Focus on autos, capital goods and financials now: Sandip Sabharwal

“Globally linked companies will have issues. So technology and commodities companies will be a complete avoid for me. Among domestic cyclicals, autos, capital goods, financials will be the ones which we need to focus on and because financials got overbought as traders got into them. If there is a decent sell off, we could see opportunities there,” says Sandip Sabharwal, asksandipsabharwal.com.

A synchronised commentary is coming in not just from central banks now but the government action as well is kicking in. What do we expect from our RBI Governor ?
I think this is a very insignificant policy because more or less it is known that they have to increase rates and now the key is whether they continue to say that inflation has peaked and the hike cycle will be moderate or not.

RBI is likely to just follow through with what is expected. They should do a 50 bps hike because doing 25 bps is neither here nor there and it could put the currency more under pressure at a time when most developed economies and central banks are actually hiking 75 bps or more.

We saw the central bank actually hike more than that, So, it is a synchronised hike cycle globally. RBI has no option but to fall in line otherwise we risk disorderly movements in the currency markets and them having to waste more and more of forex reserves to protect the currency which is not the ideal situation.

What was playing out within the pharma space on Wednesday? We have got select stocks in the news. For instance, Lupin has got a warning letter for their Maharashtra plant, Torrent Pharma has got the US Form 83 where there are three observations for one of their plants in Indrad. Some of the pharma names are outperforming as well. Do you think that the move is sustainable?
It should be sustainable in the near term simply because of the fact that I believe risk averseness will remain in the market for some time and to that extent, pharma is the only sector which did not perform as well in the overall up move.

So to that extent, the ownership also and some of the companies have been giving decent numbers. Largecap pharma could actually outperform and that is something which should be the trade for a few weeks. I still think October might be tough or the markets and if markets give a decent correction in October, then those could give opportunities.

If that plays out along expected lines, what are you going to keep on your radar or be intended to buy if the market were to fall further?
Globally linked companies will have issues. So technology and commodities companies will be a complete avoid for me. Obviously they get very sold. Bounce back trades will happen but fundamentally they will not do well. So among domestic cyclicals, autos, capital goods, financials will be the ones which we need to focus on and because financials got so overbought because all traders got into them, if there is a decent sell off, we could see opportunities there.