Mkts realise world will grow at much slower pace: Jaipuria

Markets bounced back was in line with expectation since Indian equities witnessed a 10 percent correction in the last few session, said Jyotivardhan Jaipuria, Independent Market Expert.There is a realization that world will grow at a much slower pace and markets are adjusting to that. Yuan devaluation led to that realization since China has been the world's growth engine, he said. At the moment, largecaps are looking very good compared to midcaps. Bit more correction perhaps will make them attractive. Pharma space will be attractive for the next one year but cautions that many pharma names are looking expensive now. He advised buying on dips and says falling commodity prices have been a blessing for India. Most emerging markets would be struggling for the same reason and to that extent, India will be impacted with any sell-off globally.Below is the transcript of Jyotivardhan Jaipuria's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Latha: What is the sense you are getting of the overall market itself, the volatility we have seen on Wall Street as well. The big losses for consecutive days and a one day recovery upto about a third of the losses, is this indicative that the worst is over the bounce back or we are still going to see it play? A: The bounce back we have to look in the light that the market had got oversold like a long period of sharp losses, to that extent to typically expect a bounce back after such markets. From an investor point of view these are times where you have to probably invest slowly and buy every dip, I don’t think it is like -- can we say to the market it will never go below these levels, it probably will over the next few weeks but the markets are probably going to try and consolidate. It is good that we have had a correction because if we see in any 18-months period you probably have a 10 percent correction in the market. There was one overdue -- markets were like consolidating in a range. So we have got that consolidation period which everyone was hoping would come through. Sonai: Do you think that global deflationary pressures are perhaps a big threat to equity market growth here on? A: What we are seeing just now is like a realisation that the world is going to be a much slower place than it used to be. China which was the growth engine for the last 15 years of the economy is clearly slowing. It is something which lot of us had been talking about for the last two years but now that whole step of the currency devaluation was admission that they are finding it very difficult to have growth come back into the economy. So, the world is adjusting to the fact that it is going to be a slower place. Ironically, falling commodity prices are great for India because it helps the economy in a very big way. However, it is a mixed blessing that is what we have to remember because if you look at markets, markets are actually very positively correlated to oil prices, not negatively the way one would have thought. This means if we look at history when oil prices go down the market tends to go down and that is because of just the way the world is when you see oil prices going down we end up into the situation where most of it is signaling that the global growth is going to come down. So, it is a mixed blessing, it is good for the economy ultimately and so it help the stock markets. However, near-term a very steep fall in oil prices is typically accompanied by markets not doing well. Latha: How would the mix of investment picks looks like now, you have long tracked the oil and gas space, should your Rs 100 of investment avoid commodity stocks for now? A: In general one should avoid commodity stocks so they are not places where one wants to be. Of course in India when you look at the oil commodity stocks, the oil public sector marketing companies, which for the long time have got burdened with subsidy and were not getting margins, which were good. So that is one space which will still do well though I think a lot of the returns in that space has still got made but over the next six-eight months, I would be still positive in some of the oil marketing companies (OMCs) otherwise in general I would avoid the commodity space. Latha: Would you be high-up on the export oriented, dollar oriented stocks basically IT and pharmaceuticals? A: At least for the near-term, I would be overweight all the exporters simply because of the rupee and the benefit they will get from the rupee. These stocks have done very well so they are not cheap but at the moment they probably stand out because it gives you a bit of hedge against another possible currency weakness coming through. So that would be one segment I would definitely be overweight on._PAGEBREAK_ Sonia: Just wanted your view on whether you fear further largescale selling from emerging market exchange traded funds (ETFs) because since Monday we have seen emerging market ETFs see at least USD 16 billion of selling, given that we have these growth concerns, could we expect to see more? A: It will all be part of a global thing where people are getting nervous on markets globally and especially when commodities tend to come down though India is like a little bit different, India benefits with commodity prices going down, most emerging markets struggle when commodity prices go down. So just on a macro theme, the theme would be that if commodities are under pressure, growth is a question mark then you don’t want to be in emerging markets, you would rather be in developed markets. So India may be relatively much better than most of the countries in the world and that is something which most people accept that India will come out of this stronger, India will relatively be better. At the same time, we will be part of a global sell-off. So to that extent we will see foreigners pulling out some money that is just a global phenomenon. Latha: As an investor how would you approach this before I come to how a trader should approach this? Would you buy the big largecaps which were never available at bargain prices becoming slightly cheaper? Would that be your area of concentration or would it be the gems in the midcap space? A: Essentially what you have to think is over the next one year 18 months if domestic growth is going to be quite good and just remember lot of commodity prices are coming down so input cost pressure is going to ease for lot of companies. Look for people who will gain from either weakness in the currency or from lower commodity prices and look at valuations and buy them. Just from a midcap versus largecap perspective on broad-brush midcaps had become quite expensive a relative to largecaps so to that extent largecap were looking much better. The correction in the midcaps is going to be much sharper and that is typically the case. So, may be you will start getting midcaps also at attractive prices. At the moment in general largecaps are looking better than midcaps on a valuation basis. Sonia: Just coming back to the point you made about pharmaceutical stocks that have done very well but are not cheap at this point, going ahead say if someone has a six months to twelve months horizon do you think it still makes sense to increase allocation to some of these largecap pharmaceutical names, the likes of Lupin etc just because there is some amount of stability as far as earnings are concerned? A:Especially given what has happened to the currency it had added to probably to earnings safety outlook in these so to that extent I would still be adding to pharmaceuticals and that is one space which will still be attractive over the next one year. Latha: Where would you place your bets in finance stocks, would it be safer to go to non-banking financial companies (NBFCs) at all and of course the inevitable question on public sector undertaking (PSU) banks?

A: It is very general concern and I am part of that -- the private sector banks are the easy ones to play so you keep playing the private sector banks. On the PSU banks, I think there will be a time to buy them, they are cheap but we probably can wait for another few months, wait for little more signs that the economy is turning around because essentially what the whole global turmoil is going to do is probably tend to delay the recovery a bit more. So to that extent, there is no hurry to jump into the public sector banks but they are at a situation where they are looking quite attractive if we start getting a turnaround in the economy.

Latha: Would you buy HDFC? It is flat year-to-date (YTD), month-to-date (MTD) down 15 percent and week-to-date it is down 7 percent, there seems to be some concerted selling in that stock, delivery based selling probably even by foreign institutional investor (FII) in the past few days should it be a buy in distress call?

A: Yes, high quality stocks are well owned by most people. So what happens is when the selling comes, people do tend to sell some of these stocks which are owned a lot. Businesswise things look good and it is a stock, which one should hold for the long-term. So to that extent, I would be buyer on correction in these sort of stocks.

Sonia: Will Tata Motors also feature on that list because that stock has been severely de-rated as well; is this the time to buy it?