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00:00Welcome back, you're watching Talking Point. Rajesh Kothari is joining us now. He's founder
00:14and managing director of Alphacurate Advisors and we're speaking to him ahead of the budget
00:20excitement at a time when there's a lot of anticipation of what next. Rajesh, great to
00:24speak with you. First off, you know, there is one section of the market which is anticipating
00:31and waiting for a big sell-off, either right before the budget or right after. Are you
00:38in that camp? What is your view on that? Let's begin with that.
00:43I wish I would have known when it's going to come. But I think for every, I think the
00:51important thing to think is, are we looking for a correction or are we looking for a crash?
01:00Corrections are part of any normal markets. In fact, if you look at 2003 to 2008, the
01:05great Indian bull market, Sensex became five times in five years. There were six to seven
01:10times when Sensex corrected by 20%. You know, the index corrected by 20%, six times in that
01:16five years. So why should we always be ready, be prepared? You know, I think we always say
01:22that can come tomorrow. And every day we keep saying the same thing, that correction can
01:25come tomorrow. But one should not worry too much about it. Till the time the earnings
01:29were strong, till the time the ROE and the return on capital employed of corporate India
01:34is strong, and till the time the GDP growth remains the fastest in the world, I think
01:39the valuation to some extent will remain premium. And to my mind, we are in a structural, secular
01:46bull market, at least for the next three to five years. Any such correction, if it
01:49comes pre-budget, post-budget, today, tomorrow, day after tomorrow, I don't know when, take
01:54it as an opportunity and increase the allocation to equity as an asset.
01:59Okay, so that's that's the sort of overview. I must ask you, Rajesh, have you been taken
02:05a bit by surprise by what's happening with IT? Was it something you anticipated before
02:11the Q1 numbers came out? And do you think it's justified, the kind of run up we're seeing
02:15from GCS, HCL tech? We've heard from the management, Q1 traditionally weaker, so expectations
02:21were low. What do you make of what we're seeing?
02:24Well, to be very frank, actually, you know, if you look at it from the corporate perspective,
02:28you know, there are no major changes in terms of their body language or in terms of their
02:34guidance, be it a, you know, banking's BFSI spend, be it a geography-wise spend, be it
02:41TCV. In fact, TCV is a little bit down, actually, rather than up, or be it in terms of the margin
02:47guidance. I think, if you ask me from the corporate perspective, there is no major change.
02:52But, you know, I think there are, in large-scale names, particularly, be it IT or be it FMCG,
03:00even a 0.1%, 0.2% change we have seen historically leads to disproportionate impact on the markets.
03:08And that's how, even this time, the market has reacted like that. From last three, four months,
03:14we have been increasing our allocation to IT, although we remain underweight, not that we
03:19became bullish. But yes, you know, we were thinking that it is going to happen, it's a
03:23question of time, maybe one quarter, maybe two quarters, maybe three, four, five, six months,
03:28you may not see much performance. But that's fine. We are more betting for the next year,
03:33where probably there is a likelihood of interest rate cut. And that's where, you know, I think the
03:39market is looking like that. I don't think the market is looking at what IT companies are talking
03:43about. IT companies are talking not negative, which is a positive by the market. But more
03:48importantly, the market is reading into the inflation number, the CPI print of the US,
03:53and, you know, the commentary by the US Fed, which has been talking about now inflation looks like
03:58coming under control. And therefore, one rate cut may start from September. That's what the market
04:03is hoping for. And that's why the IT stocks are going up, be it globally or therefore, more in
04:09India as well. Okay, so Indian IT companies actually following that trend, says Rajesh Kothari.
04:14But you know, ahead of the budget, let's talk about specific areas of interest, Rajesh. And
04:18let me actually pose that question to you. Do you see the usual suspects responding positively?
04:25Because this is a budget which is going to be focused on increased CapEx, is going to lay the
04:30vision for the next five year term. So defense, rail, agri, consumption, are these themes that
04:36you find exciting right now? Well, the first and most important thing is this, probably,
04:44I think after 10 years, we are going to see a budget where you will not see the commentary
04:50next to your budget. You know, when you invite all the big guys on your channel,
04:54probably they will not say it is a fine balance between A and B. You know, this is the budget
04:59probably where government has enough financial room to make, you know, happy everyone, be it
05:06a middle class citizens or be it a consumer or be it a rural economy or be it a CapEx. So this is
05:13not A over B. This time is going to be pro-growth, in my view. This time government has enough room
05:20in terms of keeping fiscal deficit under control and still, you know, make consumption to revive
05:27to a certain extent. And at the same time, CapEx theme to continue. So, you know, both the Cs,
05:34you know, CapEx side as well as consumption side is going to do, probably, government will make
05:40happy both these buckets after a very, very long time. I think probably first time in 10 years.
05:45Okay. What would be your top two or three sectors or companies that you're looking at,
05:50Rajesh? As we wrap up, leave us with something specific for our viewers.
05:58Well, I think, you know, CapEx and consumption, I think these two Cs, you know, I think these two
06:03Cs are going to make the win on, you know, probably budget will make it a little bit more relevant.
06:08Otherwise, nowadays, budget has lost importance because a lot of things government already
06:12announced through the, you know, through the year rather than waiting for the budget day.
06:17So do not get expectations very high. I think no negative will be the biggest positive,
06:21particularly from the capital gains tax perspective. That's number one. I think no
06:25negative will be considered as a positive to the market. Market will take it as a relief.
06:29And who knows if suppose something comes in terms of attracting the fixed deposits or some changes
06:36here or there, and that may act as a new catalyst for the market, we have to wait for the budget
06:40day. Otherwise, from sector perspective, two Cs are going to do well, capital expenditure,
06:47that is CapEx story and the consumption story. All right. So the two Cs are going to be in
06:53focus this budget, CapEx and consumption. Thank you so much, Rajesh Kothari for speaking with us
06:59today. You know, we've got a great overview on the show today on what you could expect from the
07:05budget and the IT momentum also expected to continue. Thank you so much for joining us.
07:11You were watching Talking Point. I'll take a very short break,
07:13but a lot more coming up on the other side on NTT Good Profit.