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Economic Times
6 days ago
- Business
- Economic Times
Tariff jitters temporary, long-term upside intact for India Inc.: Deepak Shenoy
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads "Overall fund flows seem to be more concentrated towards domestic. There is also a lot more action in terms of results and some of these tariff news and all that stuff which is kind of still creating a lot of uncertainty," says Deepak Shenoy , Founder, Capital Mind We saw about 25,000 crores enter the markets as fresh entries into mutual funds in April and given that May was like a 9% plus month for smallcaps and smallcap funds have been the second largest recipient of funds in April, that will kind of bolster more retail investment into domestic funds even that, overall fund flows seem to be more concentrated towards domestic. There is also a lot more action in terms of results and some of these tariff news and all that stuff which is kind of still creating a lot of have come to the realisation that there is a little bit of back and forth and anybody says something about tariffs that is likely to be changed very quickly in whichever direction and mostly in the direction of removing those tariffs in a short period of I feel that in the end we will come down to 10% tariffs by the US to everybody and by and large some countries may receive a little more but I do not think this is going to be a major impact longer we realise this, it is less of an impact overall. The themes that seem to still be working is manufacturing, is financialization , and is maybe defence as themes that hurt perhaps are commodities because a large amount is based on world-wide demand as well, so that theme seems to be constant. I do not think today is any special day in that sense, but we have to be cognisant that as these tariffs come off and as eventually the wars in the world come to some kind of conclusion, the upside for India is definitely strong and I am biased, I am a fund manager, so we have to be positive but some of the positives are going to get more visible in the next six I will be honest. We run a company in this industry and therefore very-very heavily biased. But I still think this is the tip of the iceberg in terms of how much this industry can scale. I would not talk about who the winners will be and who the losers will be, but India is terribly under-financialized. Less than 18% of our GDP is in mutual funds whereas in America that number is more than 100%. So, to a certain extent there is a lot of room for the Indian organised financial industry to move. We are moving away from the real estate, gold, and chit funds kind of products to save into real financial products or financial products of a more regulated sort which has a lot more potential. You are seeing this happening. 25,000 crores a month net new inflows, most of that coming through SIPs This has not slowed down meaningfully even through the fact that the markets have corrected. We have seen more regulatory action that has fortified, so whether it is an RTA, whether it is an AMC, whether it is an exchange, or whether it is a depository all of them are getting more and more prominent in the overall structural framework of now it is becoming more and more easy to transact in them, to deal with them if a person dies transferring a financial product is way easier than trying to transfer say real estate or anything like a lot of these things add up over time and fortify people's minds into saying okay we will do this. You cannot sell half a house, but you could sell half a mutual therefore, people are actually getting more and more into financial products as such and the financial products themselves are investing in different things. You can buy gold through a mutual fund. You can buy stocks through a mutual fund. You can buy bonds and so on. So that way the industry itself has kind of scaled we are also seeing wealth management players, people who manage the money of relatively richer people even those stocks are kind of increasing in value and they are increasing in terms of growth as well, in terms of real profits. So, from that perspective we are yes, maybe we are overpaying for these stocks today, but a structural approach to buy them over a period of time is perhaps necessary for any growth oriented portfolio.
Time of India
03-06-2025
- Business
- Time of India
Tariff jitters temporary, long-term upside intact for India Inc.: Deepak Shenoy
"Overall fund flows seem to be more concentrated towards domestic. There is also a lot more action in terms of results and some of these tariff news and all that stuff which is kind of still creating a lot of uncertainty," says Deepak Shenoy , Founder, Capital Mind . Lots to talk about. We have lots of news flow that has trickled in over the course of the weekend. Give us a broad sense of the kind of trading action that we have can expect through the week? We saw about 25,000 crores enter the markets as fresh entries into mutual funds in April and given that May was like a 9% plus month for smallcaps and smallcap funds have been the second largest recipient of funds in April, that will kind of bolster more retail investment into domestic funds even more. Given that, overall fund flows seem to be more concentrated towards domestic. There is also a lot more action in terms of results and some of these tariff news and all that stuff which is kind of still creating a lot of uncertainty. People have come to the realisation that there is a little bit of back and forth and anybody says something about tariffs that is likely to be changed very quickly in whichever direction and mostly in the direction of removing those tariffs in a short period of time. But I feel that in the end we will come down to 10% tariffs by the US to everybody and by and large some countries may receive a little more but I do not think this is going to be a major impact longer term. Live Events Once we realise this, it is less of an impact overall. The themes that seem to still be working is manufacturing, is financialization , and is maybe defence as well. The themes that hurt perhaps are commodities because a large amount is based on world-wide demand as well, so that theme seems to be constant. I do not think today is any special day in that sense, but we have to be cognisant that as these tariffs come off and as eventually the wars in the world come to some kind of conclusion, the upside for India is definitely strong and I am biased, I am a fund manager, so we have to be positive but some of the positives are going to get more visible in the next six months. You always debate about whether that is the right price to pay for any of these capital market stocks or not, they have already run up so much, but is there still value on the table anywhere within this theme? Deepak Shenoy: So, I will be honest. We run a company in this industry and therefore very-very heavily biased. But I still think this is the tip of the iceberg in terms of how much this industry can scale. I would not talk about who the winners will be and who the losers will be, but India is terribly under-financialized. Less than 18% of our GDP is in mutual funds whereas in America that number is more than 100%. So, to a certain extent there is a lot of room for the Indian organised financial industry to move. We are moving away from the real estate, gold, and chit funds kind of products to save into real financial products or financial products of a more regulated sort which has a lot more potential. You are seeing this happening. 25,000 crores a month net new inflows, most of that coming through SIPs . This has not slowed down meaningfully even through the fact that the markets have corrected. We have seen more regulatory action that has fortified, so whether it is an RTA, whether it is an AMC, whether it is an exchange, or whether it is a depository all of them are getting more and more prominent in the overall structural framework of regulation. And now it is becoming more and more easy to transact in them, to deal with them if a person dies transferring a financial product is way easier than trying to transfer say real estate or anything like that. So, a lot of these things add up over time and fortify people's minds into saying okay we will do this. You cannot sell half a house, but you could sell half a mutual fund. So, therefore, people are actually getting more and more into financial products as such and the financial products themselves are investing in different things. You can buy gold through a mutual fund. You can buy stocks through a mutual fund. You can buy bonds and so on. So that way the industry itself has kind of scaled upwards. And we are also seeing wealth management players, people who manage the money of relatively richer people even those stocks are kind of increasing in value and they are increasing in terms of growth as well, in terms of real profits. So, from that perspective we are underpenetrated. So, yes, maybe we are overpaying for these stocks today, but a structural approach to buy them over a period of time is perhaps necessary for any growth oriented portfolio.
Economic Times
22-05-2025
- Business
- Economic Times
Caution advised on high-PE stocks amid market optimism: Deepak Shenoy
"We do not seem to see a stagnation in earnings growth, 14% is quite decent for the Nifty 500 as a median number and I also believe that a lot of revenue growth at least for the domestic story is up ahead of us from a perspective of increased consumption because perhaps of the tax cuts which are applicable from April onwards and also because of lower interest rates which are applicable again from April," says Deepak Shenoy, Founder, Capital Mind. ADVERTISEMENT What is your current view on the markets because though we are witnessing the global uncertainties and that has been a course for the day, and day in and day out we get to hear from President Trump as well, but back home the earning season has not been that disappointing so far, so help us understand what do you make out of it. Deepak Shenoy: Yes, the big thing, the problem right now has been the uncertainty from tariffs, from geopolitical situations, both India-Pakistan and perhaps complexities in the Israel, the Middle East and in Ukraine and Russia as well. On top of that you have got other uncertainties which are slowly evening out in terms of whatever our earnings situation is. Now, if you look at overall Nifty 500 earnings so far, the median earnings have grown about 14% which is actually not bad at all, 350 companies odd have put out their results. So, we do not seem to see a stagnation in earnings growth, 14% is quite decent for the Nifty 500 as a median number and I also believe that a lot of revenue growth at least for the domestic story is up ahead of us from a perspective of increased consumption because perhaps of the tax cuts which are applicable from April onwards and also because of lower interest rates which are applicable again from April. So, it will take us about three or four months for the rates to trickle down to corporate borrowing rates, to domestic retail borrowing rates as well, but that will also drive up more consumption, more revenues therefore for companies going forward and perhaps some more capex as well. So, India as a country remains quite strong from that perspective. There are some worldwide headwinds in terms of world interest rates going up in terms of yields. So, you are seeing American 30-year yields flirting with 5%, Japanese 40-year yields at 3%, even yields in Germany and in UK going up so that has an overall broad macro-ish concern. But I mean, India is in a much better situation than most of the rest of the world and perhaps what India was also maybe six to eight months ago. ADVERTISEMENT Now, while you did speak about how India is resilient and you spoke about the consumption space as well, I want to understand, like we are five months into 2025. Are you seeing any signs of sector rotation? Which pockets are losing steam and where is leadership emerging from? Deepak Shenoy: So, clearly, we have had a sector fall in terms of both to a certain extent pharma but very largely it, so it has not recovered meaningfully. Banks on the other hand have recovered quite meaningfully since the Feb and the April rate cuts. We have had some NBFC start to come back as well. Not all of them, but some. We have also seen FII resurgence in May, which is the first time we are actually seeing any kind of inward flows, so net about 10,000, 15,000 crores in May but it is actually quite reversal from the first few months of the year. Overall, the sector rotation, we have started to see a lot of the mid and smallcaps recover quite sharply from the Feb lows. ADVERTISEMENT We are seeing this overall as market cap based, but we are seeing some of the domestic manufacturing and industrial plays start to demonstrate much better both in terms of earnings, in terms of stock price movements, a better performance, and also better economic outlays for the future. So, every few months there will be something new that kind of comes and takes the charge, but domestic consumption in terms of the large FMCG names I do not think there is a meaningful recovery over there yet and because of their pricing and their valuations being very high compared to their growth, they continue to be a little bit more suspect in terms of taking the bet on them going forward, but industrials, manufacturing, defence these continue to remain good interesting themes for us to look at going forward. You are going to be very happy for the next six months because there is still a lot of uncertainty, tariffs, there is deals that are coming up, there is perhaps the end of these wars that are happening and when we see the end of the wars, when we see the tariff thing kind of uncertainty go away, that is when the markets will be more happy. ADVERTISEMENT But given the fact that some of these companies and if I can name one is Dixon Technologies, when we talk about that company what a multi-bagger it has been, we are all aware about the growth and the kind of business that the company is doing and not just that, even delivering but the valuations are a bit of a concern. Do you believe now is the time wherein such high PE companies can also take a bit of a backseat because they have been richly valued and very well appreciated by the market participants as well. What is your take? Deepak Shenoy: No, every company will go through a phase of very high momentum and then perhaps high expectations. Sometimes, it is up to the company to meet those expectations. Now Dixon as a company I would not comment on any individual stock, but every of these companies have perhaps looked at high valuations in the past as well. Some of them have actually outperformed those numbers and in terms of growing fast enough so that you can justify those PEs. In other cases, the stock prices have corrected to reflect lower levels of growth as well. ADVERTISEMENT So, to a certain extent we should look at some of these things from a perspective of can they do that kind of earnings growth that they are expecting and overall the last three months have been kind to the pack because, because of the tariffs, because of all of this stuff it becomes more evident that we have to make more of this stuff in India, for India so that kind of reinforces the message going forward. So, there is perhaps more happening than what is just currently visible to us. So, at some point that may provide an upward surprise, but short of that you are going to always have to be careful when you buy high PE companies, that any negative news can hurt them a lot more disproportionately than a company that has reasonable PE. (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
22-05-2025
- Business
- Time of India
Defence sector remains a long-term bet amid strong domestic policy push: Deepak Shenoy
"Our domestic players will see serious revenue increases. But this has been happening the last three years. So, I am not saying that this is suddenly because of what has happened in the last one month. But there is more space to go," says Deepak Shenoy , Founder, Capital Mind. I want to go back to your sectoral views then, you did mention that manufacturing, industrials, defence continue to remain your preferred bets. I want to specifically talk about the defence space. The space has been in focus since the Pahalgam attack and stocks have seen a fair bit of rally as well and the earnings are also fairly good for most of the companies with especially healthy order books for most of them. So, within this defence space, what are your preferred picks? Could you give us some names? Deepak Shenoy: I cannot give you names. We have got a mutual fund license, so we do not do names meaningfully anymore. But the overall sector looks good for the longer term mostly because the focus of even the Indian government is shifting to procure locally from domestic manufacturers. We have zero foreign dependence during times of conflict. You do not want to be buying from a country that suddenly decides not to support you in a war. So, therefore, the Indian army, the Indian services, the defence ministry also will very surely move towards as close to 100% domestic as possible. Our domestic players will see serious revenue increases. But this has been happening the last three years. So, I am not saying that this is suddenly because of what has happened in the last one month. But there is more space to go. There will be a lot more opportunity in defence and we will both do replenishment of whatever has been spent and whatever has been used in the last few weeks or months, but also do new initiatives because increasingly we are getting to know capabilities of people who are hostile countries that are hostile to us and to counter those capabilities we are going to have to build new capabilities and therefore there will be a lot more new work that will go into these defence companies. And as I said most of this work will go locally. Live Events So, whether it is an electronics company or whether it is a missile company or whether it is a company that does tanks, physical armoured cars or trucks, these are all things that you will see more procurement for lately in the near future and we have bet on a bunch of them. But the idea here is that you have to have a 10-year view into these companies in order to understand, I mean how much space there is. Some of them are expensive so you have to be very careful on what you buy. But give us some sense that from where do you believe that the next big signal for the markets will come through because, of late, we have been just tracking what President Trump has been saying, along with that the earning season was in full swing. But now a lot has really been happening in the bond market as well. From the global markets across, we are getting to hear some comments on how some of these long-term bonds and their demand, how are they shaping up? What is your sense that from six months when you believe that the markets will be a little bit more volatile, which key triggers you will be watching out for? Deepak Shenoy: So, I am still watching out for say a good news around the war coming to an end or something of that sort, which would kind of help reduce the uncertainty going forward. Secondly, on the closing down of tariffs, so at some point America is going to have to make a decision on what it is going to do with these tariffs thing and whether it is going to retain them at this 10%, increase them, or change whatever it has to with China as well. Expect that over the next three or four months that will kind of ease down, that is really your trigger. But honestly, markets look for very sharp and very emotional triggers every day, so that is not going to happen. It is like a lot of very boring stuff comes. Now, for instance, we have reduced interest rates, that was a trigger, but we did not care when it happened and now suddenly we are saying banks are doing well. But it is a delayed effect so they get good impact for the first six months, then slowly their loans also repriced downwards and that is when they do not make that much. So, we will have to live with lower nims, but higher growth and the banks that will grow the most will make a lot of money. However, these triggers have been kind of ignored by the market for when they happened. So, we did not think that that would do so well, but now it is starting to come to the fore. We will see this, we will see a change in global inflation. India's inflation will continue to flow downwards in the next few months and world inflation will actually inch upwards, not downwards. So, you will see a very different reaction to interest rates worldwide versus what is happening domestically. I feel the macro situation is more favourable to India, but this uncertainty needs to get over on tariffs. It will take us another three or four months while whatever Trump says and whatever something else says and all that stuff, after that we will be in a better shape to kind of take more decisions. Markets tend to look a little bit forward. So, you might see the markets will kind of start predicting this a little bit earlier than everybody else. I also wanted to get your view on the oil and gas space. On the back of some news flow now with reports suggesting that Israel may be preparing to strike Iranian nuclear facilities which will lead to supply concerns. How do you think one should play this sector? Deepak Shenoy: Well, technically, Iran is a supplier, but it is not one of the biggest suppliers in the world. I would say a lot of threatening will happen, maybe some action and again markets will get excited in the short term, but in the long term you have to look at it from a perspective of how much supply exists and can it meet demand. There seems to be enough supply to be able to meet demand already and a lot of these countries are desperately looking for an opportunity to increase their production because they have decreased production, trying to control prices in the past. So, if there were a loss of one player, then another player will come in to take its place. So, I do not see meaningful increase in demand for crude, and I do not see meaningful drop in supply for crude. So, I do not think crude prices are going to meaningfully change. There may be some deals. There is some talk about how Venezuela is going to be treated. There is some talk about discovering more oil in a few other places. All of these things will change supply-demand constraint. So, they may create some short-term imbalances, but I do not think this Iran-Israel thing is meaningful more than a short-term blip.
Time of India
22-05-2025
- Business
- Time of India
Caution advised on high-PE stocks amid market optimism: Deepak Shenoy
"We do not seem to see a stagnation in earnings growth , 14% is quite decent for the Nifty 500 as a median number and I also believe that a lot of revenue growth at least for the domestic story is up ahead of us from a perspective of increased consumption because perhaps of the tax cuts which are applicable from April onwards and also because of lower interest rates which are applicable again from April," says Deepak Shenoy , Founder, Capital Mind. What is your current view on the markets because though we are witnessing the global uncertainties and that has been a course for the day, and day in and day out we get to hear from President Trump as well, but back home the earning season has not been that disappointing so far, so help us understand what do you make out of it. Deepak Shenoy: Yes, the big thing, the problem right now has been the uncertainty from tariffs, from geopolitical situations, both India-Pakistan and perhaps complexities in the Israel, the Middle East and in Ukraine and Russia as well. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Entrevista exclusiva: a verdade sobre o magnésio que ninguém te contou AlwaysFit Undo On top of that you have got other uncertainties which are slowly evening out in terms of whatever our earnings situation is. Now, if you look at overall Nifty 500 earnings so far, the median earnings have grown about 14% which is actually not bad at all, 350 companies odd have put out their results. So, we do not seem to see a stagnation in earnings growth, 14% is quite decent for the Nifty 500 as a median number and I also believe that a lot of revenue growth at least for the domestic story is up ahead of us from a perspective of increased consumption because perhaps of the tax cuts which are applicable from April onwards and also because of lower interest rates which are applicable again from April. So, it will take us about three or four months for the rates to trickle down to corporate borrowing rates, to domestic retail borrowing rates as well, but that will also drive up more consumption, more revenues therefore for companies going forward and perhaps some more capex as well. So, India as a country remains quite strong from that perspective. There are some worldwide headwinds in terms of world interest rates going up in terms of yields. So, you are seeing American 30-year yields flirting with 5%, Japanese 40-year yields at 3%, even yields in Germany and in UK going up so that has an overall broad macro-ish concern. But I mean, India is in a much better situation than most of the rest of the world and perhaps what India was also maybe six to eight months ago. Live Events Now, while you did speak about how India is resilient and you spoke about the consumption space as well, I want to understand, like we are five months into 2025. Are you seeing any signs of sector rotation? Which pockets are losing steam and where is leadership emerging from? Deepak Shenoy: So, clearly, we have had a sector fall in terms of both to a certain extent pharma but very largely it, so it has not recovered meaningfully. Banks on the other hand have recovered quite meaningfully since the Feb and the April rate cuts. We have had some NBFC start to come back as well. Not all of them, but some. We have also seen FII resurgence in May, which is the first time we are actually seeing any kind of inward flows, so net about 10,000, 15,000 crores in May but it is actually quite reversal from the first few months of the year. Overall, the sector rotation, we have started to see a lot of the mid and smallcaps recover quite sharply from the Feb lows. We are seeing this overall as market cap based, but we are seeing some of the domestic manufacturing and industrial plays start to demonstrate much better both in terms of earnings, in terms of stock price movements, a better performance, and also better economic outlays for the future. So, every few months there will be something new that kind of comes and takes the charge, but domestic consumption in terms of the large FMCG names I do not think there is a meaningful recovery over there yet and because of their pricing and their valuations being very high compared to their growth, they continue to be a little bit more suspect in terms of taking the bet on them going forward, but industrials, manufacturing, defence these continue to remain good interesting themes for us to look at going forward. You are going to be very happy for the next six months because there is still a lot of uncertainty, tariffs, there is deals that are coming up, there is perhaps the end of these wars that are happening and when we see the end of the wars, when we see the tariff thing kind of uncertainty go away, that is when the markets will be more happy. But given the fact that some of these companies and if I can name one is Dixon Technologies, when we talk about that company what a multi-bagger it has been, we are all aware about the growth and the kind of business that the company is doing and not just that, even delivering but the valuations are a bit of a concern. Do you believe now is the time wherein such high PE companies can also take a bit of a backseat because they have been richly valued and very well appreciated by the market participants as well. What is your take? Deepak Shenoy: No, every company will go through a phase of very high momentum and then perhaps high expectations. Sometimes, it is up to the company to meet those expectations. Now Dixon as a company I would not comment on any individual stock, but every of these companies have perhaps looked at high valuations in the past as well. Some of them have actually outperformed those numbers and in terms of growing fast enough so that you can justify those PEs. In other cases, the stock prices have corrected to reflect lower levels of growth as well. So, to a certain extent we should look at some of these things from a perspective of can they do that kind of earnings growth that they are expecting and overall the last three months have been kind to the pack because, because of the tariffs, because of all of this stuff it becomes more evident that we have to make more of this stuff in India, for India so that kind of reinforces the message going forward. So, there is perhaps more happening than what is just currently visible to us. So, at some point that may provide an upward surprise, but short of that you are going to always have to be careful when you buy high PE companies, that any negative news can hurt them a lot more disproportionately than a company that has reasonable PE.
