Daily Voice | Here's why this market veteran thinks Tata Tech IPO can be a multi-year growth story like TCS, Elxsi

In the last two weeks, Dow Jones is up by almost 8–9 percent, which is unprecedented but also reflects that in the short term, US markets look overbought. Hence, starting today, we may see some time corrections and price collections in the US stock market. This one-way upward rally in Dow Jones has surprised everyone in the market, as no one anticipated such a sharp rise in US stock markets and that too in such a short span of time.

This calendar year, the S&P 500 has given a RoI (return on investment) of 18 percent, while Nasdaq 35 percent, which has defied the recession in the US economy that was predicted by almost every analyst in the world a year ago at the same time.

And now everyone seems bullish on the US market for the next year. However, we are cautiously optimistic about the US markets, keeping the calendar year 2024 in mind.

We believe the US economy will continue to do well. However, the stock market will take a breather, at least in Q1 of the calendar year 2024. Also, next year, the US market may face some extreme volatility due to the upcoming elections.

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Do you see a rally in Indian equities as well?

Yes, I do believe that Indian markets will rally in the medium term, particularly in mid and small-cap spaces. As of now, the Nifty looks fairly valued compared to its historical valuations but is expensive compared to other emerging markets.

For the Nifty to take an upward journey, we must have a positive FII inflow, which we are not seeing due to higher G-Sec yields in the US bond market over the last three months. Till last week, 10-year US G-sec was trading at a yield of around 5 percent, which is almost at its 15-year high.

Hence, keeping these facts in mind, the Nifty may take some more time to start its perpetual bull run once we start seeing positive inflows from FIIs.

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What are the factors that can put a break to the market recovery that started this month?

The only risk I see is the intensifying of the Israel war for the time being along with possible higher crude oil prices due to geopolitical tensions in Gulf regions.

At this moment, the US Fed rate of interest looks almost priced in by global markets at current levels. Also specific to India, any adverse outcome from the state elections can spoil the market mood.

What do you broadly expect from the commentaries by the RBI and the Federal Reserve in the policy meetings scheduled in December?

In my view, we may see another 25 basis point hike by the US Fed in the worst-case scenario. The only risk that may exist is a “higher for longer” rate of interest cycle, which may not go very well with the global markets next year.

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So far as the RBI is concerned, we believe inflation specific to India looks under control. However, the rate cut by the RBI will only follow once the US Fed starts cutting its rate of interest next year.

Do you expect Tata Technologies to be yet another multi-year growth story?

Yes, I do believe Tata Technologies can be a multi-year growth story like TCS and Tata Elxsi. This IPO of Tata Group is coming almost after 20 years, which reflects a compelling value for long-term investors. The business model for Tata Technologies looks robust and can be a money compounder, keeping a three to five-year view in mind.

Also read: Tata Technologies IPO: Anchor investors pick Rs 791 crore worth of shares

What is your take on the IREDA, Fedbank Financial Services, Gandhar Oil Refinery and Flair Writing IPOs?

Given the euphoria in the Indian IPO market, all four look good to me. However, I will back up Fedbank Financial Services as my topic amongst all four IPOs. I see this IPO at a compelling valuation, which should not be missed by value investors.

After a small break, the broader markets returned to a fresh record high. Do you think the rally looks sustainable in the year ahead?

Yes, you are right. Recently, the broader market touched a new high, while the Nifty midcap and smallcap indices have touched a new lifetime high. Both Nifty Midcap 50 and Nifty Small Cap 250 have given a return of 40 percent in the last year, which looks fantastic by any standards.

However, after such a sharp run, there are higher chances that some of the sectors and stocks may have some price and time corrections in the short to medium term. However, in the long run, India’s bull market in the mid- and small-cap space will continue to grow.

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Are you overweight on consumer, IT and largecap banking names?

At this moment, we are extremely bullish on largecap banks like HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and some of the mid-cap banks like Federal Bank and Bandhan Bank.

In the IT sector, we are bullish on TCS, Wipro, Infosys, and Mphasis. In the consumer space, particularly in the FMCG sector, we find compelling valuations for HUL, Marico, and ITC at current levels.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.