Would you say the market reaction is more sensible this time compared to last year?
Yes that is true, and, of course, there is a reason for that. Last year, the whole thing came out of the blue. Last year, it was a black swan event. This year, it is not a black swan. A large part of it is known. Of course, the second wave quantum probably has been much higher than expected and the handling has also not been ideal. But yes, the market reaction is surprising. It is surprising in the sense of the kind of resilience the market is showing.
A lot of industries are diverting oxygen production towards the medical requirement reasons. In a pandemic situation, you have to do that. But what the impact will be on the production of some of the goods is still not known. I do not know if the surplus oxygen production is being diverted or if it is being cut at the expense of industrial production and what will be the impact on goods and industries. We also don’t know whether the market has built that in or not.
In the case of auto, things already were not good and that was reflected in the sector and the stock price movements. The market is indeed showing resilience and there is sectoral rotation. Nifty peaked on February 15 and touched 15,300. From there, the market has been range-bound.
Two months have passed and we have corrected 7-8%. In between, it has kept going up and coming down. A good thing that has happened is that the small caps have outperformed in the last two months. That is a positive sign. As I said, sectoral rotation seems to be holding on.
A lot of financial results will be out this week. What are you pencilling in?
The answer to that question would have been much easier in normalised circumstances. By normalised I mean 15-20 days or a month ago when the second wave of Corona was not considered as big as it has turned out to be. For
, in the normalised circumstances, it would have been easier for them to guide the investment community, the shareholders and for themselves. But now, suddenly, instead of the quarterly numbers which are largely going to be on the expected lines because last year’s March quarter was very bad because of the sudden lockdowns and on a year-on-year basis thanks to low base, the numbers will be good.
The question now has become what impact will this have because there is already talk of what impact this will have on let us say microfinance collections, on the retail collections etc. Last year, Supreme Court and even RBI gave a moratorium and asked banks not to count NPAs. Nothing of that sort has been done this time and is not likely to be which is quite okay. One has to take it in stride.
The bigger thing to watch out for is that there will be no commentary from the management on the coming quarter because they themselves will not be in a position to analyse that. That is where it has become difficult to pick one or two or three picks. But if at all one were to look at it from the medium to long term, look at it from the valuation perspective and look at it more from the management’s capability to handle the situation. Among private sector banks, ICICI Bank will be a good pick for me whenever the market or the stock corrects.
