![Sandeep Tandon](https://img.etimg.com/thumb/msid-111747832,width-210,height-158,imgsize-30432,resizemode-75/sandeep-tandon.jpg)
I know that your strategy, of course, is looking at sectors and stocks at those extreme inflection points. So, I am curious to understand your outlook when it comes to IT in particular. Do you believe that it has reached that inflection point? Would that be a contra call? What is the stance at the current juncture?
Sandeep Tandon: Yes, it has reached a neglected territory some time back. In fact, you asked me if it was in September 2023 itself when you saw an extreme sort of neglected phase and some capitulation happened.
Something happened at the beginning of the year also when the majority of analysts downgraded by the end of the first quarter of 2023-24. But I will also agree that when you look at it from the earnings visibility point of view or the traction point of view in the business, it is still on the lower side.
Because cost-cutting happened, margin expansion happened, and the US market has also recovered, so some early signs are there. That is the reason why the stock, which was trading in the most neglected territory, has recovered significantly.
I will not say I am extraordinarily bullish in this space because we see that risk-adjusted opportunities are far superior in other sectors. This is more of a pullback rally, more of a reflex rally. I will not call it something that has changed from a longer-term perspective. So, we are constructive, but we are not as optimistic for the sector as we were in September 2023.
Let's understand a very broad general framework, which is that we are feeling excited about what is happening in defence, railways, and what is happening in India. But the grain of the truth is that global markets are also in a fine fettle, so to speak. What are the chances that given that we have US elections and many other elections in Europe and the US, this entire party in the equity market itself could come to a stall? Could this be global in nature, which could affect India then?
Sandeep Tandon: It is a very good point. Let's break this down for two minutes from a global perspective and India and maybe talking about DM. The larger thesis is that something has changed for us. What we have been seeing, talking about that mild risk-off period, not in India, but in the global market. We believe all multi-asset classes, the cross-asset, cross-market data which we look at, are giving early signs from predictive analytics models. We can say we are getting early signs that the global volatility in all asset classes will start spiking or rather inching up going forward.
Now, it is very difficult to pinpoint this week or next week, but we are reaching that phase where most of the implied volatility data is showing they are ready to move up. What this means for us in India and from a global perspective, and then let's add the complacency part.
If I have to look at the complacency in the US particularly, particularly in technology, if I have to talk about the Nasdaq 100 instead of looking at the composite or even some narrow indices, we are seeing early signs or not even early signs; we are seeing that the complacency indicator has actually started spiking.
That is something which is worrying us because in India, people are worried. Earlier they were sceptical about the election results or the polls' outcomes, now they are worried about budget-related challenges. In the last year, because this year has been seen on the geopolitical front, with 35 countries going for elections, there are changes. Now, what we have to look at, if I look at it in totality, then we do not get an answer.
But when we dissect this whole data, then you get an answer because this is a phase where some asset classes will go up. And within some asset classes, certain pockets will do very well, and certain pockets will not do well. So, let’s look at it from the risk appetite point of view. The global risk appetite for the US and some of the developed markets has actually started drifting a bit. That is one sign of caution in the global market. But if, simultaneously, I look at the emerging markets, they are actually rising, and so is the case for India. Even if I look at the sentiment data, more from a data perspective, the sentiment data in India still remains quite constructive. The good news is that global liquidity, particularly if I dissect the liquidity, the money flow towards equity and asset classes is actually rising. Globally, it is rising, particularly in the US and developed markets.
It is not only confined to just India. Since we are a global research house and we look at the data very closely, the money flow towards equity as an asset class is actually inching up. Given this background, we are saying that implied volatilities of various asset classes can spike or move up, which can lead to a risk-off phase in certain pockets or certain markets. But if I look at it in totality, yes, it is something we should keep at the back of our minds. But if I look at India in isolation, then we do not see any challenges. If the Indian market corrects, it will correct more from a global perspective rather than from a local perspective.
The buy-on-dip thesis in India continues, the sector rotation thesis continues, and the stock rotation thesis continues. We remain equally constructive. Let’s talk about commodities for a minute. Now, when I am talking about this sort of choppiness, the complacency for gold, silver, and copper is actually rising. The data points show more complacency signs where within the metal space, base metals are showing mixed signs.
If you talk about the energy basket, oil is giving signs of peaking out, but gas is giving signs of rising. It is very interesting when you look at some of the soft commodities. If you look at grain and soya, they look like they are correcting, whereas coffee and sugar are showing a different perspective. So, I think it is a very unique period where all the asset classes will showcase this theoretical picture. What a lot of people look at will not work.
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Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price