ET OnlineStocks such as Mindtree, Bajaj Auto, Havells, SKS Micro Finance, Sintex, Glenmark, Jyothy Lab and Sun Pharma are gems and can grow by 15 per cent compounded over the next 3-5 years, says Dipan Mehta, Member, BSE and NSE, in an exclusive interview with Kshitij Anand of EconomicTimes.com. Excerpts:
Q) Rumours in the market are spreading fast that the US Federal Reserve might raise interest rates sooner than expected. Will it impact India or other emerging markets? If yes, then why?
There could be a knee-jerk reaction as FIIs may press ‘sale’ on the announcement of such news. But this may not have an impact for more than a week. Because of events on May 2014, our markets have clearly delinked from global markets. Local appetite for equities could soften the fall.
FII flows are driven by interest rates movement in the US and other developed economies. Asset price movements in those economies also impact global flows. To that extent, India is vulnerable and if there is a sell-off in global equities or emerging markets, then we will not be spared.
The decline may be less than other markets, but nonetheless, there will be a negative effect. India cannot escape a ‘risk off’ trade. Prior to Lok Sabha elections, global macro was extremely important and we were very sensitive to that variable.
However, since the new government formation, international events are having less impact as investors focus on government steps to revive the economy and the RBI moves based on macro data such as inflation, GDP growth rates, IIP etc.
Q) Despite infusion of liquidity by the government, the worst is still not over for China. On the other hand, India has managed to revive growth and manufacturing output. However, CLSA in its recent report said that the Chinese economy will be as big ($21 trillion) as the US economy by 2020. Do you agree?
Not just CLSA, several global research houses have a similar projection. We broadly agree with their analysis.
Q) Everybody wants to ‘sell high and buy low’. But does that always work for traders or investors? Is there a way of gauging the right time to buy or sell? If not, what should ivestors keep in mind while using this strategy?
Traders fret more over trying to ‘sell high and buy low’. Amateur investors are also bothered about timing the market. But our experience shows that the best professional investors do not time the market.
They are just focused on identifying the perfect investment opportunity. Their objective is to buy a great business at a reasonable price. That is the secret of their phenomenal wealth creation record.
Q) Give us five stock ideas that you are still liking and recommending to your clients?
At correction, with usual disclosures that we and our clients own these stocks, we would look to buy stocks such as Mindtree, Bajaj Auto Finance, Balkrishna Industries, Havells India, SKS Micro Finance, Sintex, Glenmark, Jyothy Lab, Sun Pharma, PTC India, PTC Financial Services, LMW, Bharti Infratel and Voltas.
Q) Any stocks or companies that you have in mind which are not frequently discussed, but have the potential to give exponential returns in the near future as the economy improves and reforms start taking shape. We also call them ‘Hidden Gems’.
All the stocks mentioned are gems. Does it matter if they are hidden or discovered? We are confident that these companies can grow by 15 per cent compounded over the next 3-5 years.
Q) What is your advice to investors who want to invest in blue chip stocks which have already rallied quite a bit so far in the year 2014? Should they wait for corrections or look for stocks in the mid and the small cap segments? What makes more sense?
Buy at corrections. At some point of time a 10 per cent correction will take place. That’s the cue to enter the market. We would advise buying once a 6-8 per cent correction has taken place. Don’t buy at one shot, always spread it over. Also, diversify the holdings.
Q) The Indian markets have rallied close to 27 per cent so far in the year 2014. Do you think there are pockets (stocks or sectors) which have run ahead of their fundamentals and a correction is eminent?
Corrections in the market may be led by infrastructure and construction, realty, PSU banks, oil companies, other PSUs coming up for divestment.
Q) Where do you see the Indian markets (Sensex/Nifty) heading in the next 12 months (December and March 2015)? How do valuations stack up compared to historic levels?
If I were to hazard a guess, 12 months from now, the Nifty could be at around 9000.
(Views and recommendations expressed in this section are the analyst’s own and do not represent those of EconomicTimes.com. Please consult your financial advisor before taking any position in the stocks mentioned.)
Q) Rumours in the market are spreading fast that the US Federal Reserve might raise interest rates sooner than expected. Will it impact India or other emerging markets? If yes, then why?
There could be a knee-jerk reaction as FIIs may press ‘sale’ on the announcement of such news. But this may not have an impact for more than a week. Because of events on May 2014, our markets have clearly delinked from global markets. Local appetite for equities could soften the fall.
FII flows are driven by interest rates movement in the US and other developed economies. Asset price movements in those economies also impact global flows. To that extent, India is vulnerable and if there is a sell-off in global equities or emerging markets, then we will not be spared.
The decline may be less than other markets, but nonetheless, there will be a negative effect. India cannot escape a ‘risk off’ trade. Prior to Lok Sabha elections, global macro was extremely important and we were very sensitive to that variable.
However, since the new government formation, international events are having less impact as investors focus on government steps to revive the economy and the RBI moves based on macro data such as inflation, GDP growth rates, IIP etc.
Q) Despite infusion of liquidity by the government, the worst is still not over for China. On the other hand, India has managed to revive growth and manufacturing output. However, CLSA in its recent report said that the Chinese economy will be as big ($21 trillion) as the US economy by 2020. Do you agree?
Not just CLSA, several global research houses have a similar projection. We broadly agree with their analysis.
Q) Everybody wants to ‘sell high and buy low’. But does that always work for traders or investors? Is there a way of gauging the right time to buy or sell? If not, what should ivestors keep in mind while using this strategy?
Traders fret more over trying to ‘sell high and buy low’. Amateur investors are also bothered about timing the market. But our experience shows that the best professional investors do not time the market.
They are just focused on identifying the perfect investment opportunity. Their objective is to buy a great business at a reasonable price. That is the secret of their phenomenal wealth creation record.
Q) Give us five stock ideas that you are still liking and recommending to your clients?
At correction, with usual disclosures that we and our clients own these stocks, we would look to buy stocks such as Mindtree, Bajaj Auto Finance, Balkrishna Industries, Havells India, SKS Micro Finance, Sintex, Glenmark, Jyothy Lab, Sun Pharma, PTC India, PTC Financial Services, LMW, Bharti Infratel and Voltas.
Q) Any stocks or companies that you have in mind which are not frequently discussed, but have the potential to give exponential returns in the near future as the economy improves and reforms start taking shape. We also call them ‘Hidden Gems’.
All the stocks mentioned are gems. Does it matter if they are hidden or discovered? We are confident that these companies can grow by 15 per cent compounded over the next 3-5 years.
Q) What is your advice to investors who want to invest in blue chip stocks which have already rallied quite a bit so far in the year 2014? Should they wait for corrections or look for stocks in the mid and the small cap segments? What makes more sense?
Buy at corrections. At some point of time a 10 per cent correction will take place. That’s the cue to enter the market. We would advise buying once a 6-8 per cent correction has taken place. Don’t buy at one shot, always spread it over. Also, diversify the holdings.
Q) The Indian markets have rallied close to 27 per cent so far in the year 2014. Do you think there are pockets (stocks or sectors) which have run ahead of their fundamentals and a correction is eminent?
Corrections in the market may be led by infrastructure and construction, realty, PSU banks, oil companies, other PSUs coming up for divestment.
Q) Where do you see the Indian markets (Sensex/Nifty) heading in the next 12 months (December and March 2015)? How do valuations stack up compared to historic levels?
If I were to hazard a guess, 12 months from now, the Nifty could be at around 9000.
(Views and recommendations expressed in this section are the analyst’s own and do not represent those of EconomicTimes.com. Please consult your financial advisor before taking any position in the stocks mentioned.)
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