Buying Nifty may not help now, look at capital goods, reopen trade: Sandip Sabharwal

“I do not see the move into renewables is impacting the overall dynamics of how power producers make money. There is PE money which is coming in etc but longer term, it needs much more reforms for it to be a viable long-term play, says Sandip Sabharwal of asksandipsabharwal.com

Your views were not very bullish when the market sold off in March. But then markets have come back. Are you using every uptick to raise more cash?
In this market, there is a set of companies which have continued to do well and there is a set of companies which are over owned which would not do well and that is mostly on the IT, largecap, midcap side.

But there are some companies or stories which will continue to play out. I think the reopening trade is becoming stronger so we have been actually adding to the multiplex stocks because I believe that movie viewing is going to come back significantly and they are very under-owned.

There are specific opportunities on the capital goods side. We are seeing how Thermax is continuously winning new orders and these are the stocks which actually did not perform so well in the initial uptick but then there is a private sector capital expenditure cycle and many of these capital goods companies – both smaller and larger -- will do well.

Read Also: Next year to be very tough for Infosys; HDFC Bank to underperform

It is more of an opportunity market. Overall I do not think the markets will do much this year. I do not see much returns from people who are hugging the index but specific opportunities will keep on coming and that is what we have to keep on buying. Cash levels continue to be around 20-25% and in general I do not go below 10-15% cash in any case because that is the only way one can capture the big opportunities in selloffs.

There is a lot of churn within the power space. If I look at the big picture which is that the economy is growing, power demand is growing, we are in for a very hot summer which means more ACs, more fans, more coolers, more electricity. How can one make money on this trend?
Sandip Sabharwal: You cannot get power and that is why we are getting power cuts all over the country. My issue with power companies has been that it is very tough for power producers to make any big money except for phases like today where because of some coal arbitrage etc and some plays which are playing out in the market, one tends to make money because of the intervention of the various governments in power pricing in the market, the losses which distribution companies make etc so I think it cannot be a secular play.

I do not see this move into renewables etc actually impacting the overall dynamics of how power producers make money. It is a story which is playing out. There is PE money which is coming in etc but longer term, it needs much more reforms for it to be a viable long-term play.