It will be a populist budget no doubt about it but adverse budget proposals can dampen sentiment of investors on D-Street, Dipan Mehta, Director, Elixir Equities Pvt. Ltd said in an exclusive interview with Moneycontrol’s Kshitij Anand.
Q) The market seems to have climbed all walls of worries and is now trading above Mount 11,000. Do you think the rally could fizzle out post the big event, Budget 2018?
A) There could be a correction at any point in time. Investors must be prepared. With every rise in stock prices, the chances of a sell-off also increase. This may be induced by some bad news.
Q) What are your estimates for Nifty or Sensex for the December 2018? Will you revise your estimates after witnessing a strong rally in the first month of 2018?
A) Difficult to forecast the trend for 2018. There are many important events – State Elections, Budget, Change in RBI policy given that inflation has picked up and corporate earnings. Disappointment on any of these fronts could lead to volatility.
Q) What is fueling a rally on D-Street apart from strong global cues?
A) Domestic Money, Domestic Money, Domestic Money, Investing in Mutual Funds has become a national pastime. The problems will start when the Mutual Fund returns are negative and then panic will set in.
Q) What are your expectations from the Budget – will it be a populist one or growth focused. PM Modi has already indicated that the upcoming Budget is unlikely to be a populist one.
A) It will be a populist budget no doubt about it. Investors should brace themselves for disappointment. Only hope that if Long Term Capital Gains is restored then STT on Delivery trades is reduced to the level of non-delivery trades. Otherwise, it will lead to double taxation.
Q) If somebody plans to invest Rs10,00,000 now – what would be your advise to him considering he is in the age bracket of 30-40 years?
Q) Emerging Markets in dollar terms are still 10 percent away from 2008 highs! With a weakening dollar, strengthening commodities could bring the back party in EMs along with Indian markets? In other words – the rally will continue.
A) We are in a multiyear Bull Market which will last for many more years. From time to time, stocks will run ahead of the fundamentals. We are at that point just now. For investing to be attractive, either the prices have to correct or fundamentals have to improve significantly; better than street expectations.
Q) What are your favourite sectors which are likely to remain in focus amid Budget expectations?
A) No sector is likely to gain from the budget. Agriculture sector will receive special attention but playing this as an investment theme is difficult given present valuations of companies which are rural focussed.
Q) Which space is likely to offer greater risk-to-reward to investors and why? Largecaps, midcaps or small-caps.
A) Investors should refrain from designing their investment strategy based on market capitalisation. Instead focus on growth, earnings visibility and reasonableness of valuation.
Q) High beta stocks have done extremely well especially in the year 2017 as well as in the year 2018. Do you think we are in a phase of euphoria or is this normal market action in any bull market?
A) The euphoria will continue till this phase of the bull market plays out. Whenever there is a correction, these stocks will not provide an exit opportunity.
Q) The fundamentals might not support what we are witnessing on D-Street right now. Do you think if the liquidity tide reverse or we see a crack in mid and smallcaps, a glimpse of which we already saw last week when broader market underperformed could make markets nervous?
A) Yes. It doesn’t take long for fear to spread.
Q) Which stocks are you recommending to your clients for long-term (greater than 2-3 years) for wealth creation?
A) Domestic Consumer-facing businesses in BFSI, Auto, Building Material, Appliances, Aviation, Retail, Media, Healthcare, Education, Lifestyle businesses like liquor, gaming high-end big-ticket items.