Help us with your take on the broader end of the markets because for Nifty when we see that it is just 10-12% from those highest level, but the correction is quite deeper in the broader end. But given the kind of move that we are seeing and we are now over some of those major events related to the political world and related to the budget announcements and so do you believe that maybe it is the time to once again look in the small and the mid-end of the market or do you believe that the valuations are still expensive?
Sumit Poddar: It is an interesting question which is on top of every investor’s mind, what to do next, has the bottom really taken place. And as you rightly said, while the Nifty has gone down by just 12%, but if we look at the stocks, I was just running through some of the numbers, stocks which are greater than 1000 crores, almost 80% of them are down by greater than 20%. So, they have underperformed the market itself. And even at a larger level, if we just look at Nifty 500, that again has corrected very broadly as such. So, while as you rightly said, 12% Nifty correction, but if you take any person’s portfolio, they would be down much more than that as such. So, nonetheless, multiple reasons for that in terms of global flows going out, America being stronger again and that is why the flow back to America. Maybe this fiscal year we saw slower spending by government, as well as even the nation was really busy with elections.
All these things really added to the slowness in the market, as well as the dream run that has been happening since COVID, it is literally coming to a pause with a lot of these events relatively taking place.
Now, with the result season being in place, of course, the largecaps and the smallcaps have rather grown just by about 10% to 14% odd but the real game has been with the midcaps which is where the growth continues to be strong. Nonetheless, with this background, we need to really look at how things are really going to happen in the next 12 months because the markets are always forward looking. Any kind of or any delays as far as interest rates cuts were concerned are now in front of us. We have already seen RBI cutting interest rates by 25 basis points. Similarly, with the tax breaks coming into picture, the pressure on urban consumer is likely to go down.
While the announcement has been done in February, the real cash will be in hands of people in the month of April, starting month of April, which is where people would start spending. Even government spending which was lagging in the first half of this particular year, from the budgeted numbers, of course, they spent less but from actual numbers, they would start really kind of coming into picture.
So, for next 6 to 12 months, of course, things are looking much better as compared to what has been the case in the last six months. We continue to be growing the fastest as far as our GDP growth rate is concerned and this slowness readjustment is what is taking place is what I would rather say.
Give us a sense of what investors can expect going ahead, what kind of returns should we be pegging so in order to not get disappointed because CY25 what kind of outlook do you have for this and on that note also, also tell us what is looking good to you, where are you seeing value, which sectors are looking attractive?
Sumit Poddar: So, interesting question. Of course, if we look at CY24 until September, the returns were quite handsome. But had it been that the last quarter correction was not there, this number could have been very well a good double digit.
Yes, there is readjustment happening as far as CY25 is concerned. Good that the year itself is starting with lower expectations, maybe the market is also taking a breather, as well as any kind of overvaluation is relatively back in space, the greed and fear is more towards fear rather than greed, nonetheless incremental events is what is going to determine how the market shapes up.
CY25, maybe by second half, of course, we would be in far-far better shape with the spending coming back, government spending, consumer spending, even the savings from interest rate cuts, also what would happen is the fear of US president taking any kind of tariff stance those fears would be kind of relatively digested.
We have already seen on many countries the kind of tariffs being announced and rather the actual situation which comes out is far better than what is being feared. So, all these things will relatively get digested in a quarter or two.
I mean, IT definitely is seeing a better demand outlook despite being uncertain. Similarly, export companies got impacted because of higher freight rates and exchange rates. All those things are relatively going to kind of get streamlined over a period of time.
So, yes, maybe from an investor standpoint, do not be kind of over invested but at the same time a good time to continue to on a monthly basis rather than a big chunk at a point in time because the days of rapid rise are relatively behind given the fact that the large investors are out and they are out.
Help us understand that in this market nobody is talking about the PSEs. Yes, we do know that there has been a slowdown in the government funding and spending as well. But now that their order books are holding strong, the growth opportunity is quite wide, do you believe that some more valuation correction is warranted or you rather spot any other attractive opportunities in this particular market?
Sumit Poddar: So, within public sector entities, possibly we can divide in two-three parts, one is of course banks, the other is capital goods companies, and then probably the oil marketing companies as such. Broadly, as such, no doubt, I mean, there could be further breakdown.
So, if you look at banks, of course, banks have delivered far better, PSU banks especially have delivered far better results as compared to private banks.
And the effect would really be seen over a period of time when people see a couple of quarters, two, three, four quarters showing the kind of differentiation as such because they had very less maybe exposure to MFIs or unsecured lending and which is what is playing in their favour now. So, yes, there is a re-rating due on PSU banks, no doubt about that.
As far as capital goods, public sector companies are concerned, what is really happening is even within sectors there is a bit of a differentiation that is taking place and each company is having their own story rather than really going as a pack and this is across sector.
I mean, we could see within banks not just private and even within private, there could be a bit of a differentiation as far as growth is concerned, primarily because of the strategy, because of how technology is helping every company to think very differently and which is what is impacting each of the companies within the sector as well. So, just to give an example, BEML or HAL, they would have different trajectories.
So, yes, there would be very company specific calls one will have to take and this is a year of stock picking, no doubt about that.
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