Transcription
We have a very special guest joining us on the program. The Chief Investment Officer, Equities, and President of Mahindra Mutual Fund. Our colleague Harsha Upadhyay ji is joining us on the program. Harsha sir has more than 20 years of deep experience in equity research and fund management, and also has good experience working with big, renowned institutions, including giants like DSP Black Rock, UTI Mutual Fund, Reliance Group, and SG Asia. You are a professional. You have a degree in Engineering, and in addition to that, you have also completed a Post Graduate Diploma in Management from IIM Lucknow, and you are also a CFA. Harsha sir, good morning. A very, very warm welcome to you. Thank you for giving us your time. Sir, first of all, I would like to get your opinion on the market's mood and sentiment. Because the results season has ended. After this results season, how do you see the markets? Are they cheap, expensive, or reasonable in terms of valuations? Please explain. Good morning, Anil ji. See, the earnings season has ended. Not many significant results have come in the large cap segment, at least. Compared to the expectations, the results can be said to be more or less in line. And it also happened that this single-digit earning growth in the Q4 results is the eighth consecutive quarter where we have seen an environment of single-digit earning growth every time. However, considering the energy disruptions in the background, this was more or less expected. So, there is no cause for concern in that regard. It is possible that the Q1 results that will come will also be impacted to some extent due to the ongoing geopolitical tensions and energy disruptions. But we feel that the current valuations have already discounted all these things. If you look at it, the valuations of both large caps and mid caps are either slightly below or slightly above the 10-year long-term average that we usually compare them with. So, we can say it's more or less a fair valuation zone. Therefore, if you want to build a portfolio for the long term, the valuations have become quite good. It is possible that in the Q1 results, we may not see anything particularly positive, because the war was ongoing in Q1, and energy disruptions are still continuing. So, there could be some impact in that regard. But we feel that it has already been factored into the valuations. Okay, absolutely right. So, these results that came, neither very good nor very bad. But crude oil also seems to be trying to settle back in the 90-95 range. How do you see this, sir? Does this create an environment for further rally, or is it better to wait longer? See, if you look closely at the energy market. Certainly, every day there is some news coming from the US side or the Iranian side. But the energy market is driving expectations in this direction, that some resolution will happen here. That is why most of the news developments, or even a couple of missiles being fired in between, have not had much impact on the energy market. So, the majority mood in the energy market indicates that crude should go down from here because fundamentally, there has been no increase in demand, and as energy disruptions and transportation disruptions end, prices should come down. If we consider that, then it is certainly positive for equity markets as well, and we feel that as we get a clear direction in the crude oil market, a clear direction will also emerge in equity markets. If, unfortunately, no resolution comes, then it is possible that crude may remain at this level or even go up a bit from here. In that situation, in my opinion, the market may also remain a bit volatile or move sideways. But according to most expectations, it seems that some resolution should happen soon. That's right. There is indeed hope for a resolution, no doubt about it, and after that, market action might also increase. Sir, regarding the action we are seeing in the rupee. The last four or five days have been quite good for the rupee. It has recovered well. It is strong today as well. What should we understand from this? Is the worst over for the currency? And will there be no more significant weakness? One of the major reasons for FII selling was also considered to be the weak currency. How do you see this? See, Anil ji, these issues are not interconnected. For the last few years, a virtuous cycle had formed, where crude oil was at benign levels, our capital flows were also quite good, and the current account deficit was also benign. Because of all this, our currency also remained stable. But in the last two to three quarters, volatility has been observed, of course. This happened first because we saw a negative emerging in capital flows. Not many significant inflows came, and the outflows from the secondary market also continued. And then, due to the increase in crude oil prices because of the West Asia war, there was also a negative impact. And if you look at the expectations for the current account deficit this year, it should be around 2 to 2.5% of GDP. So, that situation has also become negative. What was a virtuous cycle before has become a vicious cycle. Because of this, the rupee was also under pressure. But as you have seen in the crude oil market in the last week or two, as the price of crude oil, which was around $100 per barrel, has fallen to around $90, there are some expectations that perhaps stability will come, and that is what we are seeing in the rupee-dollar rate. And of course, the Reserve Bank of India has also taken some steps, which have also reduced the short-term speculation on the rupee. So, overall, stability is being seen here as well. But we feel that everything, whether it is equity markets or currency markets, will largely get its direction from the crude oil market. If you look closely at the crude oil market and feel that some clarity is emerging in its direction, then that will be a good sign for all other markets. Okay, you have given a complete analysis. Now, sir, in such a market, where do you see investment opportunities? See, as we have discussed, it is possible that in the short term, there may not be much clarity, or because of that, markets may remain sideways or slightly volatile. But for about 18 to 24 months, the market has been consolidating in a sideways range, and the trajectory of earnings growth rate was also not very significant, especially in large caps. There are expectations of a recovery from there. It is possible that even if the Q1 results are not very significant, in our opinion, investors will overlook them and focus more on the future trajectory. We feel that one should not be too negative here. If you are fully invested according to your risk appetite, then you should hold at this level. There should not be too much panic. If you are under-invested in equities, then you should definitely increase your equity allocation gradually at this level, because we feel that usually after market consolidation and earnings consolidation, the upturn that follows also offers an opportunity for valuation rerating. So, if you are thinking three years ahead, you should not be too negative about these valuations. It is possible that in the short term, you may need to show more patience, but in the long term, you will definitely benefit from here. A question for you on IT stocks as well. What should be understood? Amidst the threat of AI, IT stocks have been beaten down significantly. Is it time to buy, or is it still far away? See, our view on the sector is still underweight. We are not seeing any changes in business momentum that could be positive for the IT sector, where discretionary spending is increasing. The margins, even today, have a very good margin profile for many Indian IT services companies. The AI disruption we are talking about, if we compare it to the last one or two years, today we are closer to the disruption happening. But still, margins have not been affected. However, if you think that business momentum will remain the same and margins may be slightly impacted, then there is no situation for significant valuation rerating from here. Therefore, we feel that a cautious approach should still be taken towards the IT sector of Nifty. It is possible that in the short term, there may be pull-back rallies, and sharp pull-back rallies, because where valuations become very cheap, pull-back rallies can also be very strong if market sentiment changes. But if you consider a three-year outlook, there is no very positive reason to be overweight in the IT sector even today, we feel. So, buying IT stocks with great conviction and in large quantities does not seem to be on the horizon. So, it is better to remain neutral. Harsh sir, thank you very much. You gave us your time. You provided our viewers with a detailed opinion on the market's direction. We will meet again soon. Thank you very much for today. [Music]