Sandip Sabharwal: Commodities to remain under pressure for the next 1-2 years: Sandip Sabharwal
Is the fear in some of the AMC stocks slightly overdone, ultimately the SIP culture is strong. The big picture three years from now, five years from now is only going to expand. These stocks now, let us say, two years ago were trading at euphoric levels, now they are trading at depressed levels. Is it time to buy, let us say, a HDFC AMC or for that matter, even Birla AMC?
One of the problems with these stocks is that the regulator has been continuously cutting down on amount of profits they can make. So, the fees they can charge to clients have been cut down, then the additional fees they could charge to tier II, III cities has come down. Now, there is issue around the debt funds. So, despite the SIPs, etc, the performance also of the AMCs has been cyclical, so to that extent there has been no secular up move in the size of any of the listed large AMCs there.
Most of those funds of these companies have actually been underperforming except for a few and to that extent they have not been investor favourites ex of whatever SIP you are talking of. So, I think those are the issues that this industry is facing. I have not looked at the valuations very closely lately, but I would not play them as very long-term trends.
Three weeks ago it was only Adani and Adani and Adani. Today, nobody is talking about it. From market standpoint, is the Adani fiasco for individual Adani stocks and the impact of it on markets, is that behind us now?
I would think so because of the fact that the management was smart enough to actually raise equity by selling their stakes at whatever valuations were there at that time and getting money prior to these banking collapses in the US. So I think that has been a saviour for the group and for the overall market also. I think the impact of that group stocks on the overall market per se is behind us.
Also wanted your take regarding the metal space as a whole because this morning there seems to be a note coming in from Bank of America as well and there is a commentary coming in that IMF believes that China is going to reopen and that would mean a strong rebound in the second half of the year and they are quite constructive on the metal space as a whole and Tata Steel is their preferred pick. Would you concur with the view?
Steel has some positives going for them given the recent uptick in prices. But overall directionally for the next one or two years, I would still think commodities will be under pressure given that the global economies will slow down and even China, despite all the stimulus, etc, they are doing, they will be just growing at 3% to 4% this year. So, there is no strong rebound which is going to happen.
