Divam Sharma is the Founder of Green Portfolio
Divam Sharma of Green Portfolio is highly upbeat about the market. The seasoned financial expert forecasts a 15-20 percent rally from the current levels by next November.
Green Portfolio sees a lot of companies still available at very attractive valuations. The FPI money coming back should be a significant trigger for an expansion in valuations.
On the new age companies which got listed last year, most of them have seen major correction. These are seeing growth in revenues, however for many of these companies, the road to profitability still looks long.
“There could be some trading gains to be made in such stocks going forward as the markets moves up. However, long term investments should still be deferred for now,” the founder of Green Portfolio shares in an interview with Moneycontrol. Excerpts from the interaction:
How do you see the consumption space? Are you selective?
We are selectively bullish in consumption space right now. If you look at the demographics of India, this space will do well over the long term. Rural demand should revive going forward.
Inflation and supply chain issues have had a significant impact on the sector over the last 1 year. Although, lots of value opportunities have emerged in this sector, we will wait for more firm trends to emerge in terms of inflation and supply chain issues settling.
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How do you see the new-age tech companies like Paytm, Zomato, Policybazaar and Nykaa after their quarterly earnings?
We have seen major correction in most of these new age companies which got listed last year. We are seeing growth in revenues, however for many of these companies, the road to profitability still looks long. The window for anchor investors to exit has increased some supply to the free float.
If you look at the private equity space for large unlisted startups, there are job cuts and funding winter visible. There could be some trading gains to be made in such stocks going forward as the markets moves up. However, long term investments should still be deferred for now.
What is the sense you are getting from corporate earnings season for the second half of FY23?
Barring a few exceptions like Banks, we are seeing pressure on revenues and margins. Still, I would say that it is not a disappointing quarter. Managements of most of our portfolio companies are showing bullish stance. We are seeing a huge capex from corporates.
Also read: Q2 round-up: A mixed bag as global headwinds dent sentiment, domestic plays deliver strong performance
With many commodity prices correcting in Q2 and Q3, we should see some margins improving henceforth.
With the pricing in most of negative factors, do you think the market is ready for 15-20 percent rally by next November 2023?
Yes, we are very much bullish. The broader markets are still to participate in this rally. We see a lot of companies still available at very attractive valuations. The FPI money coming back should be a significant trigger for an expansion in valuations.
We believe that the volatility will continue in 2023 also as we need to still see the impact of high interest rates, recession in some developed economies and continuation of geopolitical tensions.
Do you see more action in primary market in second half of FY23 as we have several IPOs in November itself?
If you look at some of the recent main board listings, there has been a good traction from investors for the companies which are fundamentally strong and leaving value on the table.
With continued SIP inflows, DII investments into markets, and with promoters not reducing shareholdings in general and also doing buy backs in some cases, the demand for new issuances is inevitable.
Although we have seen some large company dropping IPO plans post SEBI approval and citing market conditions, we should see a good second half for the primary offerings in FY23.
SME IPOs are also seeing a robust traction with almost 70 companies already approaching markets in this financial year. Some of the companies have made huge wealth for investors in this financial year.
What are your thoughts on earnings of banks and NBFCs? Do you expect the similar kind of performance to continue in coming quarters?
As pointed out by Uday Kotak, the banks are having a Cinderella moment. Everything seems to be working for the banks, specially the PSB’s in Q2 results. We can see improvement in credit offtake, NIM’s, and NPA’s. We expect the capital markets business and other income also to improve for banks in the coming quarters.
However, with the fall in CASA and term deposit growth not being robust, we are seeing banks and NBFC’s issuing bonds at higher interest rates. We do not expect the margins to improve substantially from here.
The revival of credit growth has also benefitted the NBFC’s and we have seen good set of numbers from them.
These good times will continue for the banks and NBFC’s over the coming quarters. We see some valuations catch up for public sector banks in the near term, however long-term investors should only look at private sector banks for wealth creation.
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