China events to keep market volatile; prefer pvt banks: Ambit

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26 Aug, 2025 12:21

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The coming week will continue to be volatile for the global markets due to China's economic events causing discomfort for traders, says Andrew Holland, CEO, Ambit Investment Advisors. At a time when there is no catalyst available to move largecaps higher, there is a dire need of some fiscal stimulus from China's policy makers, he adds.He advises investors to be cautious while selecting stocks for trading and is bullish on private sector banks, particularly HDFC Bank. Holland is of the view that Axis Bank and ICICI Bank will see an upmove as and when the Indian economy picks up.While he prefers Reliance Industries and Maruti Suzuki in largecaps, he recommends avoid trading in L&T.Below is the verbatim transcript of Andrew Holland's interview with Sonia Shenoy & Anuj Singhal on CNBC-TV18.Anuj: My sense is that things are looking a bit ugly but you are not in that camp yet. How would you look at the current market setup?A: I think you said it nicely that we all are uncomfortable at the moment because if you look at the backend of last year, the worries were mainly around commodity prices and oil and we came into new year and China came back on to the table, similar to last August, I think that is what spooked everybody and all were thinking about how bad can it be and it's not been helped by the circuit breakers in China. I do not think that helped the market stabilise in the first four days and of course last night Dow, it didn't show any conviction, in fact it fell. So we are going into the new week, we are still on those nervous, uncomfortable, what is happening in China kind of thinking and that is going to keep the market very volatile for sure.Sonia: For equity investors unlike mutual fund guys, they do not have to invest in equity at all points in time; they can look at other asset classes as well. Do you think 2016 could be a year where other asset classes like fixed income could give you perhaps better returns in equities?A: In a very short-term it could but you are hoping that the RBI will continue to reduce rates, so yields are going to come down there and of course you take a view on interest rate risk as well, I think for the market what I think is needed now from China is some fiscal stimulus; monetary, they can continue to do but unless they do some fiscal stimulus and we are all going to keep going back to see what is happening there. So if they can do that then that might stabilise sentiment in the very short-term and that would underpin metal prices in particular. Oil unfortunately Saudi Arabia has got the game of chicken with the whole world and I do not know where they are going to go with this. So oil is the more unpredictable commodity at the moment, but if you saw that in terms of China then the Federal Reserve, I suspect, will say the data from the US is good but global economy is looking shaky. Therefore, I am not going to raise rates so quickly and all bets have moved from March to June. If that is the case then dollar should weaken as well which again would be underpinning commodities and emerging markets in the very short-term. So that's what I am hoping will happen but until that happens and market is going to keep testing the reserve of the Chinese authorities. Anuj: We have been talking about China because that is the latest worry for our market but truth be told, our market anyway last year didn't have a good year, even if we were to ignore the noise from China, in fact it may have added on to the negative cues. We had a bottom up year last year where index didn't do much but stocks moved. Would you expect this kind of trend to continue or would you say if we see rough patch for equities as a whole even the midcaps will start to correct now?A: We have got too speed market at the moment. The largecaps which have been beaten down but there is no real catalyst for them to move higher either, nothing is happening on reforms. I suspect Governor Rajan might wait now and say see what is happening around the world, if he is going to reduce interest rates. So what is the catalyst then we come to the Budget. So until we get some reforms through, the sentiment is going to remain weak and dictated by global markets. However, valuations on the largecaps are looking reasonable but if you look at the midcaps and the smallcaps, they are looking extended. So during these two speed market where you got to be careful in which stock you would be buying and I will be looking more for the largecap than for the mid and smallcaps for the next stage of the rally but it is going to take factors like I mentioned previously about China, to get the market. So we are dependent on global rather than local which is not very good. Sonia: There are a lot of largecap quality names that have corrected significantly in the last couple of months. Where do you see value now?A: There is lot of value there but if (I) take Larsen and Toubro (L&T), I got a worry about what is happening in the Middle East first and see what is going to play out there and there are too many unknowns. So its value but I do not know if it is the right value yet, so I can sit and wait for that one. We still like the banking sector, we still like the private banks because we do still believe that the economy will start to gradually pick up and the banking sector should be a leader in that and the private banks particularly HDFC Bank which is taking market share across all categories, will continue to stand out. Reliance Industries has been a favourite of ours and for the fact that they are going to start the capex and rollout the telecom business. Maruti Suzuki has also been favourite but of course the yen has been a headwind rather than tailwind in the last few weeks because now it\\'s 117/USD whereas it should be moving towards 130/USD. However, if that reverses then Maruti will come back in favour.Anuj: Apart from HDFC Bank and Reliance, the market has not got leadership. You spoke about L&T and some of the other private sector banks and that\\'s the problem for this market. One or two stocks won\\'t be able to take it far. If you have to bet on two or three stocks for 2016 and if your call is that largecaps at some point will outperform. What would those two or three stocks be?A: I look to all the private banks because I picked up what I think is the best bank but I am sure that Axis Bank and ICICI Bank again will come to the fore as the economy starts to pickup but they still have some non performing loan problems which we may see this quarter, so we are getting towards the bottom of that but markets are not going to wait, it is going to knock the share price is down first. So those are the two stocks I would be looking or we are looking at very closely in terms of whether we should be adding into the portfolio or waiting for the time being. So we are waiting at the moment.Anuj: What about IT because the call was that the rupee has been favourable, the US economy is looking up and still we have seen absolutely no leadership from Tata Consultancy Services (TCS) and Infosys. TCS is close to 52 week lows and 52 week highs?A: Because that decade of growth is behind us and I keep saying this, it\\'s not coming back, so therefore, it is becoming more like a commodity and now what PE should I pay for this. I would like to pay more like 10 times and more of 14-15 times and the Chennai problems obviously have affected the earnings there. So there should be surety of earnings going forward, it should be good value for you, but if you say that they become more like utility, right and if I am going to buy utility I want dividend yield. So I am getting none of that with the IT sector. So there is nothing to grab hold of and say this is a game changer for any other companies, the management keeps changing, they keep changing their strategy and still they are not getting the growth.Sonia: You were saying that you prefer largecaps but what about names like Bharat Forge that you have watched closely in the past and owned as well.A: We are playing auto component plays rather than Bharat Forge. It has corrected quite a lot and it is getting to the point, now we are going to start looking again but when you can see other compelling stories -- that was a story of two years ago, played out well, the share prices rose more than four or five times but these are the companies out there which could give you that kind of earnings growth which they enjoyed for two years but it is slowing down a bit now.