The fund managers are saying we were bearish, now we are bullish. Technical guys are saying we were bullish, we have become bearish. Because fund managers were bearish because valuations were not supportive. Now valuations have become supportive. Technical experts are bearish. Why? Because earlier momentum was strong, so they were bullish, now momentum is weak. So, who will get it right, the fund managers or the technical guys?
Dinshaw Irani: So, basically, the call is going to be stock specific out here. I cannot call out. I mean, we really decided that it is not to call out a bear or a bull market. Go with your gut. The gut tells us that, look, we are somewhere close to the bottom. And it is obvious from the way the momentum also has waned. If anything, I mean, I have been on the road for the last one week, basically we are marketing our midcap fund now. We just launched it recently. And the sentiment in the distribution space is fairly buoyant. They are also very keen, but the fact is that unfortunately when you have enough ideas, there is not enough money to be deployed in those ideas because money flows in only at the peak and our feel is that looking at the way the valuations have been, in fact, that is the data point that I want to share with you guys, that India used to command a premium of 24-25% in September of last year over the MSCI World Index.
We are talking about MSCI India over MSCI World. Today that premium is down to some 3-4%. So, it is obvious that things have really turned around in the terms of the interest that India generates globally and which is obvious from the FIIs selling, and also the fact that the rupee has been under pressure for a while, but yes.
We are somewhere near the close to the bottom. And anyway, our feel is that take a call, look at stocks. I do not know which sector is going to move because even if I tell you sectors, there will be stocks within those sectors which will move. It will be a very stock-specific rally, but we are very clear that at this stage is the time when you can really identify good stocks and really generate wealth for your investors, the alpha for your investors for the longer term, so that is where we are.
Now, I will take that analogy of bull and bear forward. For US markets, the strong bull market continues. In India, the bear market has started. I have never seen such a divided world because if it is a bear market, it is a bear market in equities in general. If it is a bull market, it is bull market for equities in general. In India, it does not feel, it is actually true that in small and midcap stocks the bear market has started.
Dinshaw Irani: So, one thing. I mean, the US bull market that you are referring to, it is driven by mainly those seven odd stocks as such. I mean, you saw what DeepSeek did one day that they reported numbers.
So, it is obvious that now we are talking about quantum chips and stuff like that from the US per se. So, it is like a tussle happening out there. If you ask us, I mean, we have offshore fund, by the way, global fund also which is managed by Samir and his team from Singapore, and the last I had a chat with them which was this morning, they are looking at selling out on US stocks which they believe are very expensive as compared to what they are to offer in terms of growth as such.
So, I believe that that market also looks stretched to an extent. Coming to India per se, I mean, yes, okay, so the midcap and smallcap the way they have fallen 20% plus, the indices, obviously there is a bear market happening out there.
But as I said that if you look at pockets within, I mean, unfortunately, smallcap is just the 250 stocks index, but if you look beyond those, there is enough value that we see.
In fact, even in the midcap space if you take away the top 30 or so names which are highly valued, which are really frothy, you will come up with a pretty reasonable set of stocks which are fairly well positioned in terms of valuation as compared to what they were in history as such.
And I can say so because we are doing this exercise because we want to deploy our money when we get in our midcap fund. In fact, now we are so clear that this is the space, the mid and small, where you will see growth going forward, that in our minds we are very clear that the leeway that you are allowed in a specific kind of like midcap fund is allowed 35% beyond the midcaps, we are looking at only smallcaps beyond that.
In fact, we are going to make it a mid and smallcap fund with midcaps being 66-67% weight and probably smallcaps being the rest. So, that is how clear we are in our mind that this is the time when you can pick out good ideas. Our feel is that the market will consolidate from here. We are not looking at a rally actually.
We may look at a consolidation, maybe a time correction, but in that time correction you will have enough time to identify your stocks, build up your positions, study them and stuff like that. So that is where we are today.
Just today morning we were discussing the fact that you actually bet on a story of a stock and in this market correction when you are getting opportunities and you are getting your stock at a 30% cheaper value, why do not you go ahead and buy that? And help us understand that which are the sectors that you have actually entered into in this correction because we are aware with some of your stock picks as well, I will not go stock specific and I would rather leave it to you if you want to mention some names.
Dinshaw Irani: No, I would not mention any names but let me tell you this way. So, basically, the analyst came across to us one day and he said, look, there was a stock quoting at a PE of 90, now it is quoting at a PE of 70 and he was fairly excited about this.
And we asked him, what is the growth rate? He said, around 12-13%. We said, no go. I mean, just because it was 90 and quoting at 70 today, so it is not going to work that way. Actually, you got to be very clear, I mean, it is not only corrections, but wherever there is growth expected in the future and the stock has corrected to a reasonable value, that is what you got to look at. So, if you look at it that way, then obviously there are quite a few stocks in the financial services space which have corrected quite appreciably and where we believe that things are looking pretty decent. In fact, in some of the platform companies too, you are seeing that happening and we still believe that there is enough growth out there for the next probably couple of years as such.
And also, in the capital goods space and basically when I say capital goods, it is domestic goods, we are not talking about China plus one play or outsourcing plays, it is mainly domestic capital goods focused companies where we believe there is a lot of value now being shown up.
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