â€œNifty could try testing previous highs of 9,100 because the global environment is the backdrop there,â€ Andrew Holland, CEO of Ambit Investment told CNBC-TV18. Fundamentals in India are still looking good, which is not the case globally.
The liquidity-driven global markets are pricey at current levels, but the uptick is expected to continue for a while longer, believes Andrew Holland, CEO of Ambit Investment Advisors.
“Nifty could try testing previous highs of 9,100 because the global environment is the backdrop there,” Holland told CNBC-TV18. Fundamentals in India are still looking good, which is not the case globally.
“We (Ambit) are playing a lot through the put options to buy protection for when this day of liquidity ends,” he says, adding that global events too are closely watched.
For now, nothing is scare-worthy in global markets, he adds.
Holland is betting on cyclicals and industrials on back of good monsoon. Companies that have done well, but still have room for improvement can also be looked at.
Holland, however, says: “My problem about getting too excited in liquidity driven market is that something changes and it will, which will bring a negative to global markets.”
The story in telecom is not over yet. With entry of Reliance Jio, more movements in the companies are expected. He recommends not buying into telecom now as more damage may come, he says.
(Disclosure: Network 18, which publishes moneycontrol.com, is a part of the Reliance Group.)
Below is the transcript of Andrew Holland’s interview to Sonia Shenoy, Anuj Singhal and Latha Venkatesh on CNBC-TV18.
Latha: How does the Nifty feel now that it has touched 8,900? Pricey, time to move away or just enjoy the ride?
A: It is actually feeling like it did when we last spoke actually. It is obviously still very pricey, liquidity is driving global markets. So it would not surprise me if try and test the old highs of 9,100 because the global environment, the backdrop there is favourable after the Fed spoke on Friday, the jobs data came out. The figures were weak enough to make you feel that September is not on the table.
And the only reason it could be and this is something which we need to think about a bit more is you are hearing more and more central banks, you have heard it from the European Central Bank (ECB), you have heard it from the Bank of Japan about negative rates. And even Janet Yellen herself said that she was concerned about low interest rates.
So, maybe the only reason she could do it was to try and get that yield curve a bit higher globally where obviously negative rates is really having a real negative impact actually. But that aside, you had Russia and Saudi still saying that they are going to be cooperating on oil. So I will look at the ducks in a row for this liquidity driven markets to continue for a little while longer.
Anuj: So in that case, do you still participate at these levels and if yes, then what sectors, what stocks?
A: Obviously, the banking sector, which as you know has been a favourite of ours. The private banks will continue to do well and as our expectations now with the monsoons looking okay, then you will get that pick up in the economy. So, we can start looking more at the cyclicals and industrials a little bit more which have performed okay, but the performance could move higher.
But my problem about getting too excited about in liquidity driven markets is something does change and it will which will bring a negative to the global markets to think about.
And once that comes, the fundamentals where we are while still looking good for India, globally, the P/E levels are so high that there is nothing really fundamentally to keep them that high. So, that is a concern in terms of just chasing the market. You just stick with it for the moment till something changes.
Sonia: I know that IT or technology is a consensus sell at the moment, but is there any contrarian call that you would want to advise here because the valuations for stocks like Infosys have become dirt cheap right now.
A: I have been very negative on that sector anyway. So, when it gets to P/Es nearer to 10, then I might start looking again. I just feel that with the uncertainty of the US elections, it is going to be sector which is going to be looked at negatively. You are seeing many downgrades now within the sector and that will continue. So, there is one thing that is quite confusing.
You are hearing from companies on what is happening on the ground because of the changes in the UK and Brexit. But markets are saying that there is nothing really happening. I saw that the UK has said that you need a national consensus now on Brexit which is pushing the can down the road a little bit more. So again, that will probably be a little bit more fundamentally good news for the UK markets.
Latha: What would be the shuffling that you should do in the domestic market itself? We have seen these autos and financials do very well and the IT and drugs now being followed by the telecom stocks. Is this the long and the short of the market, or the long ones have gone terribly expensive?
A: You stick with the sectors which are doing well which is the three that you mentioned. And obviously, the three that really just have their own negative problems going forward. And on the telecom sector, whilst we are still grappling with whether it makes sense to be in Reliance Jio or stick with where we are, this is the first salvo by Reliance, I do not think that by the end of December, once they have done this initial phase, I am sure there will be other phases coming through depending on how successful they are in the next three months of garnering customers.
So, I do not think we are over in terms of the telecom sector and whilst I heard previously, Udayan saying that Bharti has obviously also got the way would also get this through. Would I buying now? The answer is no because there is more damage to come unfortunately.
Latha: In your fund, how long short are you?
A: We kept our longs reasonably high throughout last month and continuing to this month, but it is difficult to keep high shorts at the moment, because obviously all stocks, all sectors whether you like them or not, tend to go up.
So, we are playing a lot through the Put Options to buy protection for when this day of liquidity ends. So, we are keeping a close eye on the global events, but at the moment, there is nothing out there which is scaring anyone.
Anuj: How will you approach auto names, the two big ones? Some of them have been your favourites as well, but stocks like Maruti and Tata Motors at current levels. Do you think there is still some more steam?
A: There probably is for the whole sector. So, we are keeping with our long bias for the whole sector. You do tend to switch around a bit in these markets because the fundamentals for some of these, again the valuations are bit above the valuations that we would like to be holding them.
So, we are switching around a little more actively, a little bit more towards the two-wheelers and the four-wheelers to be honest at this stage. And we will continue with that bias.
Sonia: The sector which has done really well up until now is cement. Is there still more value in that space or do you think now money will start moving out of cement and perhaps, into other sectors like autos, etc.
A: No, the cement stocks will continue to enjoy a favourable run. We are just at the start of the infrastructure spending and that should accelerate over the next few years as well if the economy picks up as we all expect to now. So, there is still more room for the sector to move ahead.
And we saw even with the negative view from the courts or from the Competition Commission has hardly had an impact on the prices. So, we think cement as a sector should continue to do well.
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First Published on Sep 6, 2016 10:29 am