Amisha Vora, Chairperson & MD, Prabhudas Lilladher, says “for quite some time, the sentiment was intact and the correction was shallow and this was not so broad-based. In the last 7-10 days, there was a broader correction across market caps,, less in Nifty but of course across market caps, a number of advance declines was also very sharp in favour of declines. Once a time like that comes, most of the people, their portfolios, their positions, their exposures get realigned. There are M2M related issues. So once that sets in, it takes a little time for things to stabilise and then the bull market to resurrect or the advance to resurrect.”Last few days have been pretty rocky as far as the broader markets are concerned. Which are the areas your clients have been nibbling in and you have been recommending them to buy? Amisha Vora: After a very long time, the correction looks a little broad-based and seems to have just started. I think that this phase of volatility and more corrections will continue for a couple of months at least. But in the meantime, we are continuing to have our view intact as far as BFSI is concerned and as far as capital goods is concerned. Our weak outlook on consumers continues to be intact. Also we think that within BFSI, segments like life insurance or insurance will come back and selective pharma also will come back.Why do you think that the correction has just begun and it has more legs to go?Amisha Vora: For quite some time, the sentiment was intact and the correction was shallow and this was not so broad-based. In the last 7-10 days, there was a broader correction across market caps,, less in Nifty but of course across market caps, a number of advance declines was also very sharp in favour of declines.
Once a time like that comes, most of the people, their portfolios, their positions, their exposures get realigned. There are M2M related issues. So once that sets in, it takes a little time for things to stabilise and then the bull market to resurrect or the advance to resurrect. I would say the bull market is intact. It is a correction phase, but the things to restart typically takes a little time.
But is it the best strategy right now to go towards defensives and largecap quality names and just hide in that?Amisha Vora: I would say that for some time and even now being with largecaps as an exposure little higher than before would definitely help and within that also we have as what I mentioned some select sectors which we think will do better and curtailing exposure a bit in midcaps and smallcaps would help.
But from the next 3-5-year perspective, the midcap and smallcap rally still has many more legs, maybe more selectively and with more diligence and judiciousness than what happened in the past. But the fund flow is very strong and will give those legs to the rally sooner than later.
So, essentially you are appearing to be cautious in the near term but on a scale of 1 to 10, not so cautious or defensive in the very long term. So, there is a change of stance. Would you also tilt your portfolio in favour of defensives – more IT, more pharma?
Amisha Vora: I would not do that because I still see that in the economy, the firepower continues to be reasonably very strong. If you see any key numbers, whether it is automobile numbers, whether it is the air traffic number, whether it is the hotel occupancy numbers and many such indicators that you see that the economy continues to show good strength.
It has more to do with the valuations that the correction is set in and the best part I still feel is that any such rally which got aborted in the past a decade or two was the time when the corporates were also getting over leveraged and they had a lot of debt on the balance sheet. But this time, the rally is totally equity-linked. So, most of the corporates whether this is SME, MSME, micro, small, large, medium all have bolstered their balance sheet with capital and that too equity capital., I do not see that things are going to really stop and it is any kind of a big bubble. But a corrective phase in the markets was overdue to set in and it can remain for a while.
In terms of a trigger, what do you think is going to play out next for the markets because we have got the advance tax deadline and the Paytm issue is playing out as well? Part of the details are already out on the electoral bonds. Do you think the narrative and the focus of the market would largely be split between elections and earnings?
Amisha Vora: Yes, one thing is more important, that you will have your March year ending, that always has a little bit of impact on your tax payments, the liquidity, and so on. Beyond that, during elections also a lot of achar sanhita will be there in terms of new orders, etc, so that is why I am combining everything.
I think the market might go into a consolidation phase. But this cannot really disturb us and of course the underlying assumption is that the election results will be positive for the ruling government. Beyond that, if we go, we will have a little bit of monsoon coming in. So, maybe post election pre-Diwali is the time when things will start looking very robust again.
