What is your strategy to deal with the current volatility? How would you advice investors to go about current holdings particularly in pockets that have been impacted?
The market stayed resilient for a long while. In the last 2-3 months, Sensex corrected anywhere between 1,000 to 2,000 points at least 4 or 5 times. Earlier, US yields played as a spoilsport but so far market has been resilient to any Covid or lockdown fears. Investors are now worried about the economic fallout of a fresh surge in these cases. Vaccination is also going on. But currently the fallout is more on the sense that lockdown will happen in lot of states and again that dreaded word called lockdown can probably hamper economic activities. That is why the broader participation which was happening in the market, right from IT, pharma, FMCG to metals or banks and NBFCs, can get hampered for a shorter period of time. The assumptions of 11% GDP growth rate and above 30% earnings growth for next year can get deterred at this point.
We have been advocating a balanced portfolio. You should ideally have IT, pharma, exporters and FMCG as defensives in the portfolio. You also need to have banks and insurance companies.
What is your take on Dr Reddy’s Laboratories (DRL)?
The stock has probably underperformed the broader market and other pharma companies. It is again that time of the year (like what happened last year) when a lot of pharma companies came to the fore and started to do well. You will get news thick and fast in between of sudden approvals for vaccines or some drugs. Hospital stocks, labs, niche pharma companies, MNCs like Abbott, Sanofi and Pfizer have underperformed in the last 3-4 months when all the high-beta stocks rallied. So it is time again when people will like pharma stocks, DRL as well.
What is your take on TCS numbers?
The company’s earnings have clearly benefitted from the surge in demand for digital services and also from migration to cloud services over the last 12 months. Pandemic is, of course, the trigger. From the second quarter of FY21, large deal wins and client spending on cloud computing, artificial intelligence, internet of things and shifting to digital has helped all IT companies. So we certainly carry a positive view on TCS, Infosys and other companies like L&T Technologies which are going to benefit. Productivity improvement is the central theme as work from home will prevail for some time to come.
