How are you seeing the prices fall in the commodities market? How will that translate for the equity markets here?
What we have seen over the past entire year is a fabulous rally and there are no two thoughts about it. From the bottom of the market, we are up by anywhere between 110% and 120% or even more. There are three moving parts to this rally; liquidity which has been prominent across in the last one and a half years right from the foreign investors to domestic investors. So even when we talk about retail investors or mutual fund money or domestic money, this is always driven by what statements made by Fed or other central banks of the world and how the stimuli across the markets pan out.
In the last couple of months, we have been hearing about not only the taper tantrums coming back to the fore but also about when interest rates will rise in the US and across the emerging markets. In the last two days, the rhetoric has been that the tapering would happen a little sooner than what the market was anticipating. We have already seen the correction happening in metals and the US markets correcting. If we cannot digest a 5-7-8% correction at this level after such a huge rally, it is going to be difficult and corrections will be part of the bull market.
The other two parts are sentiment as well as the fundamentals or the macros. The micros are improving a lot in India and that is why there is no reason to worry a lot. But yes, if there is a 5-7% correction, a lot of new investors who are waiting on the sidelines would start coming in and investing into the market. So I do not take this as a big surprise. Yes, there will be some corrections over the due course; the side market was also correcting for the last few days. So, a 5-7% correction from here on and would give good valuations to enter the market again.
How do you see the entire auto space playing out? Do you see any promise from the upcoming festive season?
The last three years have been very difficult for the entire sector — be it two- wheelers or four-wheelers. Only some of the tractor stocks have done well. Apart from that, it has generally been a very rough ride. Look at
, look at Eicher over the last three-four years. The sector went through multiple problems of euro norms operation.
We saw what lockdown did to these companies and when showrooms are closed for the better part of a year, how would the sales take place? Again, the sentiment was not as great for buying vehicles. But there was a double-edged sword on that. A lot of people wanted to buy a second vehicle such as a two-wheeler or four-wheeler and normally these sales do extremely well during the festive season.
The sense here is that after a long hibernation for this sector, in the next two to three months, the important monitorable is whether the sales now get a boost. August-September-October are three months where probably a lot of people are just setting their sites on how the sales emerge. A lot of these companies have also taken price hikes because of raw material pressure which augurs well for them. A good thing is productivity improvement and optimising their costs in the last one year. This probably could be the dark horse in the next two-three months. If the sales see a good amount of traction, this sector probably would again be in favour but right now, it is more or less a neutral type of sector.
A lot of people are not encouraged to go for discretionary consumption stocks. Companies like Titan or Page or other such companies are seeing a lot more momentum or a lot of more consumption is going to happen to
of the world. I am not recommending the stock but just sort of dissecting one trend with another trend.
Copper prices are at a four-month low and the stock touched a new life high on Tuesday. Either copper prices have to go higher or Vedanta stock has to come lower.
Yes, it is a difficult call to take. Metal has always been a very difficult cycle and let us be very fair that it is important to not time this time very well. All around there is taper tantrum fears. But if that is going to happen over a due course, there is going to be a correction at least in the metal prices or the dollar index is going to rise. Crude is coming down. Copper would also come down in a way. That could probably signal a peaking out of the prices of Vedanta. Maybe from here on, the brilliant days for the metal cycle seemed to be coming towards the fag-end. Of course, there is a chance for things to go wrong horribly because nobody predicts the metal cycles very well. But from here on, one should probably book certain profits across the table in some of these metal stocks, including the name that you talked about.
How would you approach after the fund raisLooking at the type of investors who are getting into the Canara Bank QIP, it seems like part of it is for writing off the bad loans. Banks probably are towards the end of the NPA cycle. The new cycle does not start for bad loans or NPAs. We are somewhere near the fag-end of the completion of this bad cycle.
Secondly, these banks probably were growth engines for the economy for both the private sector and public sector. They have improved their numbers over the last three-four quarters. So this probably can be a little bit of a growth engine, though we are still not at all positive on PSU banks as a whole. Maybe one or two banks qualify as buys but it is an important monitorable that all of these companies are raising money to take that growth engine forward. This augurs very well for the overall capex of the economy as well.
I think the market will take Canara Bank very positively when good investors come into it and QIP gets a good response. So yes again positive for that but overall, banks have underperformed though the NBFCs have done well. There will be some time after this minor correction where even large private banks will come back to the fore. They will grossly underperform the market but if capex is here to stay and if Indian markets are going to do well, this sector will start performing– private banks and some of the PSU banks.
