I will remind investors that the market going forward is a boxing ring. You must stay in the ring to win the game and in the process be ready to take one or two knocks.
Triveni Sangam in the Indian market: First leg is liquidity --demand for equity is more than supply. The divestment supply, the IPO pressure has not yet begun and the demand from domestic investor’s as well global investors thus pushing prices higher. The difference is that this liquidity is not greed liquidity or liquidity for hope. Because sentiment has improved with record foreign direct investment, GST bill has passed, monsoon, after two below average ones, is turning out to be just about average. And finally this liquidity is hoping that earnings growth will come. For last three years, we haven’t seen significant earnings growth. There is hope that with interest rate coming down and liquidity getting enhanced in the banking system, consumption demand will recover based on monsoon and Seventh Pay Commission. We will see other than an investment related companies, investment related cyclical companies, rest of the economy showing earnings growth. That’s where one can invest with a longer term horizon. Don’t expect what happened in the last 6 months (the stock price rally) will happen in next 6 months, unless until some miracle happens, but if you have a 3 year horizon certainly this is the time to invest in market.
Take on telecom & IT space: On the telecom side, there is one nice Gujarati saying that when elephants are dancing its far better to watch from outside rather than inside the ring. There are many other sectors and many other companies, which are available today. I am sure that some point of time telecom stocks will bottom out and provide great opportunity, but let the clarity come before one can enter. On the technology side, clearly we are in a massive transition many of Indian IT companies were focussed on low end of the work in terms of providing manpower for doing application related work in infrastructure management related work. Many of the companies have made a small beginning from this into consulting side, into product side, into gaming side, into digital space. Now this pot albeit growing at a faster pace, but the base is so small that it is not materially impacting the market capitalisation. I think for the time being it’s time to be underweight technology sector and then search for that company, which will be able to make an impact in digital space, products space, consulting space, gaming space. You will get your investment in that transition, but for the time being it time to be underweight technology space.