Markets offer a low margin of safety right now, but the longer-term structural healing of the Indian economy continues unabated, though, Dipen Sheth, Head - Institutional Research, HDFC Securities, said in an exclusive interview with Kshitij Anand of Moneycontrol.com. Any correction will offer opportunities to invest, he said.
Q) What do you make of the markets at current valuations? Do you think the market is topping out or has already topped out?
A) Markets offer a low margin of safety right now. The longer term structural healing of the Indian economy continues unabated, though. Hence any correction will offer opportunities to invest. This is, ironically, a consensus factor why a correction may not be deep!
Q) Geopolitical concerns have emerged once again. Do you think this could escalate into something bigger which will only lead to risk-off sentiment?
A) Yes, we have seen this kind of fear escalation around the Taper Tantrum, Chinese deleveraging/slowing down fears and even with European macro crises so a geopolitical event centered in the Middle East (now that the US looks more trigger happy) can certainly lead to a massive risk off.
Q) What is your call on March quarter earnings? Which sectors are likely to surprise and which ones are likely to underperform?
A) Positive surprises are likely in the Infra space, consumer stocks (only appliances), NBFCs, retail oriented private banks, gas companies, power transmission, wind turbine companies. IT services may see a potential bottoming out of its recent weak trajectory.
We expect weak results from real estate, chemicals and fertilisers, autos (barring Maruti Suzuki and Eicher Motors), corporate heavy PVT and PSU banks, cement, pharma, oil (barring gas), industrial capital goods.
Q) Any top 5 stocks which you think hold potential to become multibagger stocks in the next 2-3 years?
A) Potential multibaggers:
Jamna Auto PNC Infratech J Kumar Infraprojects Repco Home, and TeamLease
Q) What do you make of the RBI policy statement? Are we looking at rate hikes rather than rate cuts in near future? Does RBI nod to banks to invest in REIT lift outlook for real estate stocks?
A) No, RBI is merely being cautious given the run-up in commodities (ex oil) and the uncertainty on food inflation given monsoon jitters. It is likely to ease things if the supply side eases out.
Q) MFs saw bumper returns in the financial year 2017? Do you think the performance to continue in FY18? If yes, should investors be looking at smallcap theme or they should stick to largecaps?
A) Small and midcaps have outperformed massively in the recent past. A catch up by largecaps is likely over the next two years. However, successful bottom-up stock picking in individual cases typically leads to OPF in the midcap space.
For MFs, midcaps funds are typically more diversified than the large caps funds. Hence, OPF is possible but unlikely.
Q) What is your advise to investors for FY2018?
A) Buy large cap funds and pick individual midcap stocks for the long term.
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