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Betting on these 5 segments to invest now: UR Bhat, Dalton Capital Advisors


Talking to ET Now, UR Bhat, Director, Dalton Capital Advisors, says one can invest in non PSU banks, financials, autos, the engineering companies and the industrials now.

Edited excerpts:
First of all, I would like to know your views. You have seen so many corrections and massive rallies. The 11-12% correction which happened in the benchmarks, we have already we made up for half of them. Are we heading to scale back the earlier highs and carry on from here or is not retest of previous lows ruled out in coming weeks?

We have to consider the fact that internationally some huge risks are building up whether it is in terms of trade wars, in terms of the situation in West Asia or the potential of an all-out war. Even though North Korea is something that is probably off the front page, I think these risks are building up very fast and therefore one cannot really be very sanguine about previous highs being breached in a great hurry.

Domestically, on the economy side, you have GDP growth numbers which are fine, index of industrial production was fine, inflation is in reasonable control and even probably growth numbers as far as earnings are concerned might be good and normal monsoon is sort of forecast but I think the big issue is on the export front.

We have already not made much headway and especially with oil prices crossing the $70 mark, that is one place we need to worry about. Therefore, on the whole, while domestic savings flows continue into equities, internationally one has to be somewhat circumspect because if these risks play out, then there might be some sort of a lull on the flow front.

Also there could be probably some withdrawal from Emerging markets generally and India in particular. So, this might keep the market in a trading range as a best-case scenario.

You did touch upon some of the concerns but what do you think would be the biggest threat to emerge from what is happening in the US? With all of Donald Trumps comments day after day, crude oil prices perhaps would it be domestic concerns back home, what do you think would be the biggest threat for our markets in the year?

The biggest threat is the potential of a war over Syria. That is something that we need to watch for, but domestically, if you really see, the market seems to be somewhat concerned about what is going to come out of the Karnataka elections which is less than a month away but my take is that if BJP does not really have to win big for the market to sustain. If it gives a reasonably good account of itself, that should be fine as far as the market is concerned. But the bigger worries are about earnings growth, about exports, about oil prices rising these are the things that one needs to be more worried about than the state elections and stuff like that.

What is your analysis for FY19-FY20? Full-fledged earnings also come back. Is there a case for the market to rally a whole lot?

As the market has rallied much before the earnings came up, one has to be concerned about high enough level for the market to go because all its earnings growth have been foreseen even earlier and the market had risen quite a lot and as you said, the markets are quite expensive. The expensive stocks, which are the good stocks are really expensive and for the bad stocks, it does not matter how cheap they get!

As of now, if you really have to be in equities, is not probably the case because given the sort of risk that are building up, you need not be 100% invested in the market if you are a small investor.

But if you need to be invested in equities, these are the growth segments which one could probably be invested in — non PSU banks, financials, autos, the engineering companies, the industrials. These are the ones where some amount of economic activity is picking up. But quite a lot of the earnings and earnings growth has already been factored so therefore there may not be a huge uptick in the markets but at the same time if you have to be in the market I think these are the sectors that one could be invested in.

Original Article


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