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What are your expectations coming in from the budget? Are you expecting that the rally that we saw post-election verdict in the FMCG counters to continue given the fact that most of them are expecting that the thrust will be on rural India or the consumption themes?
Anand Tandon: The trend towards FMCG or at least consumption-based stocks has already started in the market. And unless there is something dramatic, the momentum will likely continue there, that is one of the less performed sectors and while the valuations may be a little expensive, it has not actually done much compared to what the rest of the market sectors have done. Now, as you said, it is quite likely that you may get an impetus for that in the budget and one hopes that you will get some tax break, but it is difficult to make guesses and we might as well just wait and see what happens in a few days.
I want to talk to you about one basic question. In the last few days, the way narrative has changed, earlier 90% of them were expecting a September rate cut, now 100% are expecting rate cuts and some of them are expecting rate cuts in July meeting as well, the last week and then, of course, the new development on whatever happened with Mr Trump's assassination attempt and the way people are now factoring in, calling it one on the job. If these two factors come together in September, October, do you think that the rally may get extended on the higher side, US rally and hence the impact on India as well on sentiment?
Anand Tandon: Well, certainly, I have been in the camp which believes that two to three months before an election the Fed will do a rate cut, irrespective of whatever the so-called data indicates, that has been the trend. You may talk about Fed independence or for that matter any of central banks being independent, but you do not go into an election with interest rates which are high.
And if you have the potential to cut it, you will cut it irrespective of whatever be the economists are telling you. So, as I see it, a rate cut is inevitable, whether it happens in July or in September, I do not know but it will happen before the election in the US. I would imagine, three months before, so that will probably put it where we are right now is when you would expect to see a rate cut. That is politics, it is not economics. Now, will that increase let the rally run?
I think the US market is also looking a little stretched, but otherwise compared to India it is actually relatively cheap and therefore there is no particular reason why you should not get to see the rally continue.
It may not be across the board. Again, if you take out the top seven performers in the US, most of the market is not very expensive or has not done too much unlike India where we have seen a very broad-based rally. So, I think the argument for the US to continue doing reasonably well, maybe not at the index level, but at the broader market level is fairly strong.
Coming to India, will that provide an impetus? I think so far the impetus has come purely from the domestic market and while I think that the foreign players may come in, right now there are a lot of other markets also which are running up, so I do not think that there is any great logic for necessarily a swift shift.
But the domestic market momentum continues. And unless I think there is either some policy action or the IPO, FPO pipeline becomes too large, the IPO pipeline rather becomes too large to kind of take away all the fresh money, right now there are no signs of nervousness as far as the retailers are concerned.
So, what should the right strategy be for investor, traders for this year if their portfolio is up 30-40%? For last three years, the portfolios have doubled. And now the call for stretch valuation is becoming louder. Is it prudent to take 20-30% kind of a position off and wait for a correction, however long it might take or the right way is to just ride through a correction because the liquidity will ensure that whatever correction does happen, it may be shallow, 10-20% at max or are we opening for 40-50% kind of correction as well? Is the bubble so stretched?
Anand Tandon: There are several layers of the question that you have put in there. What should you do as a strategy? I think you should stay invested. Hopefully, you have bought reasonably good quality stock and you can just put a stop loss there and make sure that you do not get wiped out when the turnaround happens. If you bought illiquid stock, then there is a problem. Obviously, you want to be able to move either to more liquid ones or to make sure that your stop losses are such that you will be able to move out fast.
But assuming that you are in reasonably liquid stocks and you can trade in and out, there is no particular reason to be looking away because the last part of a momentum rally is always the one that gives you the maximum money and you do not want to be watching stocks moving up.
You have already seen, for example, take defence stocks. In the last three months, many of them have gone up 40-50%. So, if you said defence was expensive, which it was, it has become even more expensive. So, from a trader's perspective, getting out before the market tells you to get out is not a great idea.
As I said, you have to just watch for illiquidity. Now, it comes to whether there will be a shallow correction or a deep correction. Frankly, if there is a shallow correction, it is no correction at all because at the end of the day we have seen sector rotation happening where a few sectors have given up and some of the other sectors have gone up and that is not reflected in the index because it is rotated but you have actually seen many them going away and some of the stocks retreating 20-30% easily from the peak.
So, I do not think that a shallow correction is a correction at all. If and when there is a correction, it should be fairly deep. But it is not possible to time it. So, you cannot stay away from the market based on that.
As a longer-term investor, I would argue just stay with the asset allocation, make sure that you are in reasonable quality and unless and until there is a deep enough correction which merits moving out. There is no particular reason why you should be doing anything with other than staying there.
Have you trimmed any of your positions, I do not want to talk about the specific position, but just to understand categories or when was the last time you actually added a new idea in your portfolio?
Anand Tandon: You do a little bit of tactical investment, but from a strategic perspective, not anything recent.
Flavour of your tactical activity?
Anand Tandon: So, there is some corporate developments that you keep looking at and therefore, wherever there are announcements, for example, of capital restructuring or company splitting and so on, those are usually opportunities where if a company splits up and sets up multiples other companies which are listed, you will find that the overall market value actually goes up. So, some of those companies are investments which one could make.
Able to spot a lot of special situations in this market, right?
Anand Tandon: Yes, there are quite a few which I think you are able to get opportunities in.
What is your take, are you also of similar views when it comes to if you are looking at that particular space, it would be much better advisable to look at gold financiers than the companies that actually deal in the jewellery business?
Anand Tandon: So, I prefer gold itself, it is easier, it is simpler and it is not complicated by what management does. So, if you are bullish on gold and that is the reason you are looking at it as a diversification, there is no reason to look at anything else other than buying the gold itself.
Especially Titan because you had a strong rally in the underlying commodity price, there is some bit of less offtake that happens because people are resistant to higher gold prices and till that becomes psychologically accepted, there will be some slowdown in terms of demand.
But given the way that the demand in India is driven in terms of marriages and as a saving habit, I do not think that is going to change anytime soon.
So, the best thing is that if you are looking at wanting to play it to a derivative like a corporate, it is best to stay with a company which has a proven track record with a good corporate governance and where there is no question of not being able to deliver over a period of time. So, I would not move down too far, as I said, the best way of playing gold is to buy gold.
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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