Latest news with #AlchemyCapital
Economic Times
10 hours ago
- Business
- Economic Times
Think Beyond PE: Hiren Ved advocates PEG Ratio for smarter valuation assessment
"But if you look at the last three, four, five years, they have not really delivered the kind of returns. The capital market plays have done far better and that is where we are invested frankly," says Hiren Ved, Director & CIO, Alchemy Capital. ADVERTISEMENT What we want to know that what will work now? Hiren Ved: So, again, I mean, this debate has been around for a long time that the large private sector financials is where the value is or where the valuations are reasonable, which is true. But it really depends on in your mix of portfolio what is the average growth that you are looking at. If you look at the latest numbers, credit growth has slowed down to like 9%. So, maybe the efficient private sector companies can grow at 12-13%. But our sense is that while the RBI has given them the ability to fight off a reduction in NIMs because of the CRR cut, but unlikely that unless credit growth picks up in any meaningful manner, that we could see early teens kind of growth in earnings there. On the other hand, if you look at the capital market plays, there is a structural story there and those have actually done far better than the big private banks. So, our sense is that there is this bias that we have because there was such a large weight in the index and therefore these big banks keep looking cheaper to us. But if you look at the last three, four, five years, they have not really delivered the kind of returns. The capital market plays have done far better and that is where we are invested frankly. ADVERTISEMENT But there too the valuations have not peaked out and I mean, when I ask question of valuations, you are like who is to know what is the correct valuation for these stocks? Hiren Ved: The right way to look at it in terms of valuation is to not just look at absolute PE, but to look at PEG. So, if earnings are growing at 50% or 30% and then if you end up paying 30 times, you are still okay versus paying 18 and 20 times for 10% or even lower growth. I mean, if you look at it, Nifty trades at what 23, 22 times one year forward, but Nifty earnings growth is 10% or lower. So, what peg are you paying for the Nifty. ADVERTISEMENT Or something like an expiry day change as well can bring about some shake offs on an intraday basis. Hiren Ved: Correct, and actually that is exactly what we saw in Jan-Feb which is that the largest correction happened in areas where the participation was the highest and also those were the companies that were growing. So, there was a wave of whatever you call it, profit booking, precautionary money taking off the table, taking some risk off the table and when we were looking at it, the next 50 index corrected much more sharply than the Nifty 50 because that is where the money was made and that is where the earnings growth was, so that is where everybody had their exposure and that is where the exposure came off significantly. ADVERTISEMENT So, I think that from here on given the broad valuations, we should have reasonable expectations of returns. And we are very clear that money is to be made in the broader markets. Probably barring Bajaj Finance in the top Nifty 50 and maybe companies like Trent and a few handful of ones which can still talk about compounding profits at 20-25% plus, everything else is in single digits or early teens. So, we have to moderate our expectations of growth. If we want to have lower risks, then you have to moderate your return expectation as well. And if you want higher returns, then obviously we will have to pay up for the growth that we have, so that is where we are in the markets today. ADVERTISEMENT So, let us take it one by one and let me start off with the capital markets theme. Would you be willing to put fresh money to work right now and again, within capital markets also do you become selective or do you buy a basket of stocks, of course, the top creme within that? Hiren Ved: Yes, I mean, I still feel that while valuations are expensive, but there is a structural growth in those. So, whether it is asset managers, wealth managers, exchanges, I still feel that there is money to be made there. So, to answer your question would you still deploy fresh money? The answer is yes, I would. Let us also touch upon some of the sectors within the broader markets where companies have already delivered well and they are still looking forward to great growth numbers. One of the case, I believe, is EMS counters where Indian companies rather have showed what they can do and what they are capable of, of course, with the government support. And the other one is the quick commerce place where we have seen a bit of a turnaround as well in select companies. Do you believe it is still reasonable at these price points where the valuations are already stretched but still it is the case where you can pay more. Hiren Ved: So, I agree with you. I think EMS is a great growth opportunity still. We are in the early stages of a growth cycle. Probably with the exception of Dixon which is just about going to reach one lakh crore of market cap, a sector which is so large and the opportunity which is so big, I think you will see the birth of many large companies there. And yes, the valuations are quite punchy, but you will have to, therefore, elongate your time horizon for investing. Having said that, we have to be careful because a lot of the growth is in the price and valuations. So, unless you are really willing to bet for the next three to five years and wait for that growth to unfold, there could be intermittent quarters where the numbers may or may not pan out to be good and you could have a very significant draw down in these kind names. But on a structural basis, I still believe there is money to be made. It is a young sector in India relatively.
Time of India
11 hours ago
- Business
- Time of India
Think Beyond PE: Hiren Ved advocates PEG Ratio for smarter valuation assessment
"But if you look at the last three, four, five years, they have not really delivered the kind of returns. The capital market plays have done far better and that is where we are invested frankly," says Hiren Ved , Director & CIO, Alchemy Capital. What we want to know that what will work now? Hiren Ved: So, again, I mean, this debate has been around for a long time that the large private sector financials is where the value is or where the valuations are reasonable, which is true. But it really depends on in your mix of portfolio what is the average growth that you are looking at. If you look at the latest numbers, credit growth has slowed down to like 9%. So, maybe the efficient private sector companies can grow at 12-13%. But our sense is that while the RBI has given them the ability to fight off a reduction in NIMs because of the CRR cut, but unlikely that unless credit growth picks up in any meaningful manner, that we could see early teens kind of growth in earnings there. On the other hand, if you look at the capital market plays, there is a structural story there and those have actually done far better than the big private banks. So, our sense is that there is this bias that we have because there was such a large weight in the index and therefore these big banks keep looking cheaper to us. Live Events But if you look at the last three, four, five years, they have not really delivered the kind of returns. The capital market plays have done far better and that is where we are invested frankly. But there too the valuations have not peaked out and I mean, when I ask question of valuations, you are like who is to know what is the correct valuation for these stocks? Hiren Ved: The right way to look at it in terms of valuation is to not just look at absolute PE, but to look at PEG. So, if earnings are growing at 50% or 30% and then if you end up paying 30 times, you are still okay versus paying 18 and 20 times for 10% or even lower growth. I mean, if you look at it, Nifty trades at what 23, 22 times one year forward, but Nifty earnings growth is 10% or lower. So, what peg are you paying for the Nifty. Or something like an expiry day change as well can bring about some shake offs on an intraday basis. Hiren Ved: Correct, and actually that is exactly what we saw in Jan-Feb which is that the largest correction happened in areas where the participation was the highest and also those were the companies that were growing. So, there was a wave of whatever you call it, profit booking, precautionary money taking off the table, taking some risk off the table and when we were looking at it, the next 50 index corrected much more sharply than the Nifty 50 because that is where the money was made and that is where the earnings growth was, so that is where everybody had their exposure and that is where the exposure came off significantly. So, I think that from here on given the broad valuations, we should have reasonable expectations of returns. And we are very clear that money is to be made in the broader markets. Probably barring Bajaj Finance in the top Nifty 50 and maybe companies like Trent and a few handful of ones which can still talk about compounding profits at 20-25% plus, everything else is in single digits or early teens. So, we have to moderate our expectations of growth. If we want to have lower risks, then you have to moderate your return expectation as well. And if you want higher returns, then obviously we will have to pay up for the growth that we have, so that is where we are in the markets today. So, let us take it one by one and let me start off with the capital markets theme. Would you be willing to put fresh money to work right now and again, within capital markets also do you become selective or do you buy a basket of stocks, of course, the top creme within that? Hiren Ved: Yes, I mean, I still feel that while valuations are expensive, but there is a structural growth in those. So, whether it is asset managers, wealth managers, exchanges, I still feel that there is money to be made there. So, to answer your question would you still deploy fresh money? The answer is yes, I would. Let us also touch upon some of the sectors within the broader markets where companies have already delivered well and they are still looking forward to great growth numbers. One of the case, I believe, is EMS counters where Indian companies rather have showed what they can do and what they are capable of, of course, with the government support. And the other one is the quick commerce place where we have seen a bit of a turnaround as well in select companies. Do you believe it is still reasonable at these price points where the valuations are already stretched but still it is the case where you can pay more. Hiren Ved: So, I agree with you. I think EMS is a great growth opportunity still. We are in the early stages of a growth cycle. Probably with the exception of Dixon which is just about going to reach one lakh crore of market cap, a sector which is so large and the opportunity which is so big, I think you will see the birth of many large companies there. And yes, the valuations are quite punchy, but you will have to, therefore, elongate your time horizon for investing. Having said that, we have to be careful because a lot of the growth is in the price and valuations. So, unless you are really willing to bet for the next three to five years and wait for that growth to unfold, there could be intermittent quarters where the numbers may or may not pan out to be good and you could have a very significant draw down in these kind names. But on a structural basis, I still believe there is money to be made. It is a young sector in India relatively.
Time of India
11 hours ago
- Business
- Time of India
Pharma, chemicals offer contrarian bets in stock-specific market: Hiren Ved
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel "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 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 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 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 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 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 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 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.
