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Avoid financials, pick pharma and speciality chemicals: Daljeet Singh Kohli

It is too early to say which sector will be the leaders of next rally, says Fund Manager, Valentis Advisors.

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Last Updated: Apr 01, 2020, 05.48 PM IST
Daljeet Singh Kohli-1200
As of now, nobody has any clue about where it is going to end. So I guess that is the reason why you see this kind of volatility.
What is happening with the market? Again a breach of 8,200 on Nifty looks likely. Since last week Thursday, things were beginning to look up. We are back to square one pretty much.
I do not think that we are done with this kind of volatility mainly because the reason for this fall we would attribute that to Covid-19 although the global economy was not looking very good in any way one month back. Till the time we start seeing the numbers flattening out, especially the US market, which is kind of a mother market from where we all take cues, I do not think the market is going to stabilise so fast.

In our domestic markets also, India has gone for a lockdown and numbers are increasing here also; so there is a bit of nervousness about where this will end and how long will this take. As of now, nobody has any clue about where it is going to end. So I guess that is the reason why you see this kind of volatility; every sharp fall appears to be the probability that this is the last fall but I think we will have to wait. Even if the rise is sharp, it will not be a one way rally; so we will still get many opportunities to buy.

What the problem with the investors is that they feel that if say 20-30% kind of gain will come tomorrow, then I will miss out the opportunity. So our understanding is, it is not the case. You do not miss out on the opportunity. Markets do not move in one direction always; there are phases of consolidation which will give you enough opportunities. So there is no hurry. Wait out and let the cues come from the market itself; as of now everything is uncertain.

I am certain that you must have drawn up a list already as to when the value does look ripe and right and the timing as well, you go buy those names. What is on your list?
Yes, that is right. That is exactly what we are doing as of now; utilising our time sitting at home. One thing which is very clear in our mind is that we will not be very inclined towards financials. That is mainly because normally what we have seen in such shakeouts is, the leaders of the past rally do not continue in the next rally. So financials have been 30-40% up in the last rally and they have done fantastically well. I do not think they are likely to continue in this next rally. We do not foresee that kind of a thing.

It is not that we are saying that the importance of financials will go away or corporate banks or NBFCs will not be there. But the way they were getting PE multiples, the way valuations were given, probably that will get rerated. So we are not touching financials.

It is too early to say who will be the next leader, which sector will be the leader but to our mind, it appears to be pharma and related companies like chemicals. So speciality chemicals, we have been bullish for quite some time; many of the stocks have come down substantially; so they again appear to be the leaders of the next rally. Then the tyre manufacturers which are beneficiary of crude; there is one main brand in India which has come off sharply and there is tyre manufacturer which has a lot of presence in Europe. That has come off very sharply; so that is offering an attractive valuation. So those kinds of things we are looking at and avoiding the financials.

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