Going to see an extended rally now: Andrew Holland, Ambit Capital

When we got down to lower levels last week, the Indian market was really oversold. Then we felt that it was a good time to be cherry-picking. It was not just that the market was down 15%, but there were many-many stocks which were down a lot more than that and what we have been seeing now is a relief rally. There are a lot of bargains out there, particularly in the infrastructure sector, and that is what we are starting to see.

So may be there was a pretty short covering, but the markets have been affected by only two factors. Inflation — everything else was known like 25 bps which the RBI did - has really been the problem. The inaction of the government on many different fronts - be it scams or inflation or anything — has just really not been good for the markets. Markets do not like uncertainty and that is what they have been trying to deal with. Hopefully, we can now get back and up.

There has been a long talk about money going away from emerging markets which we have seen and going back to developed markets. I am not convinced on that story. There are still problems with the US and Europe is still to come through. Also, high food inflation, high food prices and oil prices do have a demand destruction in these economies as well. So I expect to tick down that in the global economy over the next quarter which very nicely leads to the fact that commodity prices are going to come down too. So fast forward to the end of March and you could really see inflation in India starting to come down quite sharply and that is why I think we are going to see an extended rally now.

With the kind of correction that we have seen in some of the stocks and sectors, are valuations now looking attractive at this point in time? Where you would want to buy more in sectors that you always wanted to chip in?

Yes, premised on the view that if I am correct on the law of commodity prices and oil prices going forward, then obviously with through the end of the interest rate hike cycle in India. So obviously you could look at the interest rate sensitive sectors. But infrastructure has been beaten down too much. Once the government gets onto front foot, there will be large scale orders coming through in infrastructure across the board. The likes of say L&T and BHEL have been severely hit but - apart from the markets falling – they would lead the recovery along with interest rate sensitives.

What is your current tactical trade?

Current tactical trade is to buy the banks and infrastructure. There is capital goods sector which is not going to be leading the market in the short term. Keep any shorts in some of the sectors which have got a bit of overhang - telecom would be one and obviously real estate would be the other. So those would be the tactical positioning of portfolios at the moment.

Vivek Kumar
PGDM 2nd Sem