“We like the Defence sector despite the sky-high valuations, but we are allocating to this sector. We are investing in Tier 2 companies,” says Sreeram Ramdas, VP at Green Portfolio PMS.
In an interview with ETMarkets, Ramdas said: “We remain bullish on Telecom Products. Companies like Frog Cellsat and HFCL continue to be part of our portfolio,” Edited excerpts:
It was about time we witnessed a material correction. The last one we witnessed was when Japan raised interest rates, and the yen carry trade was presumed to be under threat.
The correction is not 3% or 8%, it’s much greater for specific sectors. We are beaming at defence companies and railway players whose share prices have fallen by more than 40%. Sector-specific corrections, steep ones indeed, are taking place in the background.
To answer your question now, we are viewing the markets favourably. We have more opportunities now, many more opportunities to deploy funds. Before the correction, we were sitting on 20% cash for new investor accounts, and now that’s 5%.
This could be the much-needed correction/fall everyone awaited. Do you see a further fall in markets?
Yes, despite mutual funds holding lakhs of crores of cash, with readiness to deploy them, further corrections won’t surprise us. More than anything, market sentiment will depend on how this Middle East situation escalates.
Escalation will result in soaring oil prices, which will primarily impact the country’s fiscal deficit and the margins of companies in several sectors. To name few, paint stocks, tire stocks, and aviation stocks, these sectors will be heavily impacted.
Any sectors or themes that investors can look at if they have a long-term time horizon to take advantage of this 5% fall from highs?
Yes. Defence, despite the sky-high valuations, we are allocating to this sector. We do not touch those generic names.
Instead, we are investing in Tier 2 companies – meaning companies that are supplying materials and key components to the tier 1 defence companies. These tier 2 companies are available at 2x Price-to-sales and 35x price-to-earnings.
Secondly, we remain bullish on Telecom Products. Companies like Frog Cellsat and HFCL continue to be part of our portfolio.
They are manufacturing world-class products that India definitely requires if we have to decouple from China and become self-reliant on the telecommunications front. We are bullish about the electronics manufacturing space in these markets.
Do you see FII money flowing towards China as India appears expensive now?
This is temporary. No amount of stimulus or stock purchase incentive can surrogate for a crippling economy.
Before the stimulus announcement, the Chinese markets were trading at 8x Price-to-earnings which is considered dirt cheap while Indian markets were trading at a median PE of 30x.
The stark difference between these ratios is explained by growth projections – weak for China, and strong for India.
Underweight on Banking, commodities, Tier 1 auto players, and IT. It’s been a while since we dipped into IT. Investing in IT for us is as good as investing in Chinese markets.
If someone plans to invest say Rs 10 lakh (in the age bracket of 30-40 years) after a recent fall. What should be the right asset allocation?
What is your call on crude oil? If the crude oil picks up because of geopolitical concerns our macros could take a hit. Your take?
You couldn’t be more spot on. Macros are one side of the equation. On the other hand, we will witness aviation players take a beating as nearly 70% of their revenues are grabbed by the cost of oil.
What is your view on Gold and Silver – another asset class that is hitting highs?
Higher the instability, higher the price of safe haven assets like gold and silver. Despite the highs, this asset class might continue this trend line as the probability of war and more countries getting involved are only increasing.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)