What your outlook is for the week or a couple of weeks going ahead. We have seen a very good trading week and a trading month coming in. Next week could be rather stable. But after that, 2nd April is when Trump’s tariffs come into action. So, what is your outlook? Do you believe that we are completely out of the woods and something like a tariff cannot affect us going ahead and now the markets are one way up or do you still believe that some more volatility is in room for us?
Ajay Bagga: Global markets are really flying into uncharted territory as far as April 2nd goes. We do not know how broad the tariffs will be and how deep the tariffs will be. So, overall, there is a lot of pressure on the Trump administration both in terms of consumer sentiment as well as business sentiment as well as governments working behind the stage trying to get some kind of an agreement done before tariffs are levied.
One example being Europe yesterday deciding that they will not levy their tariffs till 1st April and most of their tariffs, they have postponed till 13th April to give some chance for negotiations. So, April 2nd remains a very big source of uncertainty for markets.
India, we have seen domestic criteria improving very fast, both the macro, the fiscal, as well as the monetary policy where RBI has cut rates, has injected huge amounts of liquidity and has done micro prudential easing as well.
So, we have seen heavy lifting happening in India. We are probably bottomed out as far as the economy goes by September and we are probably near the bottom or bottomed out already in December as far as corporate earnings go. So, domestically, we were well positioned for a bounce back. The issue was the global issues and those remain.
So, it will be difficult to have a one-way market. You will probably have some selling happening going into 2nd April unless there is a US team which is coming over next week for further negotiations, unless India announces that all tariffs are on hold till the bilateral trade agreement is signed in this autumn.
If some news like that comes, then you could have a huge relief rally in India. So, that is why we have been telling investors to stay invested and not sell in desperation even when the markets went down to 21,800 and lower levels.
A couple of things that are happening that perhaps will work out for the better as far as India is concerned, whether it is bottoming out of the market, bottoming out of the earnings or whether it is the cooling off of the dollar index, which is of course being a very big positive for all the emerging markets, especially India. So, going ahead, do you see better days ahead and also now that once again the bulls that are likely to take in charge, there will be a sectoral churn once this dust settles. What are the sectors that you see leading from the front? Do you see value in the banking and the financial pack because they have been doing pretty well. Also, the valuations look very-very ripe for the banking pack. So, do you see value in the banking pack or what according to you is the sector that will be leading the charge here on?
Ajay Bagga: Banks, industrials, power, these are some of the sectors which will lead the charge. IT is watching from the sidelines. So, IT maybe it is a couple of quarters more before we start seeing the AI applications making a dent on delivering more top line growth for IT, we are probably a couple of quarters away from that. But the moment there is some policy certainty, some policy stability in terms of the Trump administration, you will see IT starting to rally.
So, it might be a good time to nibble into IT, but the sectors leading will be financials and within financials, private sector banks, leading private sector banks, then industrials and then energy, mostly power, anything related to power should do well.
Defence is coming back. We have seen defence stocks doing very well over the last one month and maybe that also points to public sector companies coming as value buyers given the sharp corrections that they have seen. So, maybe the PSU as a sector coming into its own once more given the sharp corrections that have happened.
You mentioned a couple of sectors where you see value in, you mentioned banks, you mentioned pharma as well. Any buy calls coming in from that space, if you will?
Ajay Bagga: Leading private sector banks, particular stocks I would not be able to name because of compliance reasons, but leading private sector banks, power finance companies which are financing power and also supplying equipment, creating transmission lines, power producers, industrials who have really suffered as the government expenditure lagged across last year, now the order flows are really picking up, industrials will do well on that basis.
These are some of the segments within the market which are looking quite attractive. Real estate has seen a bounce, this week again from extremely oversold zones and we must remember real estate, normally the cycle is multiple years and right now it is just a two-and-a-half, three years cycle post the COVID and that it has taken, starting gaining traction still.
Real estate has a lot more space to run. Cement will recover. Cement, we are seeing pricing coming back and with more orders coming in, cement should recover.
Metals, I was not very positive, but two big things happening. One, the duty protection that the government has brought in, we were disappointed when the duties were cut in the budget, we were really saying why is this happening when Trump is going to bring tariffs on China and China will dump its excess capacity.
So, duty coming in on metals is helping. Second, Chinese property market seems to have bottomed out and we could see traction coming in there, along with China’s steel makers cutting down their production. So, lot of positives coming in for metals. Indian metals will do well in this scenario.
