confidence because at this point in time, I think there is just too much fear on the street, there is a lot of fear on the street.Sonia: I guess the fear is also not so much how much the market may sell-off from here but when the recovery process starts that could be very long and perhaps painful. So the time wise correction could be protracted as well you think?A: That is okay in the sense that from an investors' perspective even if the market stops falling that itself is good. If there is a time wise correction that is not such a bad thing because typically what happens is that when a market consolidates in a certain range, there is at least a differentiation that starts happening in the market.So the better stocks tend to start outperforming in a flattish market and people are able to take rational judgements, when the market is falling almost on a daily basis, even the buyers step aside because nobody wants to catch a falling knife. So that is not such a bad thing that the markets would go into a long consolidation mode after this kind of a correction. I would welcome that because at least there will be some rationality that will come back. People won't be taking decisions based on fear but would be taking cool-headed decisions.Latha: What were you telling your high networth individual (HNI) clients yesterday when the market was showing a capitulating fall, what were you asking them to buy?A: We were asking them to basically start topping up and investing because we manage money for HNIs. We were certainly telling them that this is probably the right time to add to their investments. I told them that I cannot tell them where the exact bottom of the market is but I certainly believe that 12-months down the line, you will be happy that you bought around these levels.Latha: Which specific stocks that you advised? We saw some very good numbers, Infosys, Reliance, Zee, Asian Paints -- the stock prices did not celebrate those numbers much barring Infosys. Were those the kind of stocks you asked them to buy?A: I think my sense is that you will have to take a dual strategy. One is that where the results have been good and there is reasonable clarity and the trend has been that wherever the results were good, the stocks corrected post good results barring probably the exception of Infosys and probably what happens is that when the market recovers, the strong stocks typically recover the fastest and where the results have been very clear, those stocks will obviously give you the cleanest returns.The second strategy is that you could be a little contrarion where most of the risks start getting priced in in certain stocks, which have got beaten down substantially. I was looking at the numbers yesterday, Nifty is down one year 18 percent. The worst performing index is the public sector undertaking (PSU) bank index, which is down 50 percent, almost 49 percent. The Bank Nifty is down 24 percent. So you should be contrarion for the sake of being contrarion but you will get some very select opportunities if you want to be contrarion because a lot of the risks would now starting to get priced in at certain levels.So you use a dual strategy, buy strength for a large part of your portfolio and be a little contrarion for a small part of your portfolio because from a risk reward perspective, you will start getting pretty good gains there.Sonia: In terms of individual stocks, I know you don’t want to talk about stocks but the stock of the day clearly is Axis Bank. It is up 6 percent. These look like very attractive levels for Axis Bank at Rs 400 and now a lot of the clean up seems to have been done by the bank, you think one should go out there and invest into banks like these?A: I think between this quarter and the next March quarter, at least most of the sensible banks will take most of the hit. Especially in some of the private sector banks like ICICI Bank or Axis Bank, the good thing is that at least there is retail growth that is happening and they don’t have a capital issue.So as opposed to public sector banks, which may have a capital issue -- we don’t know the government has said they will probably provide capital but let us see what happens in the Budget -- the advantage you have is that if you believe that most of the hits have been taken and they have capital to grow, I think these are good compounding plays to look at.Latha: How would you approach the midcap space? They have been rank outperformers in 2015. What is the advice for the next few months?A: A lot of people have mentioned this that if you looked at in general valuations of midcap versus the largecap, you had a situation where in the last three months the midcaps were trading at a substantial premium to largecaps. The last time that happened was in 2005-2006 but the situation was very different. You had an economy, which was growing and earnings, which were booming and the operating leverage in midcaps was working in their favour. Here, it is different.However, again I would not like to generalise but yes, people should be very careful. You will always find a few midcaps, which can do well but in general, in a market like this we have always seen after a steep correction, typically the largecaps stand to outperform and do well and also relatively speaking the valuations are far more attractive in the largecap space than they are in the midcap space.In midcaps, you will get your chances to get back again because people were so overweight midcaps that at every rise, if the fundamentals were not right, people might want to sell on rise. As opposed to that in largecaps, buying the dips would be a better strategy.Sonia: What about the midcap non-banking financial companies (NBFCs), some good numbers this quarter from the likes of LIC Housing, Indiabulls Housing? Is that a space you like?A: I think that is a bright spot. Some of these specialist NBFCs have continued to do very well and if the valuations are reasonable, that is a good space to be in.Latha: If today we don’t end at highs, you would worry?A: At some stage, you would need the market to close higher in the green. So worry in the sense that you would then come to the conclusion that probably the correction is not completely over. As I said, when markets correct like this, the bottom formation doesn’t happen in a day. It would take time, may be the market is up today, may be second half may not be that great.So it all depends on how markets pan out. It is going to take a while for the markets to bottom out. It is going to be volatile at the bottom.