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00:00Amit, great to have you in our studios at NDTV Profit.
00:05Thank you for having me on, Tamanna.
00:07Yeah, alright, so let's begin with your overview, sort of what's happening in the markets right now.
00:13We were talking briefly in the break, Amit, about how global queues don't look too bad.
00:20They've gotten over their fear of will he, won't he, power cut.
00:25Your Indian elections are largely priced in towards policy continuity.
00:30What are the reasons for the jitters that we've been seeing in the last few sessions?
00:35Right, a few reasons, Tamanna. Firstly, I think the global macros,
00:41if you look in the rear view mirror, then things actually look pretty good.
00:46But if you were to look in the front view mirror, I reckon that there is this sense
00:52which is coming into the markets that the economic data is no longer as robust as it used to be.
00:59And we look at this among the plethora of data points that we look at,
01:04US Economic Surprises Index has seen one of its sharpest down move
01:11from plus 60 levels to minus 10 levels in the last four weeks.
01:15And that's a very, very sharp down move. So whether it is retail spending
01:20that is looking very iffy, the fiscal impulse is going to be negative in US
01:25because there is so much of awareness about the fact that US fiscal deficit
01:29is way, way above what it should be. So the fiscal impulse is negative.
01:34The monetary impulse is still negative in the world with interest rates as high in US
01:39and with quantitative tightening still going on in US.
01:43The economic data is beginning to slow down.
01:47You do not see that in the equity markets in US because of the fact that
01:53people had become way too risk averse getting into the result season.
01:58So there has been a little bounce. But more importantly, the bond yields have come down
02:03because of the softening US data. So that has given sort of a lease of hope
02:08to the equity markets in US. But if you look at the front view mirror,
02:13we clearly see signs of a big slowdown emerging in US.
02:17I think starting from this quarter, we are actually looking at US either being
02:22in the negative territory for GDP growth or maybe in the sub 1%.
02:27So this is going to be discounted over the next few weeks and months to come.
02:31So global macros is not looking good at all. If you look at what's going to happen
02:36in the next 15 to 18 months, even from the Indian standpoint,
02:40one of the reasons behind the jitters is because we track the probabilities
02:45of the election outcomes very, very closely getting into every major election,
02:49not just in India, but across the world. And in India, a few weeks back,
02:54the expected number that was coming in from the bookies and the trading
02:59that goes on in the Indian election outcome, 325 was the BJP number
03:06that we were hearing till about two to three weeks back.
03:10And that number has sort of slightly moved down to 315.
03:14Now that doesn't change who the next Prime Minister is going to be
03:17or who the next ruling party is going to be.
03:20You are referring to the BJP number or the NDA number?
03:22No, I am actually talking about the BJP number.
03:25So that has sort of slightly moved down in the last two weeks.
03:30So directionally, it is not looking great, even though in an absolute sense,
03:36they are still way above the 50% mark. So there is still not much doubt about
03:41who the next PM or who the next ruling party is going to be.
03:45But it's just that the environment, which was looking so sanguine
03:49till a few weeks back, is looking somewhat less sanguine.
03:52And when markets are priced to perfection the way they have been,
03:57even these little bit of jitters, either coming from the US macro data
04:01or from little bit of geopolitical or political headwinds,
04:05can easily shave off, let's say, about one or two percentage points
04:09from the market at any point. And I would also like to mention here
04:12that the small cap and mid cap space in India, plus the micro cap space,
04:16that is looking more vulnerable than the large cap space.
04:21Again, because of the sheer euphoria there, the kind of inflows that we've seen
04:25and the valuations, they do not give us any room for comfort.
04:28Sure, Amit. So on the global side, if I can come in to try and understand,
04:34would you therefore be long bonds? Would that be the way to go at this point?
04:40What should one do as an investor?
04:43Excellent, Harsh. So absolutely, long term bonds is the way to go,
04:48as far as we can see. So we are long India bonds right up to 2053
04:54and even 2063 Government of India bonds.
04:57So that is how bullish we are on duration in India.
05:00But even more than India, we are bullish on the US government bonds
05:04because we've got products in India, we've got products globally.
05:08So we have been buying US 20 and 30-year government bonds.
05:12And we believe, because the kind of run-up that we've seen in the US bond yields
05:16is way higher than the run-up that you've seen in the India bond yields.
05:19So over the next 18 months, we are looking at a slowdown and a recession
05:24in the world led by US and Europe and also China,
05:28which would mean that the inflation numbers go down.
05:32When inflation numbers go down, the central banks start cutting interest rates
05:36and you would see a massive flow of money into long term bonds.
05:40I can tell you that last two years, the long term bonds in US
05:45have had the worst time in last 300 years.
05:48That's the kind of beer market you've seen in government bonds,
05:51long term government bonds in US and of course, even in UK.
05:54I think over the next 15 to 18 months, a lot of that is going to reverse
05:59and long term government bonds could become a great asset class in India,
06:03in US, in Germany and in so many parts of the world.
06:07Sure, Amit. Amit, also just with regard to the triggers,
06:11we've seen a decent-ish cool off when it comes to inflation,
06:16especially global inflation. It's come off.
06:19Of course, there's still some way to go and every opportunity the Fed gets,
06:24they keep reiterating that. But what would those triggers be?
06:29What would those triggers be which you would look out for
06:33to believe that there is that inflection point where you stop buying debt
06:37and start switching over to equity? What are those key triggers?
06:42Yeah. So, Harsh, we are looking at a protracted global slowdown
06:47over the next three years. It's not going to be a blink and you miss it
06:52kind of a low economic phase. This is, in my opinion,
06:58from whatever we've studied over last 500 years of capitalistic history,
07:02this could be a protracted economic slowdown because of which
07:07the equity markets could be in a sort of, you know,
07:12in a downward mode for a few years. But that doesn't mean that
07:16there would not be any opportunities in the equity space.
07:19So, we have been playing beer market rallies in every single beer market
07:23in last three decades. And I can safely tell you that
07:27there are going to be some amazing opportunities because
07:30when the pendulum swings from extreme euphoria to extreme panic
07:34and the positions are squared up and longs are liquidated,
07:38you get some amazing entry points. So, we were extremely bullish on equities
07:42last year, October, when the markets came down because of rising bond yields
07:46and in March last year when the markets came down because of the banking crisis
07:50in US and Europe. So, there are going to be many such opportunities
07:54where we would be buying. Amit, three, three. And, you know,
07:56I don't know if they're brief. You can look at us when you're talking to us
07:59in the studio, Amit. The cameras will catch you. It's a fun chat we're having.
08:03So, you're saying lots of opportunities. Name three in the Indian markets.
08:06The more specific you go, the better for our viewers.
08:09Are you talking in terms of specific stocks?
08:11Preferably, if not, then sectors.
08:13Okay. So, where we are in the economic cycle for India and for the world in general,
08:18we would not want to buy materials. We would not want to buy any company
08:23which has got high operating leverage. So, autos is a no-no.
08:27Manufacturing is a no-no. Materials is a no-no.
08:30So, what is in our comfort zone is, let's say, solid PSU banks
08:35because we believe there is going to be an NPS cycle, but it's not beginning yet.
08:40There could be some time before the next NPS cycle bites.
08:44So, which would mean the likes of State Bank of India with a P ratio of,
08:47let's say, about 11-12. The likes of Kotak Bank, the likes of HDFC Bank
08:52could be great buys. We like oil marketing companies
08:55because they are still trading at 5 or 6 P ratios.
08:59And they are going to be making a lot of money over the next few years
09:02because petrol and, I mean, diesel may be a fuel of the past,
09:06but petrol is not going anywhere in the next 5 to 7-8 years.
09:09So, we like oil marketing companies. We like some of these utility players.
09:13We like PSU banks. We like some low value, low P ratio private sector banks.
09:19So, that's the space we like. We are in the, we want to catch stocks
09:24where the earning yields are great, where the dividend yields are possibly good,
09:29but we do not want stocks which are high on the operating leverage
09:33because that's where the maximum damage is going to happen.
09:36Small and mid cap, the kind of small cap run up you've seen so far.
09:41Did you, you know, have a chance to participate in it, book profits?
09:45Would you stay away?
09:46We did participate in it, let's say, last year March,
09:51but they moved out of our comfort zone sometime in August, September of last year.
09:57And since then, we have confined ourselves to large caps.
10:01So, we missed out. I am not saying it was a great decision in hindsight.
10:04We have missed out on a run up in the small cap and mid cap.
10:08But I would do that because I think the kind of price damage
10:13and the kind of time correction that could happen in that space
10:16is going to be pretty, it's going to be pretty damaging.
10:19So, I would rather miss out on the last 10-15 percentage points of the bull run
10:24than risk getting caught with the bag at the wrong time when the music stops
10:30and then see my holdings go down in both in terms of price and time.
10:34You know, that's the trickiest bit, figuring out where the music stops in the Indian markets.
10:39If you listen to some, I mean, it's an ongoing party, definitely.
10:43But different view from you, Amit. So, great to have you today.
10:47We're just a few minutes from close. So, I'm going to wrap it up
10:50and just get last calls on PTSD. But welcome back anytime.
10:54Amit Goel there in our studios today.