India is entering a new bull market on hopes of new Govt: Nilesh Shah
India is entering a new bull market on hopes of new Govt: Nilesh Shah, Axis Capital
In an interview with ET Now, Nilesh Shah, MD & CEO, Axis Capital, shares his views on the market and the investment strategy in the current scenario. Excerpts:
ET Now: Well, the BJP offices in Delhi and Mumbai have ordered 2000 kg of ladoos. Are you also ordering the same in Axis Bank? I mean are we in for the biggest party of the season?
Nilesh Shah: Yes, if you see the market, currency, equities and fixed income, they have priced in the new government reviving growth in the economy. We have seen the rupee moving significantly since the exit poll. We have seen the equity markets running a little bit ahead of the exit polls and thereafter exit polls, even yields have softened. So yes, it is party time.
ET Now: So how does one participate in the party, come at 9:15 and buy, sell before 3:30, make money, go home?
Nilesh Shah: If you are lucky, then surely you should do that. I guess it is time to be an investor. On a longer-term basis, India is probably entering into a new bull run.
For the last six years our Sensex has virtually remained the same, plus or minus 5-10% here and there, whereas the earnings have doubled and now we have a scenario where growth and investments could be on the uptick.
Even in a global market, some of our peers are facing hard time. China has its credit bubble and slowing growth, Brazil has weak economic fundamentals, Russia has the Ukraine crisis, Indonesia and Turkey have political upheaval, whereas in India now you have political stability, you have revival of growth, you have uptick on investment, and valuations have gone up a little bit, but it is still in the fair value range.
So you have support from the global market side and more importantly, now you will have support from the domestic investors also. The domestic investors have been net sellers of equity for a long period of time.
They are completely underinvested in equity and vis-a-vis other forms of investments, be it gold, be it real estate, be it fixed income. Now there is a clear case that equity will outperform and domestic flows will come into equities.
ET Now: Is it time to exercise some caution look at Gujarat Fluoro? It has got nothing to do with Gujarat, it is making gas, but just because it has got a pre-fix Gujarat, the stock is moving up?
Nilesh Shah: No, I do not think so. It is time to be that cautious yet. If you see the broad market, it is still trading at 15 times forward earning. If you see, most of the sectors, barring consumer staples, are trading at below their historical valuations.
Yes, you will have sectors like IT and pharma which will probably underperform the market because of the rupee appreciation, but within that also you have quality companies now available at 11 to 13 times forward earnings in the IT sector, especially the midcap and slightly smaller large cap companies or within pharma at 13 to 17 times forward earning.
So valuations are still in your favour and more importantly, the flows are also in your favour, and till now our markets have run on just one wheel, it was the FII. They were pumping in money and domestics were taking out. Now FIIs as well as domestics will both start buying into the market. Of course, there will be supply of papers at a later date, but now you will have two wheels to your market.
ET Now: There is clearly a left out feeling in the market. It has only been FIIs which have driven the last move of say 300, 200 odd points. What does one do now? If a retail investor wants to jump in, is there still time, is there money to be made? More importantly, how do you allocate money between cyclical and the exporters?
Nilesh Shah: Retail investors have no choice but to increase their allocation to equities from an overall portfolio point of view, forget where the markets are good or bad. According to our analysis, roughly about 6% of retail balance sheet is exposed towards equity, excluding real estate investment. So clearly they are underweight equity and they have been underweight equity for a long period of time.
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
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In an interview with ET Now, Nilesh Shah, MD & CEO, Axis Capital, shares his views on the market and the investment strategy in the current scenario. Excerpts:
ET Now: Well, the BJP offices in Delhi and Mumbai have ordered 2000 kg of ladoos. Are you also ordering the same in Axis Bank? I mean are we in for the biggest party of the season?
Nilesh Shah: Yes, if you see the market, currency, equities and fixed income, they have priced in the new government reviving growth in the economy. We have seen the rupee moving significantly since the exit poll. We have seen the equity markets running a little bit ahead of the exit polls and thereafter exit polls, even yields have softened. So yes, it is party time.
ET Now: So how does one participate in the party, come at 9:15 and buy, sell before 3:30, make money, go home?
Nilesh Shah: If you are lucky, then surely you should do that. I guess it is time to be an investor. On a longer-term basis, India is probably entering into a new bull run.
For the last six years our Sensex has virtually remained the same, plus or minus 5-10% here and there, whereas the earnings have doubled and now we have a scenario where growth and investments could be on the uptick.
Even in a global market, some of our peers are facing hard time. China has its credit bubble and slowing growth, Brazil has weak economic fundamentals, Russia has the Ukraine crisis, Indonesia and Turkey have political upheaval, whereas in India now you have political stability, you have revival of growth, you have uptick on investment, and valuations have gone up a little bit, but it is still in the fair value range.
So you have support from the global market side and more importantly, now you will have support from the domestic investors also. The domestic investors have been net sellers of equity for a long period of time.
They are completely underinvested in equity and vis-a-vis other forms of investments, be it gold, be it real estate, be it fixed income. Now there is a clear case that equity will outperform and domestic flows will come into equities.
ET Now: Is it time to exercise some caution look at Gujarat Fluoro? It has got nothing to do with Gujarat, it is making gas, but just because it has got a pre-fix Gujarat, the stock is moving up?
Nilesh Shah: No, I do not think so. It is time to be that cautious yet. If you see the broad market, it is still trading at 15 times forward earning. If you see, most of the sectors, barring consumer staples, are trading at below their historical valuations.
Yes, you will have sectors like IT and pharma which will probably underperform the market because of the rupee appreciation, but within that also you have quality companies now available at 11 to 13 times forward earnings in the IT sector, especially the midcap and slightly smaller large cap companies or within pharma at 13 to 17 times forward earning.
So valuations are still in your favour and more importantly, the flows are also in your favour, and till now our markets have run on just one wheel, it was the FII. They were pumping in money and domestics were taking out. Now FIIs as well as domestics will both start buying into the market. Of course, there will be supply of papers at a later date, but now you will have two wheels to your market.
ET Now: There is clearly a left out feeling in the market. It has only been FIIs which have driven the last move of say 300, 200 odd points. What does one do now? If a retail investor wants to jump in, is there still time, is there money to be made? More importantly, how do you allocate money between cyclical and the exporters?
Nilesh Shah: Retail investors have no choice but to increase their allocation to equities from an overall portfolio point of view, forget where the markets are good or bad. According to our analysis, roughly about 6% of retail balance sheet is exposed towards equity, excluding real estate investment. So clearly they are underweight equity and they have been underweight equity for a long period of time.
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
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