ETMarkets.com"So on the whole, I think a solid set of fundamentals and strong liquidity, I think are the perfect kind of tailwinds that the markets would really look forward to," says Nilesh Shah, MD & CEO, Envision Capital.
Just wanted to begin by taking your view as far as where the market is headed. We were having those all-time high level insights just 100-200 points away on the Nifty. Do you see that happening soon in the month of June itself?
Yes, I think it is a great opportunity for the markets to advance further. We have had some strong tailwinds in terms of the macro data which has come out. We have had some solid growth. Inflation is tapering. So pretty much looks like a Goldilocks situation from a macros perspective. We have just completed the earnings season. I think it has been a great close to the quarter, great close to the financial year from corporate India.
And the liquidity overhang which was there in terms of the FPI selling most of late 2021 and 2022, that trend has reversed and they are net buyers.
So on the whole, I think a solid set of fundamentals and strong liquidity, I think are the perfect kind of tailwinds that the markets would really look forward to.
And post the market consolidation for the last 18 months, the valuations also have turned relatively reasonable. So on the whole, great fundamentals, solid liquidity and reasonable valuations I think that really provides a lot of support and a lot of push for the markets to continue to move forward.
What do you think is going to be then the next big trigger that the markets will watch out for? Do you think it is largely likely to be domestically led back home or do you think that it will be a combination of factors from across the globe as well?
I think it is going to be a combination of all. I think we are today relatively spoilt for choice because the domestic growth momentum is very solid. There is strong growth that we are seeing essentially in a lot of discretionary consumption items. The investment in the capex cycle which has still kind of just begun is showing again very-very strong momentum. So you have both discretionary consumption as well as the investment in the capex cycle which essentially are unfolding. In addition to that if inflation has started to moderate, it is quite possible that we are already on a pause mode and if the rates start to decline that will give a further boost to a lot of rate sensitives like real estate, automobiles, and some of the other rate sensitives.
In addition to that from a global perspective while there is a slowdown and there will be challenges in terms of exports but selective pockets across the board I still think are poised to do well.
Some of the companies have evolved some really specific business models and are making them increasingly relevant to the global supply chain. So I think it is going to be a combination of rate sensitives, discretionary spending, capex investment plays and selectively export or global plays. I think a combination of all of this are expected to outperform.
Combination of a lot of factors but what is also impacting the market at this point of time is the clear divergent moves coming in in the broader markets versus large caps. It is the midcap and small caps that have been outperforming while the likes of Reliance, HDFC twins they have really failed to participate. What is your view on Reliance and the HDFC Twins at large?
Well both the packs have consolidated quite a bit and clearly we see a lot of value emerging there. Especially the HDFC Twins, they basically are currently countering a bit of a technical overhang in terms of what the MSCI's decision was in terms of the inclusion and their respective weights. So that is an overhang and the merger is just around the corner. So I believe that maybe for some time these overhangs may persist, but I still believe that the earning season, I think has been great for both of them. And you are seeing them to kind of become more reasonable on valuation. So I think they are attractive for a long-term investor. We own these in our PMS, so we have a vested interest.
I understand the vested interest but what are you doing with your positions? Are you looking at this consolidation as an opportunity to add, or are you just holding on to your position?
We are holding on and adding as well. So we are using these, essentially this phase of consolidation or even a bit of the declines to keep adding to these positions because we still believe that these are really some strong giants. They are stalwarts and they continue to kind of deliver cutting edge products and services. So to that extent, on the whole we really like the long-term investment thesis for some of these established companies.
Anyone who is everyone is just betting on the entire manufacturing theme, talking about how this is the next big sector to bet on when it comes to India. I am sure you too have jumped onto the bandwagon. Tell us a little bit more if you have and what exactly is it that you would look at from a market standpoint?
Well, this decade should witness the emergence of India manufacturing. Lots has been done in the last five to seven years to make Indian manufacturing competitive and these reforms are essentially going to propel India's manufacturing to new levels and new heights. For many decades, the share of manufacturing in our GDP has essentially been either falling or has been abysmally low, and it is time for the manufacturing sector to catch up.
And thankfully, several policy measures and reforms have been unleashed in the last five to seven years which make Indian manufacturing very competitive. So in relation to the China plus angle, I clearly believe that it is become imperative for global supply chains to de-risk their outsourcing and India clearly is a very strong destination.
We have seen some really big players coming and expand their manufacturing and outsourcing from India, the likes of Apple, Tesla is continuously knocking on the door and evaluating options.
And in addition to some of these really technology or the new age companies we also see manufacturing pick up strongly in chemicals, pharmaceuticals, auto components, defence.
These are some of the areas where Indian manufacturing is really becoming the focus of the world. So I think on the whole, manufacturing is a huge canvas. There are several sectors and we really see majority of these sectors to do well.
And especially with the kind of cost proposition that some of the Indian manufacturers have to offer, we think that a combination of a strong domestic opportunity, import substitution, and export promotion are really wonderful kind of areas to look for from an Indian manufacturing point of view.
You have quite a few positions when it comes to the liquor industry. You owned at least United Spirits, Radico Khaitan, you were looking at Sula as well. What is the update with respect to that and I am also keen to understand, what is the view on pharma? Are you looking at it incrementally positive?
Firstly, on the alcoholic beverages, we are extremely constructive, extremely positive on the Indian alcoholic beverages segment. We pretty much think that this sector is pretty much like what consumer staples like soaps and shampoos were 10, 20, 30 years back.
Under penetration is abysmally low and we have a lot of headroom to catch up. So there is a solid case for these businesses to kind of compound or grow their volumes in high single digits and value in mid-double digits.
So we clearly believe that this is an extremely attractive opportunity. We used to own United Spirits as well as Radico, we continue to own them.
And we have most recently added Sula as it is the market leader in the wine segment which is still kind of very-very nascent and in very early stages. So we own these three positions in the Indian alcoholic beverages and we think it is one of the best proxies for Indian consumption story.
And as per capita incomes rises, we actually believe that there will be an increase in consumption of some of these discretionary products. So clearly we continue to be very positive on that.
Secondly, in the liquor segment, we think margins have bottomed up and when we kind of look at the guidance which some of these companies are giving, they are talking of getting back to their historically high margins over the span of next few quarters or next few years. So that will provide additional tailwinds to the growth for these companies.
Coming on to pharma, I think pharma has so far been a very disappointing experience. They continue to face some strong headwinds in terms of price erosion, especially for the US markets and some of the regulatory issues. So I still think at this stage, we are not as constructive on pharma as what we used to be a while back. But let us see how things unfold if some of these headwinds recede, then we are willing to kind of have a fresh look at Indian pharma.
If you are having too much daru you need the insurance policies from the likes of PB Fintech and probably some chakna from the likes of Zomato?
Oh, yes, absolutely. These are really the kind of opportunities that we are looking for. We like the insurance space and we clearly believe that Indian insurance is again significantly underpenetrated. Our per capita spending on insurance is just about $80 versus a global average of $800. So that gives basically headroom for growth for several years or maybe for a decade or two. And within that online insurance is again relatively underpenetrated or the share of online insurance is still very low.
It is still probably 1 to 2% versus maybe 10 to 13% for countries like China and the United States. So clearly, there is a very strong compelling growth proposition for online insurance.
We have been liking PB Fintech, we continue to own PB Fintech. On the food side, yes clearly we still believe that the food basket itself of the average Indian consumer is changing and from the basic staples, I think it is moving on to some of the different kinds of foods.
And I think within that, we have been owning Prataap Snacks for a while and a year back approximately we added Mrs Bector as well. And we continue to like these though, of course, the run up the valuations have gone on to a bit of the higher side.
But let us see, I think on the whole we like these kinds of opportunities where the plate of the Indian consumer is changing, the consumption basket is changing, and we are continuously evaluating opportunities on them in this space.
Just wanted to begin by taking your view as far as where the market is headed. We were having those all-time high level insights just 100-200 points away on the Nifty. Do you see that happening soon in the month of June itself?
Yes, I think it is a great opportunity for the markets to advance further. We have had some strong tailwinds in terms of the macro data which has come out. We have had some solid growth. Inflation is tapering. So pretty much looks like a Goldilocks situation from a macros perspective. We have just completed the earnings season. I think it has been a great close to the quarter, great close to the financial year from corporate India.
And the liquidity overhang which was there in terms of the FPI selling most of late 2021 and 2022, that trend has reversed and they are net buyers.
So on the whole, I think a solid set of fundamentals and strong liquidity, I think are the perfect kind of tailwinds that the markets would really look forward to.
And post the market consolidation for the last 18 months, the valuations also have turned relatively reasonable. So on the whole, great fundamentals, solid liquidity and reasonable valuations I think that really provides a lot of support and a lot of push for the markets to continue to move forward.
What do you think is going to be then the next big trigger that the markets will watch out for? Do you think it is largely likely to be domestically led back home or do you think that it will be a combination of factors from across the globe as well?
I think it is going to be a combination of all. I think we are today relatively spoilt for choice because the domestic growth momentum is very solid. There is strong growth that we are seeing essentially in a lot of discretionary consumption items. The investment in the capex cycle which has still kind of just begun is showing again very-very strong momentum. So you have both discretionary consumption as well as the investment in the capex cycle which essentially are unfolding. In addition to that if inflation has started to moderate, it is quite possible that we are already on a pause mode and if the rates start to decline that will give a further boost to a lot of rate sensitives like real estate, automobiles, and some of the other rate sensitives.
In addition to that from a global perspective while there is a slowdown and there will be challenges in terms of exports but selective pockets across the board I still think are poised to do well.
Some of the companies have evolved some really specific business models and are making them increasingly relevant to the global supply chain. So I think it is going to be a combination of rate sensitives, discretionary spending, capex investment plays and selectively export or global plays. I think a combination of all of this are expected to outperform.
Combination of a lot of factors but what is also impacting the market at this point of time is the clear divergent moves coming in in the broader markets versus large caps. It is the midcap and small caps that have been outperforming while the likes of Reliance, HDFC twins they have really failed to participate. What is your view on Reliance and the HDFC Twins at large?
Well both the packs have consolidated quite a bit and clearly we see a lot of value emerging there. Especially the HDFC Twins, they basically are currently countering a bit of a technical overhang in terms of what the MSCI's decision was in terms of the inclusion and their respective weights. So that is an overhang and the merger is just around the corner. So I believe that maybe for some time these overhangs may persist, but I still believe that the earning season, I think has been great for both of them. And you are seeing them to kind of become more reasonable on valuation. So I think they are attractive for a long-term investor. We own these in our PMS, so we have a vested interest.
I understand the vested interest but what are you doing with your positions? Are you looking at this consolidation as an opportunity to add, or are you just holding on to your position?
We are holding on and adding as well. So we are using these, essentially this phase of consolidation or even a bit of the declines to keep adding to these positions because we still believe that these are really some strong giants. They are stalwarts and they continue to kind of deliver cutting edge products and services. So to that extent, on the whole we really like the long-term investment thesis for some of these established companies.
Anyone who is everyone is just betting on the entire manufacturing theme, talking about how this is the next big sector to bet on when it comes to India. I am sure you too have jumped onto the bandwagon. Tell us a little bit more if you have and what exactly is it that you would look at from a market standpoint?
Well, this decade should witness the emergence of India manufacturing. Lots has been done in the last five to seven years to make Indian manufacturing competitive and these reforms are essentially going to propel India's manufacturing to new levels and new heights. For many decades, the share of manufacturing in our GDP has essentially been either falling or has been abysmally low, and it is time for the manufacturing sector to catch up.
And thankfully, several policy measures and reforms have been unleashed in the last five to seven years which make Indian manufacturing very competitive. So in relation to the China plus angle, I clearly believe that it is become imperative for global supply chains to de-risk their outsourcing and India clearly is a very strong destination.
We have seen some really big players coming and expand their manufacturing and outsourcing from India, the likes of Apple, Tesla is continuously knocking on the door and evaluating options.
And in addition to some of these really technology or the new age companies we also see manufacturing pick up strongly in chemicals, pharmaceuticals, auto components, defence.
These are some of the areas where Indian manufacturing is really becoming the focus of the world. So I think on the whole, manufacturing is a huge canvas. There are several sectors and we really see majority of these sectors to do well.
And especially with the kind of cost proposition that some of the Indian manufacturers have to offer, we think that a combination of a strong domestic opportunity, import substitution, and export promotion are really wonderful kind of areas to look for from an Indian manufacturing point of view.
You have quite a few positions when it comes to the liquor industry. You owned at least United Spirits, Radico Khaitan, you were looking at Sula as well. What is the update with respect to that and I am also keen to understand, what is the view on pharma? Are you looking at it incrementally positive?
Firstly, on the alcoholic beverages, we are extremely constructive, extremely positive on the Indian alcoholic beverages segment. We pretty much think that this sector is pretty much like what consumer staples like soaps and shampoos were 10, 20, 30 years back.
Under penetration is abysmally low and we have a lot of headroom to catch up. So there is a solid case for these businesses to kind of compound or grow their volumes in high single digits and value in mid-double digits.
So we clearly believe that this is an extremely attractive opportunity. We used to own United Spirits as well as Radico, we continue to own them.
And we have most recently added Sula as it is the market leader in the wine segment which is still kind of very-very nascent and in very early stages. So we own these three positions in the Indian alcoholic beverages and we think it is one of the best proxies for Indian consumption story.
And as per capita incomes rises, we actually believe that there will be an increase in consumption of some of these discretionary products. So clearly we continue to be very positive on that.
Secondly, in the liquor segment, we think margins have bottomed up and when we kind of look at the guidance which some of these companies are giving, they are talking of getting back to their historically high margins over the span of next few quarters or next few years. So that will provide additional tailwinds to the growth for these companies.
Coming on to pharma, I think pharma has so far been a very disappointing experience. They continue to face some strong headwinds in terms of price erosion, especially for the US markets and some of the regulatory issues. So I still think at this stage, we are not as constructive on pharma as what we used to be a while back. But let us see how things unfold if some of these headwinds recede, then we are willing to kind of have a fresh look at Indian pharma.
If you are having too much daru you need the insurance policies from the likes of PB Fintech and probably some chakna from the likes of Zomato?
Oh, yes, absolutely. These are really the kind of opportunities that we are looking for. We like the insurance space and we clearly believe that Indian insurance is again significantly underpenetrated. Our per capita spending on insurance is just about $80 versus a global average of $800. So that gives basically headroom for growth for several years or maybe for a decade or two. And within that online insurance is again relatively underpenetrated or the share of online insurance is still very low.
It is still probably 1 to 2% versus maybe 10 to 13% for countries like China and the United States. So clearly, there is a very strong compelling growth proposition for online insurance.
We have been liking PB Fintech, we continue to own PB Fintech. On the food side, yes clearly we still believe that the food basket itself of the average Indian consumer is changing and from the basic staples, I think it is moving on to some of the different kinds of foods.
And I think within that, we have been owning Prataap Snacks for a while and a year back approximately we added Mrs Bector as well. And we continue to like these though, of course, the run up the valuations have gone on to a bit of the higher side.
But let us see, I think on the whole we like these kinds of opportunities where the plate of the Indian consumer is changing, the consumption basket is changing, and we are continuously evaluating opportunities on them in this space.
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(What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
...moreDownload The Economic Times News App to get Daily Market Updates & Live Business News.
Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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