In an interview with ETMarkets, Bhootra, said: “Investors should always deeply study the companies and the valuation it is demanding before applying in new IPOs” Edited excerpts:
We are seeing some nervousness at record highs for Mr. Market. How do you see things moving – have we hit the top for the moment?
We are in the middle of the earnings season and about 30 out of 50 companies have declared earnings so far, and in index weight terms, it is about 70%.
The results have been decent so far and if we look at the domestic-focused sectors then it is good. Currently, markets have seen a sharp runup leading into the results season and now trading at reasonable valuation.
In terms of earnings, the consensus is confident of high teen digit growth of between 17-19% for the next two years so that should continue to support the markets.
Overall, we don’t see any major downside in markets from a long-term perspective but since the recent run-up is sharp; hence, in the near term one should remain cautious and let the earnings catch up.
Having said that, global risk continues to remain high and could be more likely the reason for any downside than domestic factors.
Interestingly the US Fed is open for further rate hikes. Do you see that could dampen the bulls party on D-Street?
Rate hike does have an impact on the markets as it increases not only overall cost of funds for the corporates bringing earnings down but also affects the risk-return and discounting of the equities.
However, right now, it seems that the overall state of the US economy is strong and markets are not pricing in any recession till the first half of 2025 so this run could continue this year.
Large caps dominated the party on D-Street — do you think one should now look at going overweight on small & midcaps?
Small and Midcaps have also rallied and participated in the current rally. If you look at the overall return both YTD and 12-month then the NSE Smallcap100 and NSE Midcap100 have rallied 20.1% and 19.4% in YTD and 27.4% and 36.9% in 12-month basis respectively while Nifty50 has rallied 8.9% and 14.9% on YTD and 12 months basis. So they have already outperformed the Nifty handsomely.
In terms of fresh investments, we believe stock-specific opportunity continues to appear in all types of market regimes and similarly in the current market we still have enough opportunities.
How do you see the recent Corp announcement made by the house of Reliance Industries as well as M&M expanding their business empire in different fields?
Don’t want to comment on individual stocks. However, it certainly does give confidence that the large and well-established corporate houses are also showing increased interest to venture into new business areas.
Commodity prices have bounced back. Do you think it could lead to a spike in inflation?
Prices have bounced back from lows but still remain well below highs of what has been seen in the last year. Right now, they are in their comfort zone and we do not see it posing any risk to run-away inflation immediately.
IPO season is on and the ones which are getting listed are getting maximum attention. Your take on the recent IPOs which got listed and particular businesses you are watching out for?
IPO market has turned vibrant after a lull period seen last year. The sentiment has turned optimistic, and this has been seen in the recent IPOs listing in the past few months.
However, investors should always deeply study the companies and the valuation it is demanding before applying in new IPOs.
In terms of businesses, there is enormous opportunity arising in Defense, semiconductor manufacturing, EV, Renewables and contract manufacturing and a lot of small to medium companies have started to operate in these areas. These companies could well be future candidates for IPOs.
What is your take on the earnings trajectory for the rest of 2023? What is your take on the management commentary? Does the consensus sound cautious just like the IT pack?
If you look at the consensus estimates for the current and next financial year, the Nifty50 earnings are expected to grow with high teens at about 17-19% which is a strong growth.
Coming to the management commentary, except IT and global cyclicals most of the commentary is optimistic with good momentum in growth to continue.
Even with the fall in inflation, consumer space has also started showing signs of improvement with some volume growth coming back and expected to improve further.
Things which investors should avoid doing especially when the market is trading at record highs?
1) Investors must always study the company and its business in detail before investing not only in current markets but every time. If he/she is unable to understand or have time then should take help from registered market experts for help. Also, investors should also avoid investing in unknown, very small, and illiquid companies which are by nature very volatile and risky.
2) Also, in the current market situation where we have just witnessed a sharp rally, the investor should look at investing in a staggered manner.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)