Daily Voice | Why this ace investor sees recent all-time highs as top of the market for now

Are you bullish on the chemical space?

Of course. Looking at the recent share prices, many commodity names are correcting, and one would think why. But one has to separate near-term cyclicality from long-term structural growth. Specialty chemicals may still be relatively strong given their moat and value-add angle, but even the commodity players shouldn’t be overlooked.

Prices have softened primarily due to a decline in global demand, softening of some of the raw material prices and due to the softer demand in China that has led to an increase in their exports.

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In our view, the long-term thesis still holds that India will increase its stature. We are currently ranking number 6 in the world in terms of chemical capacity but will benefit more as the economy grows and more tailwinds are expected from a number of sources.

Not only China+1, but Minus China, as China itself looks to reduce both over-capacity and some of the more basic/environmentally cloudy products. The tailwinds won’t only blow from the East, but possibly even from the West as Europe looks to relocate some of its manufacturing.

Do you think the manufacturing sector will generate the biggest multibaggers in the current decade?

It's hard to imagine multibaggers in the first place, let alone guess which sector will generate the biggest. But for us, we are happy in a sector that has a decent balance sheet, and perhaps produces products that are easier to understand. It is really about sticking to what you know and while other sectors may produce better returns, I am happy to swim in my lane.

Is the infrastructure sector looking overvalued?

Valuation is about time and perspective. A lot of infra companies have had a brilliant run. But rightly so, thanks to the government’s strong push on developing infra, it is also an election year which has accelerated spends and all this has translated into record-high order books.

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I don’t believe that the journey is over as infra projects themselves take time and the country has ambitious plans.

Do you expect a bull run to start soon in the steel sector?

We cannot time the market! Steel has been again impacted by a slow pick-up in China, which has led to their exports increasing and a subsequent softening in prices. But India, over the long term, will be a steel powerhouse.

Again, similar to the chemicals thesis, we believe that as India becomes a richer country, there will be an inflective increase in demand, coupled with the over-riding thesis that China itself will continue to reduce its excess-capacity in this basic commodity as it looks to move into more value-add products.

Do you see any risk to the FII inflow that boosted the equity markets confidence in the current fiscal?

There is always a risk that it may do an about-turn. Narratives and sentiments may change. My vision is far-sighted, I believe this is India’s decade from a structural basis, and any near-term volatility caused by liquidity flows can in fact create opportunities for FIIs to continue entering the market.

Is it the time to sit on cash or stay invested?

This is a question of time, it’s difficult to gauge, and it doesn’t need to be absolute. For instance, at the beginning of the year, people were spooked by all the bad news out there, but today, we are around all-time highs. This may be the top of the current market, but it’s hard to second-guess the near term.

Personally, if I was feeling a bit edgy and wanted to take some money off the table, maybe I would shave off 5 percent. My preference would be to stay invested as long as I was still able to be in stocks that were well valued, and my risk-appetite was able to take what I perceived to be a notional loss.

One often hears that India is over-valued when looking at the Nifty50, for instance. But that’s just 50 stocks, while we have over 1,000 listed. For those with the right philosophy and effort, one should be able to find a basket of stocks that are well promised and relatively well-valued.

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