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00:00It's a delight to have in Ashish Somaiya, CEO of White Oak Capital AMC.
00:03Just for the perspective of the texture of the Indian market in light of the fact
00:08that we seem to have become a low beta market and it was evident in the way we recovered
00:14from what was perceived to be a potential market mover which is that Hindenburg note
00:22and just the way we struck that off completely. Ashish, good morning and thank you for joining
00:27in Neeraj here. What do you make of the way the market shrugged this off because
00:31there were telltale memories of what happened in Jan and Feb 2023
00:37but it was not even remotely close to anything that happened then?
00:44Yeah Neeraj, thanks for having me. I think probably last year's experience
00:51showed to the market that maybe there is not much substance. I think it caused a flutter last year
00:59and then the way things moved after that, clearly whether there is any substance to it,
01:05how much to read into it, what is the lasting impact, I think all of those things the market
01:10has few lessons learnt, number one. And number two, I think what came this time around seemed
01:18like a serious stretch of imagination kind of situation. So I think people have maturely taken
01:27it in their stride and hence market has not really paid much attention to it.
01:34Sure Ashish, Harsh also joining in. Ashish, I will shift focus. We are at the fag end of Q1
01:40FI25 numbers. What really stood out for you as part of Q1 earnings and do you believe that
01:47earnings is quickly living up to the kind of valuations that we have actually built on
01:55even prior to Q1? I think that a lot to read into the way the market is behaving. The reason I am
02:05saying that is because you can clearly see some kind of rotation setting in and market is taking
02:12cues probably from the earnings itself. So if you see some of the sectors,
02:19we have seen this, 2006, 2007 and 2008, we all were around and we saw what happens when market
02:24runs purely on order books. So there are some sectors where it's all been led by order books
02:31and even if all those order books rectify and all of those result in free cash flow and all
02:36of those free cash flows are in excess of cost of capital, even then how much does the valuation
02:42really justify. So I think some of the sectors have been running purely on sentiment and order
02:49book and investment related announcements etc. And on the other hand, there are some sectors
02:55where the earnings have consistently played out but on the other hand,
02:59they are on a relative basis they have been underperforming. So if you really ask me the
03:04story on earnings and at the same time the way the market has been reacting under the surface,
03:09you can clearly see that there is a rotation which is kind of setting in and everything that
03:14was, everything that had a rip-roaring rally in the last two years seems to be kind of, I think,
03:21is set to cool off and everything which has been underperforming in the last couple of years,
03:26purely on relative valuations, I think market is set to rotate. The second important thing is
03:31that when macros change, the drivers for the market also kind of changes. If you see from N21
03:39till couple of months back, the dominant narrative was higher for longer and interest rates.
03:45Interest rates were the biggest headwind and hence short cycle businesses with short cycle cash flows,
03:50they kind of outperformed. I think now the narrative is that at least for the US,
03:55Europe we have seen and at least for the US, appears that rates will tend to go down,
04:01which means that businesses with long cycle cash flows would tend to bounce back or outperform.
04:08So our results, last couple of months of market behavior and some of these macro trends,
04:14everything kind of points out to a rotation and you can clearly see it in performances as well.
04:21So I think that is something that everybody needs to prepare for.
04:24Okay. Ashish, appreciate you joining us for this quick perspective,
04:29texture of the market, earnings and more. Really appreciate it. Thanks so much.