Porinju, Safir and 4 other top value investors tell you where is money in this market

Top value investors on Dalal Street are not anticipating any big fall in the domestic equity indices anytime soon, even though valuations have become pricey amid multiple weak macro signals for the domestic economy.

The fear of missing out (FOMO) will ensure the equity market does not see a big fall anytime soon, unless there is a completely new unfavourable event or a major second wave of Covid-19, they say. At the same time, they do feel valuations have become expensive and urge investors to stay cautious.

BSE benchmark Sensex and NSE’s Nifty have surged over 50 per cent from their respective 52-week lows hit in March in the wake of the Covid-19 outbreak.

In a quick connect with ETMarkets.com, six renowned value investors — Safir Anand, Niteen S Dharmawat, Dhwanil Desai, Abhishek Basumallick, Gaurav Sud and Porinju Veliyath — shared their views on the state of the market and identified the themes which, they feel, may deliver big returns despite various uncertainties haunting the equity market.

Abhishek Basumallick. Founder, Intelsense

  • The way forward: There is a feeling of being left out among investors amid the ongoing stocks rally. So, there will be buyers at every fall. The country has crossed the worst phase of Covid-19 and things will probably get better from here on.
  • What to buy: There are sectors which have been impacted less by the Covid disruption. They include agri-related businesses, pharmaceuticals and FMCG. Low or mid-income housing should also pick up once people become sure of economic stability. Personal mobility like scooters, bikes and small cars should do well too. Some beaten-down sectors like cement and infrastructure can also give decent returns to long-term investors.

Safir Anand, Strategist, and Investor

  • The way forward: It is almost impossible to predict market behaviour. However, opening up of hotels, travel, malls, multiplexes will be a positive for the economy. This will boost sentiment. Similarly, there is news of Phase 2/3 trials of Covid vaccines by pharma players like Astrazeneca and Pfizer, which are progressing well. Market mood will perk up further if things turn out better even by December. In some of the positive developments, the government had assured that it would give relief when green shoots start appearing. The talk of a GST cut for two-wheelers is also a positive for the market. The recovery of AGR dues within a framework can boost banks.
  • Where to invest: Select banks and pharmacetutical players will continue to rally.

Niteen S Dharmawat, Co-founder, Aurum Capital

  • The way forward: Liquidity-driven rallies are fast and furious and one cannot fight them. In these types of rallies, correction comes when no one imagines it. It usually comes when the guards are lowered. Therefore, predicting the endgame is a futile exercise. It is almost impossible.
  • Where to invest: Auto ancillaries, automobile, rural economy-focused companies, cement, infrastructure, metals and companies that can replace imports.

Dhwanil Desai, Value Investor, Ahmedabad

  • The way forward: Most of company managements highlighted that the demand has been recovering every passing month and rampup of businesses is happening better than expected. Thus, the market is enthused. However, a correction after such the sharp rally is very likely, but there will be buying interest at lower levels and hence any sharp correction will get bought into. Chemicals, API-focused pharma are some of the sectors where the valuations have reached frenzied zone. There may be price and/or time correction in these spaces.
  • Where to invest: Non-banking financial companies and housing finance players with strong balance sheets and sectors still reeling under the Covid impact such as hotels or entertainment will do well when normalcy returns.

Gaurav Sud, Managing Partner, Kanav Capital

  • The way forward: The pumping of huge liquidity by global central banks and arrival of a new set of traders, who started investing during the lockdown for the first time, have supported the market during the past five months. Besides, with interest rates bought close to zero or negative worldwide, even conservative savers across the spectrum is chasing riskier assets in search of returns. This rally is not sustained by fundamentals, so currently the market looks overvalued and one needs to be cautious.
  • Where to invest: Sectors like real estate, metal and media are looking attractive. The realty space has been down in the dumps for last so many years. There is a big consolidation happening and home loan rates are reaching historic lows of close to 6 per cent. This affordability along with interest subvention schemes and tax breaks are very appealing for first-time buyers to purchase homes. The ongoing momentum in the metal space seems sustainable given the huge infrastructure spending being planned in China, the US and Europe. Many metal stocks are also trading below book values and that provides an opportunity for gains. Media players, including print and radio, are trading at cheaper valuations, and it seems the market sees them as a sunset industry with most advertisements moving to digital.

Porinju Veliyath, Founder and Portfolio Manager, Equity Intelligence

  • The way forward: The ongoing recovery in midcaps and smallcap space should continue for the next 2-3 years. However, Nifty may not go up that much now.