What is the message out there for India investor given the recent selloff, given the incessant FIIs and FPIs selling and of course the big cue that awaits all of us, the US elections?
Rajeev Agarwal: I feel that, some pullback in the markets is pretty healthy for the market. The last time I was on your show Nikunj was saying, well, will the market keep running? And since then, it has come down. So, it is a pretty good thing that the market has pulled off some. Multiple reasons, as you pointed out, with FPI pulling the money and taking that money elsewhere. Obviously, there is some uncertainty with the US elections and we will see that tomorrow if the results actually come out that quickly or whether there is some litigation around the results. But I do think for people like us who look for individual opportunities rather than the market as a whole, it is starting to give us some opportunities to invest our money and we are active investors as the markets have come down.
You are not selling, a lot of our fellow friends who are foreign investors, they are not selling, where is the sell number coming from? Are these country dedicated funds, are these ETFs? Why is the number of FIIs selling so excruciatingly big every day now?
Rajeev Agarwal: Yes, a lot of these might be very macro focused hedge funds is what I would assume, because these are the people who are coming into the markets based on the momentum. And clearly, as the momentum has moved around and as well as there is an expectation about the fact that China possibly will have a bigger stimulus in the next few weeks and they want to be positioning for that, they obviously missed the first leg of that. But maybe there is a lot of driver around that. The second fact, which we know, all of us know, is the fact that Indian markets were not necessarily cheap if you compare to many other markets. So, they have made some good money in the last few quarters and this is a very normal thing that they would want to take the money off and try to de-risk some of the portfolio positioning and use it elsewhere.
How would you look at the overall picture when it comes to what is happening in the US in particular, given that everyone is talking about being a very neck and neck race between Kamala Harris and Donald Trump? Do you think that we are likely to see a major shift in terms of the mood as to what exactly comes out of the US elections or it is not going to be a big market moving event globally?
Rajeev Agarwal: It could very well be a market moving event and the bigger move could happen if the election verdict is not very clear. Because given how tight the race is, as you are showing on your screens, I think the race is very tight and it is possible that a few states ultimately decide the election as we know and if the vote difference between the two candidates is not significant, there is a much higher chance that this time there is litigation around that and that is an uncertainty that nobody wants.
We also know that the two candidates have very different policies and the longer it drags on, the more the uncertainty will be there. And definitely that is a risk that is there in the market. So, it is too difficult to call out how the election will be, clearly. But the uncertainty is creating some concern for the investors. But people like us, we basically try to take advantage of that, so we are okay.
Where is it that you are actually putting money to work? What have you been buying in this recent decline?
Rajeev Agarwal: You talked about the Bank Nifty. I think banking/NBFCs, has been a sector that has been hit hard, especially with the unsecured lending businesses really not doing well in the Q2 results and that has come down, the prices have come down significantly.
If we look out a few years, maybe some of them are starting to look a little bit more interesting to us, that is one area. I think capital markets have done very well in India and those capital market players’ results have been very strong this year or this quarter and we think that capital markets can continue to do well.
They may not have the same run rate as we have seen in the recent quarters. But capital markets in India should continue to do well and frankly, there are a few good players who are playing for the long haul, so that could be another very interesting area.
And the third thing I feel which India needs a lot is energy and Nikunj brought up the renewable energy sector and I think that could be another area that one could look at, because there will be a lot of action in India on the renewable energy side.
