Bull market | market correction: easy phase of bullish crushing, according to Sandeep Tandon; decode what to buy, sell and hold now

“The fear in the market is not as high as in March 2020. Global liquidity is still quite abundant but in terms of percentage it has started to decline a bit,” said Sandeep Tandon, Managing Director and CEO, Quantitative mutual fund


What is your assessment of the market because there are two big moving parts now; one came from the Fed last night and one that came to the Covid front last week?
Let me start with the Covid front. Let’s understand what happened in March 2020 and where we are now. This will give you a better perspective in the wider angle of the market. As of March 2020, a similar fear was present, although the intensity of the fear was clearly very high at the time. By the way, also today the India Fear Index, the Bond Fear Index, posted the second largest spike we have seen after 2020. When 2020 rolled around , the risk appetite collapsed and the liquidity was extraordinary. It was a deadly combination for a running bull and for nearly 18 months of peak mass.

Now let’s understand where we are now. From a global perspective, the flow of money to global equities in September was at a decades-high level and since then it has started to decline a bit. The second most important thing is that global liquidity is still reasonably plentiful, but in percentage terms it has started to decline a bit.

Third, the risk appetite, especially the risk appetite of developed markets, is on the decline slightly but it has not collapsed significantly and so should not be overly concerned. If I have to combine, we can say that we are in a euphoric phase overall. But can this euphoria last a few more months? The answer may be yes. After the small correction or consolidation that we observe, it can still go up.

So if I dissect the euphoria between the growth component and value for the MSCI world or the FTSE world, then the very interesting data coming out of Quant Perception Analytics shows that the metrics have peaked or seen a euphoric sign. for growth stocks around the world while value stocks are actually on the lower end. The euphoria therefore only focused on growth stocks and not in general.

It would not be fair to say that the world market has peaked. From a liquidity perspective, a cash flow perspective, and a risk appetite angle, we can easily conclude that the easy phase of the bull run is over. But we are still in a bull run. This is the difficult phase of the running of the bulls. In the current context, we have been a little cautious for about two months. We talked about accelerating the VIX cycle. India’s fear index is second highest after 2020. In terms of liquidity, in India good liquidity is still on the rise and risk appetite on a relative basis is better than global markets . It is seen towards the upper end and there is a marginal drift but which is largely constructive.

If I am to conclude from multiple data points, have we seen a market peak in India from a longer term perspective? The answer is clearly no and the hike is still pending. We haven’t seen any classic signs of euphoria. Yes, we’ve seen the euphoria of small caps, some growth stocks and some pockets, but that doesn’t mean we’ve seen a euphoric move in the Indian market as a whole. We therefore remain very constructive for Indian actions in the perspective of the coming years.

Divide the market into three parts for us based on your understanding and your technical and fundamental indicators – the stocks you would like to buy in this downside, the stocks you hold, and the stocks you will sell.
We don’t want to be specific to stocks, but we can certainly talk about broader sectors. The first point to emphasize is that the weighting of the value portfolio should be significantly higher. The sector themes that we like include banking despite a very massive correction in the banking space very recently.

So we like banking at the current level, capital goods, maybe the media, textile stocks. Some of these names still sound interesting to us, and we believe that the investment cycle in India has just started and that it usually lasts slightly. It lasts 8 to 12 years and the derivatives of the investment cycles are much more. We remain very constructive on the overall investment cycle and if I am to speak to the broader value theme, then emerging markets are seen as value versus developed markets as well. We must therefore focus on value rather than growth compared to current levels.

You seem to prefer value stocks. You mentioned banking as well as textiles. What about infrastructure, electricity and all that?
We remain suspicious when we talk about investment and the investment cycle. Infra is part of it, electricity stocks are also part of it. We remain very constructive on the values ​​of electricity and energy in general.

Monetary stimulus as an exercise has collapsed or failed miserably in recent years. Now The fiscal stimulus cycle has begun. The United States is another example that is going to happen and every time we see a fiscal stimulus happening the infrastructure spending is actually going up and given the interest we have seen in the commodities market, it is also an indication that the investment cycle is coming back not only to India, but to the world.

How do you see IT?

Sandeep Tandon: We believe the market has never penalized or reacted the same way for the surprises we saw in 2020. The impact of the second wave of Covid was slightly less and we are now talking about a third and possibly be of a bigger wave. I don’t see anything happening on this front because our Perception Indicator for tech stocks globally is trading at lifetime highs. When I say perception metrics peak, we’re not trying to say their price has peaked or their income has peaked. What we’re trying to say is that the valuation multiple for this sector is actually high.

When profits increase and PE expansion occurs, this is the time to make the most money. An important factor in PE expansion or multiple expansion began to decline. We believe that the valuation multiple of this stock or sector has reached a peak and we remain very cautious. I am not negative. The IT outperformance phase observed in recent quarters has reached its peak. We remain very constructive in this space. From a longer term perspective, the answer is yes but the outperformance is gone, they will now perform well in the market.

What about the pharmacy? Hope the Omicron variant doesn’t spread like the first variant did. Do you think the outlook for pharma is going to change now?
From our Quant Perception Analytics perspective, pharma peaked in March 2015 and then bottomed out in September 2009. From where it is today we have seen spikes and small corrections occurring in pharma. Yes, the easy phase has been played and we have seen a correction and consolidation take place.

We remain rather constructive in the pharmaceutical space from a longer term perspective. The dip buy strategy is expected to be very effective and the second upward movement is independent of the Omicron variant outbreak. Sometimes the cycles are about to change and then an event unfolds and it just acts as a trigger. Likewise, when the market was significantly euphoric and an event has occurred, we see a correction. These are all excuses. We remain very constructive in the space but risk appetite as well as liquidity indicators for the pharmaceutical sector as a whole are on the rise again. We therefore remain very constructive in a longer term perspective.


Source link

Comments are closed.