What is your outlook on the markets. What do you think or where is it that you think we would likely to see leadership?
I would not fall into the trap of trying to predict the market especially in the short term as we saw that till about last week we were consistently hitting 52-week highs and now we have seen a bit of a correction.
So it is the liquidity in the short term which always drives the market both upside as well as downside and we indeed saw that on two or three days when the Nifty hit 52-week high or rather lifetime high that the FII flows were positive and they have again turned negative.
Now the point to be noted here is that while the Nifty was at lifetime high in those days that was not the context of the market that was not getting reflected anywhere in the breadth of the market. There was hardly any participation seen even by the large caps. So the whole select few days movement of hitting life high was led by one or two sectors.
But going further into it and looking at the market we need to keep in mind two things. One clearly in terms of numbers or performance if we see on a 14-month basis we are flat as an Indian market. We have not moved anywhere as 18500 was Nifty in October 2021 and today we are in December 2022 and we are at the same level. So effectively market has not given any return. Of course not to mention the fact that in this 14-month period the mid and small caps have given negative returns.
Now let us change the perspective completely if we compare the same numbers globally then we have sharply outperformed almost all the global markets in this 14-month period and obviously that has been led by the significantly differentiated better macroeconomic numbers that India had in last 14 months compared to the global markets right from GDP growth to the GST collection. Inflation was a problem in the whole world. India’s problem was relatively lesser in terms of the absolute quantum of inflation and that also now seems to be peaking out. So I think going forward we will continue to carefully watch the market and adopt a wait and watch as we go along instead of trying to be a hero and trying to guide the direction of the market which does not get guided by anybody. We will have to look at more macro factors, sub macro or rather corporate factors and the individual result numbers.
What is your outlook when it comes to the entire auto space owing to the fact that we had the auto sales numbers coming out? How are you judging the performance of some of the two wheelers, four wheelers and tractors?
A few things have clearly happened largely on the positive side thankfully for the auto sector. One of course the global crude price has seen a sharp correction. The companies as of now have not passed on that correction as after a certain stage they had stopped passing on the increase. So I think they are trying to create that balance wherein if it falls further after a certain level may be they will start reducing the retail prices.
But nonetheless it is a big relief that the global crude prices have corrected and have corrected sharply. We need to hope that they stay there because if they correct more it would be good not only for the automobile sector but also for the Indian economy as a whole.
The second factor is that in the initial months of the year lot of metal prices corrected. In the last two-three months they have been flat but still on an year to date basis they are down 15%-20% except for nickel. So as most metal prices are down it is a positive for the automobile sector.
Interest rate hike has been one factor which is of course on the negative side for all those people who buy vehicles on borrowed money as it becomes a slightly expensive proposition. But nonetheless given the numbers that have come in including as recently as for the November month we continue to see the passenger vehicle certainly seeing good growth.
Leaving aside the short term movement which will always be difficult to predict I think just like we saw last week FMCG sector suddenly coming into the buying radar of the investors and stocks hitting 52-week high something like that can always happen to other sectors also and in which auto is certainly there.
What is your take on the entire cement space. A lot of consolidation is happening, we of course saw the Adani coming out as a big player but now the other smaller entities as well as plants are getting taken over by the larger players. Do you think this is the phase the entire cement sector is likely to be in?
I think, the corporate action in cement space as a whole will continue, in fact, even before Adani Group came into the cement space, we had the bigger groups continuing to buy smaller groups even earlier also. We had the sale of JP Cement unit taking place, we had sale of Anil Ambani Group cement unit taking place and a few others as well.
Going forward also the same will be the case as larger players would want to participate in the whole game of cement manufacturing, selling, distribution and pricing. Everybody would want to become as large as possible as much as their financials and their management bandwidth can allow so that when they sit across each other as an industry body or as some people wanting to see the future of these, they can have a say that okay I come with such a backing of this much capacity so please listen to me as well. So I think that is going to be the scenario of the future.
In terms of stock prices this is another sector which has underperformed reasonably after the September quarter numbers which came in. There weakness was on the expected lines because of the increased raw material prices putting significant pressure on the margins. I think sequentially we should see the margins improving and which as of now market has not taken much notice of. So cement sector also is one such sector which suddenly can come into the buying radar of investors because of the correction in the prices resulting in correction in the valuation and the fact that sequentially we should see margin improvement even if not an year-on-year basis.
Just wanted to understand where within pharma is it that you are finding comfort? Would you be sticking with some of the large caps?
Pharma as a space has been a complete story of under participation obviously as a result of story of underperformance. Now within that yes, selectively some stocks for a few days have been doing well and then again coming off the radar of investors buying. So on a sectoral basis there has not been any consistency. This obviously is coming from the fact that the performance of the companies in general is getting affected. The US sales continue to be a pain point for almost all the companies and most of the exporting pharma companies. So, we continue to see pricing pressure.
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