In an interview with ET Now, Andrew Holland , CEO Equities, Ambit Capital Pvt Ltd , talks about the markets and high beta pockets offering value.
China is down, Nifty has lost 6000 yet again and the Fertiliser Secretary has just told ET Now that he is confident that the new urea policy is coming soon...
Let me start with the global factors first. Yes, China is a big concern for me because even a few weeks ago, we were expecting China to slow down its economy and that is the shock to the world and I do not think the markets have taken into account this factor and the more the Chinese market falls, the more we are going to get jitters about it.
On the other hand, I expected China to kickstart its domestic consumption to offset the exports as the currency rises. If they do that, then obviously that means that commodity prices are rising which will cause more problems. China is a lose-lose situation for global markets throughout Europe and the new investigations in terms of hedge funds and insider trading in the US and you have got a mix of markets which are pretty spooked. So as commodity prices actually head downwards, I can actually see that emerging markets, particularly India, might retrace a lot of the gains that we saw in October. So we are in for a hefty fall from here in the very short term.
What could be the quantum of the fall and which sectors do you think would actually tumble down? Is it going to be high beta, the likes of metals, real estate or do you think it is going to be the ones which have actually led us up until the 6000-6000+ levels, the likes of banks and autos?
If you see some of the ETF selling which will happen, then it will obviously be all the index stocks which lead the markets down. So I suspect those would be just an index fall rather than it is any particular sector. Commodity stocks will be under immense pressure in the short term because if China is slowing down, commodity prices will remain low.
If you see commodity prices starting to increase, then obviously the governments worldwide and particularly emerging markets will try to cool down the inflationary impact of that. So again net net, I do not see this as a win-win situation for commodity stocks and that will have an impact on the markets overall. So for very short term, we are in for a big fall and it could be very quick and it could be over in a matter of days, but it is not going to be nice.
Markets are down about 6% from the recent highs, but individual stocks have corrected about 15% to 20%, real estate stocks, selectively metals stocks and then the ADAG Group. Is any of the high beta pockets offering value and do you think you would be a contra buyer in them?
No, not at the moment. I would rather be a buyer into safety sectors which I would see is IT, consumer goods and autos, that is a real pack that I would be buying at the moment. I would throw in telecom into that but obviously with what has been happening, it is a sector which is under the scanner. I still think there are a few problems in that sector to unfold.
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