PSU banks: ETMarkets Smart Talk: Next set of multibaggers could come from PSU banks, and manufacturing: Dick Mody

In an interview with ETMarkets, Mody said: “We feel these still are MULTI BAGGERS despite running at a CAGR of 32% and 28% respectively,” Edited excerpts:
2022 closed on a positive note, and 2023 started off on a muted note tracking global cues ahead of the Budget. What is your take on markets?
Here are my few observations –

1. Markets will remain in a range and consolidate for some time before making a new upmove

2. Budget will be the next big trigger for the markets

3. Inflation is going to remain sticky for some more time

4. Global developments will have a minuscule impact on Indian Markets

5. Indian markets will not see a big downfall if the global market collapse happens, however, when the tide turns Indian Markets will bounce back more sharply when compared to other developed markets. What are your estimates for the December quarter? Sectors that are likely to do well and which may lag.
Earnings season will see some pockets of green shoots while others are going to remain under pressure due to inflated commodity prices, recession concerns in the US, and growth slowdown.

1. Banks, Auto & Auto Ancillary, Infra, and Industrials sectors will see good growth

2. I.T., Pharma, Chemicals, and Textiles will underperform and may disappoint in their earnings.

We saw a little bit of weakness in the rupee – what is your call on the currency movement in 2023?
The dollar up move has peaked now and it seems that Rupee will appreciate going further in 2023. India will stand tall and witness strong buying from domestic investors, at one-point FIIs will turn to India, as the return potential is much better when compared to other EMs

What are your expectations from Budget 2023? And, if you were the FM, which would have targeted?
Here are my few observations –

1. Focus on Infra development

2. Manufacturing will get a lot of support from the government

3. More transparency and support in policies that generate good employment opportunities

4. Investor-friendly policies for global giants to encourage them to come and invest in India

5. Extending PLI support to Industries so that they can serve the globe and improve the standard of living of common people

Which sectors are you overweight on in 2023 and why?
I see a strong rebound in cyclical sectors including Metals, Industrials, Auto, and Financials. There are immense Investment opportunities in various projects across roads, railways, metro, airports, and ports that will further support the Prime Minister’s nation-building vision Infra sector is witnessing strong growth in India.

Public Sector stocks – both Banks and Manufacturing too. In fact, we are the earliest to push both these themes via our Cherrypicked PSU Financials and Handpicked PSU GEMS smallcases way back in early 2020.

You will be amazed at the fundamentals of some of these businesses and most of them are high dividend paying dominant businesses trading even now at attractive valuations. We feel these still are MULTI BAGGERS despite running at a CAGR of 32% and 28% respectively

Which sectors are you underweight in 2023 and why?
FMCG and Pharma will lag. IT will underperform but not for too long and will end up in the middle of the above 2 baskets. These sectors will underperform and consolidate for some time before they begin their new rally.

With global equities down in double digits – do you see this as a good opportunity to diversify globally or India still remains a preferred player? What are your views?
I am not at all surprised and that has been our firm’s consistent view ie BUY India on every Dip. Take a simple view here, strong demographics, and stable leadership, coupled with a strong and independent foreign policy have kept India in a strong position globally when you look at it from a geo-politics angle.

These 3 are sufficient to conclude that unlike the collapse of the more fancied Emerging markets like Turkey (the Lira has crashed more than 90% in the last 10 years!!) or South Africa (scores of corruption scandals at the highest level) or China (overleveraged growth in the 2000s is hitting them hard now), Russia (conflict with the West), India stands tall.

How should one play the small & midcap theme in 2023?
Small & midcap themes offer maximum returns if the story works well. They offer great growth opportunities when compared to many matured companies.

One should just invest at their desired price in stocks or ideas that they believe in. It is difficult to time the market and there is a good chance that the price may fall further after investing.

However, quality names will outperform markets over time and yield strong returns in the long-term.

What will work in 2023 – growth or values?
2023 will see many fundamentally strong companies where there is a significant correction offering great value to investors. It offers great value due to mispricing and negative sentiment in the markets.

In fact, times like these offer great opportunities for investors to build portfolios. Investors should not miss out on such opportunities.

What about new-age companies? There are more than 50 companies that will make their debut on D-St in 2023. What should be the criteria to evaluate these companies after the dismal performance seen in 2023?
At the end of the day, companies should be able to generate some cash and strengthen their Balance Sheet. Many companies that are coming out via IPOs are just an exit route for Angel Investors or HNIs.

While it is fair that after being invested over for 8 to 10 years they should get good returns, it is equally important to leave something on the table for new investors as well. Major investors are bleeding red and are losing out on their invested capital.

Some examples are

, , Delhivery, Policybazar, , , and many others.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)