Don't get too carried away with short term moves in the market: Dinshaw Irani

"We may see valuations correcting rather than any big correction on the earnings front and that will still be around the mid single digits kind of earnings growth for FY24. I think they will more or less achieve that but valuations will not sustain," says Dinshaw Irani, CIO, Helios.

It has been a good solid and a rewarding December. What is in store now?
The scenario is going to change. It will be a high inflation, high interest rate scenario which is going to be the ruling the roost for the next year at least. I do not think many fund managers today are seeing that scenario or rather traded that scenario so that is going to be an area of concern.
Obviously, there will be picks along the way and you have to be very selective out here. We will be more of on the cautious side than be aggressive at this point in time.

So what is your cautious side telling you about what to do with the fintech majors’ buyback announcement from a Paytm? It seems like they at least focussing on the path to profitability?
That is one of the stocks which has been just added to our portfolio. Obviously fintech was one area that we are looking at very closely. However, we were waiting because we were not convinced with the price obviously and as and when the price came off, that is when he said okay now it is a time to look at the stock.

So we like the story, we like the fact that the management is talking the language of the market. They are now talking about growing their profits and breaking even and stuff like that which is a good thing.

What about the other frenzied spaces in the market right now? PSBs, railway stocks and defence names, have you been invested in any of these pockets?
The biggest PSB in the space is SBI which is probably equal to the whole industry put together and I think we have got that in our portfolio.

The good thing about State Bank was and still is, is the sum of part story which is playing out. I think that is working perfectly for it and despite the huge run up the price to book also is still not that expensive.

On the defence side we have got only one stock which is Bharat Electronics that we think is going to be more of story dependent on domestic orders coming in.


You have has started selling off IT stocks from your portfolio is that still the situation. Do you own IT stocks, are you looking to change that trend?
We were selling off IT till June, July of this year. We are zero in IT today. I do not think there is anything to sell for us except in our long short fund where we would be shorting the names out there. But our feeling is that that the industry is going to go through a fair bit of choppiness. I mean we have been calling it out from the June end results that things do not look that great.

You can already feel that when you talk to the managements, that caution is building in, they are talking about deferment of projects and stuff like that. They are talking about utilisations moving up and their outsourcing becoming more of a in-sourcing bit. So it is obvious that things are not looking that great.

When you will see the likes of Infosys giving out their guidance, I do not think they are going to be that excited anyways so our belief is that it is still at a 40% premium to pre Covid levels.

We may see valuations correcting rather than any big correction on the earnings front and that will still be around the mid single digits kind of earnings growth for FY24. I think they will more or less achieve that but valuations will not sustain.

You have been candid enough to say that you own SBI from the PSU banks so there are a lot of people who must be looking at what is happening with the smaller banks and trying to figure out what is going on from an Canara to a Union Bank to Bank of India to an IOB. What is happening with Yes bank? Are you going to join the small bank party?
No. In fact, let me tell you we started selling off IT in the beginning of this year. In terms of the PSU banks I do not think we have looked anywhere beyond State Bank of India though our analysts did bring across a Bank of Baroda and we said no way, I mean, this is the max we can go here. So I do not think we will be looking at any other smaller bank in the PSU space.

I remember BPCL privatisation which was announced at one point in time and nothing went through, till today there is no privatisation. So there are lots of slips between the cup and lip in the case of PSUs, so we would rather avoid PSBs, the small cap and midcap ones as of now.

Let us look at what is in store for 2023, what would be the market template?
We have been telling our investors that they should not get too carried away with the short term moves in the market because we have seen this earlier. The markets are going to be choppy, but fortunately for India we have some intrinsic strengths going around. One is obviously the manufacturing outsourcing story and the second one is the domestic consumption story which is playing out. Frankly, India has managed inflation very well, in fact we did not need any interest rate hikes from now on also but we have to match the Fed and I think there will be some more coming in. So that way India is fairly insulated but that is about it and beyond a certain point you have to look at comparative valuations and frankly India today is already at historic highs in valuation in comparison to various other markets. In fact even if developed markets were taken into consideration, India has done fairly well.

So I think from here on for India to outperform the globe, it has to stabilise which does not look the case so you have to be very sanguine of the fact that may be we are looking at a very choppy market going forward and as a result we have to be very cautious here.

Do not sit on the sidelines, be around but start staggering your investments, do not go in a lumpsum manner and that is what we have been telling most of our clients. In fact, the new fund that we have launched we have made it very clear that we are going to call money only when we see the markets stabilising.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)