“We see good potential in Indian equities over the long term. Given the huge innovation happening in India, we are very bullish on the listed equity space for the next decade,” Vivek Sharma, director (strategy) at Estee Advisors and head of investments at Gulaq, a part of Estee Group, says in an interview to Moneycontrol.
On sectors to watch, he says, “Based on more than 100 factors that our algos analyse on the BSE500, we see a lot of value in industrials, materials, and utility sectors. We are bullish on these three sectors which have about 55 percent weight in our portfolio compared to BSE500 which has less than 25 percent in these three sectors.”
Do you expect enormous opportunities in the real estate space in the coming quarters?
We don’t expect any outperformance in real estate in the near term, hence we are neutral on it. We see better opportunities elsewhere like materials and industrials. Home prices have picked up in the last one to two quarters but real estate stocks have priced in all the upside for now. However, over the long run, real estate upcycle will help real estate stocks to perform well.
What is your take on the power sector and should one have these stocks in a portfolio considering the increasing focus on electric vehicles, renewable energy, etc?
Also read – Dalal Street Week Ahead | 10 key factors that will keep traders busy next week
We are bullish on electric vehicle (EV) and renewable energy for the long term. In the short term also we are slightly overweight on utilities — Adani Green is one stock we like for the short term. It comes out on top in most of the quant-based factors like momentum. Huge money will be made in these sectors in India and the nation is at the forefront of technological innovation but as of now there is no clear visibility.
Stocks that do well come out with string ranking in both technical factors as well as fundamental factors. Stocks in these sectors have neither, except Adani Green.
Most of the sectors have seen a run-up in the last one month. Where do you see the value now?
Based on more than 100 factors that our algos analyse on the BSE500, we see a lot of value in industrials, materials, and utilities sectors. We are bullish on these three sectors which have about 55 percent weight in our portfolio compared to BSE500 which has less than 25 percent in these three sectors.
IT and financials are two sectors where we feel valuations have run up and hence we are avoiding these for now. Most of our micro-factors are pointing out that these sectors are likely to underperform in the next one to three months’ time frame.
Also read – RBI Monetary Policy: Soon, you can make cardless withdrawals from any bank’s ATM in India
What could be your contra bets that deliver enormous gains in the long run?
The kind of factors we analyse keep changing month-on-month. We see good potential in Indian equities over the long term. However, it will be very difficult for us to comment on a sector or stock for long term as we do churn our portfolios faster than what normally fund managers do, but that’s our edge and we have been able to generate healthy alpha over the last two years — we have been live with Gulaq portfolios. Given the huge innovation happening in India, we are very bullish on the listed equity space for the next decade.
Do you still see value in metal space, even after a huge run-up?
Yes, we are bullish on this sector. We have one stock, RHI Magnesita India, which we picked from the metal space due to factors like momentum and low volatility. They have a strong focus on R&D and investment in capacity expansion which will see it in good standing in the next couple of years. This company is in the production of high-grade refractory products and solutions and has three manufacturing units in India.
Click Here For Live Updates on Russia-Ukraine Crisis
Overall also we see the impact of the Russia and Ukraine crisis on the metals sector. They both are large exporters of raw materials and the production and exports have been disrupted. These disruptions bode well for Indian companies in this space.
What would be the bigger risk for the market going ahead in FY23 – is it earnings, US Fed move, inflation, or unknown?
We believe Fed moves and inflation are linked, and those are going to be the two biggest factors that are going to impact the markets in the next one year or so. I don’t think even central bankers have the ability to predict inflation and it’s anybody’s guess how good a job they will be able to do on the inflation front.
Fed seems laser-focused on controlling inflation from the minutes of the recent meeting, and is prepared to raise the rates sharply over the next few quarters. Traders have already priced in about 225 basis points of a rate hike this year. Some of it is priced in the market and this is what is making the markets nervous.
Do you still see value in banking and financial space?
On banking, we are negative in the short term. We feel they have run up too far and we are waiting for them to give us the right opportunity to include it in our portfolios. We see better opportunities elsewhere.
Not only momentum-based factors but the ones which represent the efficiency of the business, dividend payouts, asset turnovers, etc, all point to bearish effects on the financial services sectors in the near term.
We just have one stock from the financial space, Angel One. Have seen good performance in the last few months from Angel One and expect it to deliver over the next few months as well.
Cement companies have managed to pass on the raw material costs to some extent given the demand is high. Should one buy the space at these levels?
Cement companies have increased prices over the last few months. I feel that demand is going to outpace supply and hence the next few years might be good for them. Good thing has been that the higher prices haven’t been able to dent demand.
In the near term, we don’t see any good picks which can deliver returns in the next few months given the high levels they are trading at right now.
We are currently not recommending stocks in this space in our latest portfolio. We believe there are better buys from materials sectors like chemical companies.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Download your money calendar for 2022-23 here and keep your dates with your moneybox, investments, taxes
