Pharma, chemicals offer contrarian bets in stock-specific market: Hiren Ved

Time of India

6 hours ago

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"I personally feel that given the level of monetary policy action that the RBI gave, had it not been for this geopolitical issue, my sense is that the markets would have probably broken out on the upside because it is a fairly strong monetary stimulus that you have given to the economy. Unfortunately, it all got diluted in the near term because of what we are seeing on the geopolitical front," says Hiren Ved , Director & CIO, Alchemy Capital What it is telling you is that the markets are probably stuck in this range because of what we are seeing on the geopolitical front.Yes, I mean, so there are opposing forces. It has been pretty resilient, the markets, in the face of what we are seeing globally. And I guess that there is a little bit of the confidence that is coming back from the fact that finally in the Q4 earnings we have seen at least earnings stabilise a little bit. And typically, in the short run while the markets tend to focus on a lot of narratives like we saw in the case of tariffs, I think what the markets want to see is that if because of all the geopolitical situation, unless oil goes above $85, we will be okay and we should see a better earnings picture next year.I personally feel that given the level of monetary policy action that the RBI gave, had it not been for this geopolitical issue, my sense is that the markets would have probably broken out on the upside because it is a fairly strong monetary stimulus that you have given to the economy. Unfortunately, it all got diluted in the near term because of what we are seeing on the geopolitical front.Well, the level of supply is definitely a concern in my view in this market, but it also tells you the psyche of most people who are selling because they believe like we said in the beginning of our interaction that market should have corrected by now. So, people feel that okay this is a godsend gift, let us take some money off the table, let us create some liquidity.And there has been a barrage of supply ever since we have seen a pick up in the market from the lows of March and so on and so forth. But I think that also apart from other reasons, this is also one of the reasons why the Nifty is stuck in this range because there is a barrage of supply that is coming in.And when I speak to brokers, they say that this is just the beginning, there is a whole line of more supply that is likely to come up. In a way, it signals the depth of Indian markets now. But we should be very careful and especially in companies where promoters are just selling because the price is good.So, you rightly mentioned, I mean the market is not really cheap and I think that what is seemingly cheap, there is no growth. So, let us say, if you take the fourth quarter numbers itself and we were doing some analysis that the largecap definition as per AMFI which is probably the top 100 companies, the pat growth was 7%. But if I take out the next 50 and just leave the top Nifty 50 companies, it was 3%. That tells you that your top largecap companies there is no earnings growth.On the midcap side in Q4 the earnings growth was 28% and on the smallcap side it was 18%. So, really what the market is telling you is while most market commentators and strategists are telling you that stick to largecaps because that is where the value is, the problem is that there is no growth in earnings there, that is why probably they are available at the valuation at which they are available.But equally the dilemma is that if you want to buy where there is growth, you have to pay up. So, I guess we are in this nice little equilibrium where we should stay invested. But having said that, I think there are always bottom-up opportunities that are there. There could be sectors where there is a lot of pessimism priced in. Pharma could be one of them, chemicals also is coming off a very low base. So, there can always be one-off opportunities that you could find in this market as well. While at a very broad level we might be thinking that valuations are full up, but this is a stock specific market in my view.