Markets will see an explosion, but next week will mark the grand final for 'Modi stocks': Sushil Kedia

Not too long ago, the vast majority of our population would end up swinging their last minute votes on a bottle of cheap rum or a bicycle or sometimes even on a laptop. That era is gone, and people are seeing that their self-interest lies in voting responsibly. It’s very rational behavior.
On exit polls, most pollsters, due to the limitations of statistical methods, will tend to make conservative estimates, which is what is visible in the last 4-5-6 elections; the winning side was underestimated in each of the elections, in each of the exit polls. 380 is what the pollsters are broadly claiming today. Who knows? It could be a 400-plus mandate also, which will be discovered only on Tuesday.

Also read: Current pullback an opportunity to buy, Nifty faces strong resistance, says Sushil Kedia

So, you expect an upper circuit on the index on Monday?

I don't want to make extreme forecasts. But euphoria will be hitting the markets on Monday itself. Those who were scared, or hedged, will rush in on Monday.

Your strategy next week?

My market response is based on how aggressive the market is. Monday will change. My philosophy is buy on anticipation, and take the cash, when the anticipation works out. So, those who haven't bought yet, those who are underbought, let them participate. We are loaded up to our chin. And I'll never go up to my nose.

Market's response to this will be a rally on Monday, Tuesday?

Explosion.

Define explosion. Over 5%?

You cannot rule out an upper circuit. But it is better not to expect it. Many stocks through the next week may go up 20%. Even stocks that I expect are going to be getting into a state of weakness over the next 3 months or next 6 months, they will also get whipped up. So, the job left now is to figure out and keep an eye on the larger trades over the next 3 months and avoid pockets that are already euphoric and where there may be a final bull drag.

So, where are you fishing?

We will continue to back stocks where the relative margin of safety was very high. Stocks that have not performed well so far: FMCG, IT, media entertainment, some bit of chemicals. We will stay away from metals. We will get out of any remaining positions in autos. We will be actively and eagerly looking for this euphoria to settle down to start finding shorting opportunities in financials.

So, you are betting on a completely different set of stocks to lead the rally from hereon…

Yeah, I see major down drifts on the charts of copper, aluminium, zinc, even gold, silver. Even Narendra Modi's return to power cannot defy that gravity. Once this election euphoria is out, it will be business as usual. The commodity businesses like metals, banking or even NBFCs, they will have their own stresses.
What happens to the Modi stocks?

All of us love to speak in euphemisms. Our market cap to GDP ratio is already 1.4, which is, by that Buffett indicator, a stretched valuation. If the masses rush into the so-called extremely stretched Modi stocks, without applying their brain, and they get emotional, well... You don't get free lunch.

So you are saying these so-called Modi stocks are set to correct now?

These so-called Modi stocks have been leading the euphoria. Market creates its internal currency. So, stocks that have been weak and where, newer green shoots will come, they will go up. This is the completion of euphoria. Stocks that have been already euphoric, their finale will come in the next 3-4 days. After that, a solid correction in them should come.

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