Porinju Veliyath, founder and CEO, Equity Intelligence India, feels that good times are just a question of when not if. He told ETNow that the stocks that have corrected or had a huge selloff are going to see a turnaround.
What is the outlook for the markets this Diwali?
So, Samvat 2075 is beginning. I think it’s a good start. We are in a completely oversold markets today unlike last Diwali where we had a very highly overbought, high valuation kind of environment. Samvat 2075 is going to be definitely much rewarding for the investing community, with the new money coming in.
New investors coming to equity investing are going to be well taken care of, with highly rewarding stock market going forward. At the same time, there is a lot of pessimism still in equities because of the big drawdown and the sharp corrections in most companies. So, that is not the way to look at.
The deeper the market correction, the more attractive the investing. So, we should be looking at what is the going forward, forget the past and some of these companies have already started recovering a big vacancy, hundreds of small and midcap companies in the last 2-3 weeks going up by 20-30-40 per cent and some of them more than 50 per cent.
That way, markets have bottomed out, there is no doubt about it. We have all the earlier positives what we talk about, the black to white and unorganised to organised. All those forms of economic aspects are still live and India growth story is intact. That is what people should not forget. We can only go up. That does not mean there will not be correction or anything of that type. Of course, the recent correction was really very, very painful.
I have been predominately investing in small and midcaps. So, people like me had a lot of pain to go through after huge rewarding years earlier. So, that also should be there to be taken care of. We will again see good times. The stocks which have corrected or had a huge selloff are going to be highly rewarding.
If you are saying investors are on the sidelines so far, do you think it is still not late? One could still start investing for the longer term and maybe things like delay in earnings recovery or impending elections do not really matter if you are investing for the longer term.
It does not matter. Let us look forward. If we look for 2-3-5 years kind of perspective, Indian market is one of the most attractively priced markets in the world today for various reasons. Still, we are the fastest growing large economy in the world and many of the important much required financial reforms what we have gone through, have started yielding results. See, already this financial year, we are expecting one crore more income tax payees and the GST collection numbers have started improving. They have got a long way to go and this will surprise most of us.
See what is happening the banking system, India’s financial system. This is like a never before kind of clean-up is happening in the system and India will see a very very strong financial system in coming years. All this NPAs, the problems are still continuing, but this will be past story very soon. So, we need to account for all these things, not only just look at the negatives and stay in pessimism. That is not what investors are supposed to do today and they can see the large number of the NPA resolutions.
What is happening in the Essar kind of stories will create a base for the future.
What is your Diwali pick? Which is the sector you are bullish on?
Hotel segment is one sector that is oversold in the last many years. I like these companies. The occupancy is really going up. Cost of setting up a new hotel and running it has really shot up. It has become almost very difficult to break even for the new properties. There is a shortage of hotel properties in many cities. So, the hotel sector is something very safe for the next 2-3 years for equity investors to invest in. As I told you, we had seen big movement in paper and the intermediate movement, upmove in sugar.
In India, it is always sector by sector play. That is basically a trading idea when we talk about these small cycles and segment-wise movement. If you keep your eyes and ears open, that kind of opportunity always emerges in India in different sectors, but need not be very much focusing on one particular sector. We have seen the most fancied or blue chip guys invested in housing finance and the NBFCs. They had a big meltdown recently for various reasons. So, these ups and downs happen to every industry. One should not forget that.