What are you doing with your schemes? Where have you locked gains? Where have you taken a hit and decided to exit and what are you adding?
What has changed is that India’s risk appetite parameter has corrected significantly much earlier than the global market. January onwards it started drifting down and in the month of February, we have seen in the US market and some other economies also. So what has really changed is that the risk appetite has started declining. Liquidity conditions are actually quite mixed. In fact, I will say liquidity conditions has started improving from January onwards, maybe in last few weeks’ time or so some minor changes are here and there. But largely these are long term cycles, so when risk appetite bottoms out, it does not bottom in just one day. It is a phenomenon which can take sometimes like a quarter or two.
So maybe if I have to say from a longer term perspective, maybe first half of 2023 it should bottom out. So that should be again an indication that by first half of 2023, globally also in many markets, okay you leave aside China which has done extremely well and that data points still remain very constructive.
Europe is another surprise element even for most of the people where data points are more constructive than US and even the emerging market where the whole world has written off Europe. So China and Europe are in a better position from a macro data perspective, risk appetite perspective. So I think I am slightly more optimistic on these economies. And maybe by second half of 2023 other markets also bottom out and then you see a reasonably big move happening in the second half. So I will play very safe.
As I said that the priority is safety. So we have obviously moved and rebuild our portfolio from a safety perspective and the thesis which we like is that our portfolio still looks skewed towards value as a thesis.
Non-banking PSUs if you exclude that most of the stocks have done extremely well. So I think the whole thesis revolves around how you park as I said beginning of the year, I said metals could be surprise element, power sector should be a surprise element, PSU themes continue as it is and value is a much larger theme. I call it as a decade of opportunity not for one year or one quarter of opportunity. So that is the way we have rebalanced our portfolio and remain skewed towards these names. And clearly avoiding anything which is grossly over owned or over researched or overvalued stocks which are predominantly good stocks globally, I am not talking about in India. Globally that thesis has worked very well. If you look at last one year, they have underperformed significantly and that is the area where we see challenges.
Fundamentally what will change in the world construct or the India order for our markets to bottom out in the second half as you are predicting?
I think that the most important aspect where the whole world is eyeing is about the 10 years US yield and how the inflation environment or the yields or what happened to the Fed. My view is that maybe by July’s meeting or somewhere between July to September you will see pause happening as well as cut can come.
So I am expecting between July to September somewhere in the US the Fed will start pausing and cutting.
I do not think pause is happening in this month’s meeting given the data is still not comfortable from a Fed perspective so maybe it will not be 50 bps, it could be 25 bps, it could be 15 bps but I think hike is coming that is the way data points are endorsing.
But second half, I think this can change and if whatever reason there is a bigger casualty globally, because if you recollect Powell’s statement, he talked about either inflation has to come down or there is a casualty.
So we have seen small casualty but if that leads to a bigger casualty, I think it can pause and can even start correcting down. So that is the one trigger, but I tell you, these are more of a psychological data point than people look at.
But if you look at from a purely from the Indian perspective, Indian banking sector are very-very vigilant. There is no problem what is happening globally.
I will look it as a buying opportunity, if you ask me banking could be a phenomenal opportunity both public sector as private sector. Even for private sector bank we have turned very constructive because we were cautious earlier, they have also corrected a lot. So I think the private sector and public sector both banking as a basket should be and has a potential to give you highest return and if somebody has a willing to take one, two, three years perspective, even you take one year perspective I think Banking Nifty will outperform other indices significantly from the current levels.
When you say banks are going to lead what within banks is going to lead because we have been talking about this on a daily basis, banks are so divergent and bifurcated right now?
If you are talking about purely from banking perspective, this space has been a very favourite and a consensus trade for a long period of time and anything which is consensus does not work. And if you really notice in last few months, this consensus trade has not played out very well as FIIs owned the banking space in a big way. So it was one space where over ownership was there. And if you see now that passive sell, which I talked about passive selling continues. I think we are seeing some amount of capitulative move, if not on immediate basis maybe in next two weeks’ time, next three weeks’ time, I think that a capitulative phase has already began.
So I think if some of the FII over ownership which was there has corrected a lot. And I think similarly in the domestic side also lot of people have prune down some of the names which you may highlighted in last many months.
If you are bullish on Indian economy then purely from a leverage economy perspective the banking is the first choice. Now, if I look at from a behaviour perspective from trading in the most admired territory or most over ownership perspective I think they have not reached the other extreme but they have corrected and it becomes attractive now or they might become more attractive and let us say in another 7-10 days or maybe two weeks’ time. Let us say if correction continues further also I think there is a great opportunity to buy some of the names.
