In Samvat 2077, auto as well as Nifty pharma did not see much growth compared to the other Nifty indices. What are you making of that and do we see that trend continuing now?
The scenario and the sentiment right now is very similar to what we saw last Diwali because we were just out of Covid first wave. Markets had run up a lot, there was this confusion whether the market can actually continue the rally. But then liquidity completely took over and as we got out of the Covid second wave, we are hitting levels of 60,000 and beyond and even now there is some concern whether this can continue. But I believe that the last one year was all about deviating from the mean and the next one year would be about reverting to the mean.
We have had a fabulous year. A lot of the positives are already discounted in the price. I do not think the indices can run up at the same pace. I am talking about the headline indices, The market is going to be a lot more sector and stock specific going forward and therefore we will have to work a little hard for returns.
Coming to auto and pharma sectors, auto had a fabulous 2020. It is only in the last four months that it has not done as well. Clearly there are some headwinds on the fundamental side and even chartically there have been some issues. So, auto will be a market performer. I do not see great moments there and even pharma you know and index which have moved up almost three times in value from the 2020 lows has underperformed in the last four to five months. So I do not see any immediate opportunity. The liquidity is now moving into the underperformers and we like real estate, capital goods, the banking space and also the PSU banks.
The underperformers are going to be the basket that could give you serious returns over the next 6 to 12 months. So our view at Goldilocks is to stay away from the high fliers of the last one year and stick to the underperformers. That is where the real return will be made.
What have been the learnings in the past year? What are the key themes that would continue going into the next year or learnings which could do better in the coming year?
After a very long time, I feel very optimistic and excited about the outlook for the Indian economy. Even in the pre-Covid days, there was a period of three or four years from 2016 onwards where the economy was not in the best of shape. After a very long time, I feel very excited about the Indian economy and firmly believe that over the next three to five years, the Indian economy will surprise all of us on the upside including myself.
You said that the underperformers will do well going ahead. How does one identify which of those underperformers would do well in Samvat 2078?
Underperformer is a very sensitive word. If one has actually invested into underperformers in the last many years you know you would have been on the wrong side of things and there have been so many first breakouts in the last 10 years. Look at real estate; every two years there is an attempt to break out and it falters. It was almost a trap which is being led for investors every two years and therefore people almost gave up on it.
Something similar was happening with PSU stocks where despite such great dividend yields between 5% and 9%, capital appreciation was never there for PSU stocks but with what has happened in the last three-three and a half months, this is a structural change and the fact that they have started to outperform relative to the Nifty is a game changer because we have not seen that in a decade.
Which is your dhamakedar pick for Samvat 2078?
Firstly a disclaimer, whatever I say, we might have recommended to our subscribers at Goldilocks. Since I like real estate and I believe that this is a theme that will stay for the next one year, the stock which I am picking is
. This is a stock which has not done nothing just for a decade. The recent corporate development, management change is a sort of a game changer and the charts reflect that while the stock has already done quite well in the last three to six months.
The potential upside from current levels is huge and the market is not much aware of the fact. That is probably the reason the stock has underperformed just a little bit in the last couple of months. If I have to take a one year view, I see a 40% to 50% appreciation on this stock and it is likely to outperform the real estate index. The charts are good, weekly charts and monthly charts have shaped up after a very long time and these are the trends which will not reverse in a hurry. We are quite confident and we feel that to play the real estate theme, Indiabulls Real Estate is one of the better place.
For your next pick, do you have anything from the reopen trade?
Yes I love the unlock trade. I have been a big bull on it for many months now. We went through a Black Swan 2020 which I guess India and the world was not prepared for and the unlock set of stocks have probably seen the worst in decades. In that sense, the opportunity is huge.
Hopefully, the Covid third wave does not come and that is what the market is factoring in. If it continues the way it has for long, the stock which I am picking is PVR. I really like the stock set up which has gone through a consolidation phase for the last six to eight months. It is a marquee name, it is an industry leader and it has great institutional backing. I believe that PVR has the potential to get past lifetime highs. May be a 30% to 50% up move from here is quite likely. I like a number of stocks but PVR offers great risk reward and it will do well in difficult markets as well.
Quickly what will be your third pick and the rationale for that?
I am picking a new age business. Thus is a stock which has not done so well in the last three-three and a half months but it has great potential and that is Route Mobile. Lot of market participants might not understand this business but the kind of model that it has is very futuristic and I do believe that if things work out the way they should and what the management is trying to do, over the next five to 10 years this stock can generate tremendous value and this is one of the fewer stocks which has done very well post listing. It is a very nice clean looking chart making higher tops and higher bottoms at regular intervals and then does not get impacted by market corrections. It has some large marquee investors; the earnings trajectory has been excellent in the last multiple quarters and the commentary has been great. On top of it, the chart set up is fabulous and so this underperformance of the last two months is an opportunity. But the downside is limited to just about 10% to 15%, if at all. But the upside potential is huge and this would be my third pick this Diwali.
