Speaking to CNBC-TV18 Jyotivardhan Jaipuria, Founder & MD of Veda Investment Managers said that the pain from demonetisation will continue for three more months. â€œWe are still 8-12 weeks away from normal.â€
Speaking to CNBC-TV18 Jyotivardhan Jaipuria, Founder & MD of Veda Investment Managers said that the pain from demonetisation will continue for three more months. “We are still 8-12 weeks away from normal.”
The first quarter of the next fiscal year will be volatile, he said, adding that lower prices now are a chance to buy big names in auto and cement. He believes a few of these companies have come off 15-30 percent.
“Buy on dips. Buy the pain in the market."
Although the consumption space was hit, infrastructure and capital goods were not impacted that much. In the last 7-8 years, they have been trading at a lower end, he said.
He likes a mix of capital goods and consumption.
He believes that the room for the Finance MInister to offer great tax sops is limited. "I hope he tries and spends on infrastructure which is more important than giving small tax rates."
Below is the verbatim transcript of Jyotivardhan Jaipuria’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: How have you read the tell-tale anecdotal evidence of demonetisation and its dislocation of the economy? Is that largely priced in?
A: It is still not over, so till we get back to normalisation it could continue for the next three months. So, in the first quarter of the year, we will have ugly earnings data and people still grappling with hoping for the normalisation. We are probably are another 8 to 12 weeks away before we get back to normal on the demonetisation front.
Sonia: So, until then, do you expect to see more damage on some of these consumption oriented plays, auto, cement etc and what would you do then would you stay away or would you put some money to work here?
A: Q1 is going to be a volatile period for the market. We probably will see lower prices also at some point during the first quarter, but what it also does is it gives you an opportunity to buy some good companies because you are getting them quite cheap. So, my view would be on dips you should buy some of these names because some of them have come out quite a bit. They have come out 25-30 percent and once we get back to a normalisation phase these will do badly. I would say buy the pain in the market.
Latha: Where would you buy? Would you start nibbling at infrastructure because they have been such a neglected sector for so long, capital goods or will you persist with consumption goods?
A: I would say mix of both, so I like some of the capital good names because I think over the next two to three years what we are going to have is a surge from the government on spending on rural areas and on infrastructure. So, I would play both these themes. Out of these two like the ones which have got hit a lot by the demonetisation is the consumption space. Infrastructure, capital good names has not got hit as much, but if you just look at it over the last 7-8 years they are probably trading at a low end of the range. I would probably buy a bit of both of these baskets rural India and capital goods/infrastructure names.
Sonia: The market is picking up a bit of pace, so it seems like at least for the moment it has put a bottom around that Brexit day low of 7,900 to 7,930. Do you get a sense that that low could hold in the first quartile of the New Year?
A: Like these are the holiday period, so I don’t know whether it I s fair to look at this period and forecast the market. It will be a tough market. It will be volatile, I think there is a possibility that low can be breached at some point in Q1. We will have earnings which are not great. My eyes are on the global developments because Donald Trump takes over as the President finally in January and we have seen dollar appreciating. Appreciating dollar has never been good for emerging markets, so we have already seen it going to below 1.04 to the euro and that is where I would keep my eyes on.
Latha: You said that you would have a mix of capital goods as well as consumer goods. Where are your preferences in the entire financial space private, public, small banks, NBFCs the whole range?
A: It is in private banks, basically the safe area, which is very consensus. We are looking at some of these NBFCs the good quality ones, which have corrected quite a bit and trying to figure the right time and the right valuation to buy. We will get them at a decent valuation sometime early part of next year, so probably will add some NBFCs to the private banks.
Latha: Does the Budget have enough spunk to pull this market up like it did last time?
A: We always get very excited about the Budget but my view is that ultimately the room of the finance minster is limited. It is not like he is going to get a lot of taxes, this whole talk about dividend from the Reserve Bank of India (RBI) probably is not going to materialise. So, to that extent, he doesn’t have too much room to play around with he gives some taxes at a lower end but that by itself is not good for the market. I hope he tries and spends more and more money on infrastructure, whatever surplus money he has got because to me that is probably more important than giving the small tax breaks.
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