How do you see the overall market configuration now? Do you think there is a sense of relief in the market now that the second wave of the pandemic is gradually behind us and we will likely see a strong recovery in investment?
The feeling of relief probably came around the middle of the second wave itself. Our 12 month Nifty target is around 15,500 so we clearly see a downside to where we are today.
Capex is one of the stories that you generally need to be careful and selective about in terms of which sectors you want to play when valuations are stretched. We have advised investors to look to private banks, even though bank stocks have risen above their historical premium over the market. Some car and power supply names sound interesting.
What sole proprietorship are you looking for in the financial space?
I would like to play the best 3-4 private banks and. If you look at a stock in isolation today, it looks expensive compared to its history. But you have to look at where the ratings are relative to Nifty and where they were in the past. Most of these private banks are still around 10-12% off.
How do you see the electricity sector? This sector has been in turmoil lately. Do you think this is a flash in the pan or that there is merit in the story?
The immediate outlook for growth and demand may not be so strong. Interest rates have bottomed out and you might start to see bond market interest rates rise. These sectors would generally perform better. The type of PE compression that occurs for these actions should be much lower than what you would see for other actions. Our view of the house is for a gradual increase in rates overall, but I think stocks like
should probably do better if rates start to rise. Otherwise, from a demand outlook perspective, the short term is not so good.