Dinesh Thakkar, Chairman and Managing Director, Angel Broking, simply brushes aside day-to-day volatility of the stock markets. Despite the weaking Sensex, which lost over a 1,000 points in the last few days, Thakkar says the stock markets are now correctly priced for investors to enter. Edited excerpts of an interview:
A year into Prime Minister Modi’s term, there appears to be some disillusionment about how much the government can achieve. Is this a valid concern?
I don’t think so. The government has made enough policy decisions which will help the country in the long run, like the coal mine auction, and the Mining Bill. Till last year, we imported 150 million tonnes of coal, which is about 0.5 per cent of GDP. We have enough coal reserves; we only need labour and a government licence to operate it. Had we done this earlier, we would have saved forex of up to ₹50,000-60,000 crore. But these steps take time and we will have to wait four to five years for results to show.
Conversely then, did the stock markets expect too much too soon? Do we see the undue optimism dying down?
The market behaves impulsively. Market cycles always run much ahead of economic and business cycles; they take some time to realise that benefits will take some time to trickle in, then it corrects. But that’s the normal nature of the market — to get ahead of fundamentals, correct itself and then again appreciate. Markets always see impulsive buying and then some knee-jerk selling.
How much correction do you see happening?
Historically, Indian markets trade at 15-16 times of expected corporate earnings, at which point the markets are stable. As of today, I think the markets are properly priced.
What do you make of RBI’s reluctance to cut rates?
I think it’s in Governor Rajan’s nature to be conservative, which is fine for India. While inflation across the world has been controlled, India is still struggling with it. So, it’s better to take some cautious steps.
Data from the exchanges show that retail investors have been net sellers from January. Brokerages say that retail activity is increasing but are they all selling?
In the last 15 months, benchmark indices have risen 30-35 per cent, while mid- and small-cap indices have appreciated 50-60 per cent. So, for someone stuck with a certain portfolio for the last five years and is now seeing some appreciation, the first consideration would be to sell.
Perhaps, this is what has been happening now.
Which sectors do you recommend to your clients now?
Among our favourites are financial services, particularly private sector banks, passenger carmakers and pharmaceuticals. Also IT and FMCG at market weights. When you’re creating a portfolio, you can’t avoid any sector. You should decide where you want to be overweight, underweight or match the market’s weight.