The second one obviously is the results. We met quite a few corporates along the way and I do not think the March numbers are looking that great as such.
So, this rally may not just be supported by the fundamental numbers, maybe the flows as such and thirdly, I mean unfortunately the first of the blocks will be the IT gang which will be reporting numbers and I do not see those being too exciting either.
So, it is going to be a bit confusing, but one has to now tread cautiously. I am not looking at the correction in the market frankly, but was more comfortable with the time correction given that we are somewhere there in the market in the sense, in the bottom of the market somewhere, but yes I will just leave it here. In this market comeback, banks have made a comeback, but you are not the only one who is saying it so you do not get any brownie points for it. Everyone is saying banks. But IT has gone down. You were long IT at some point in time. Are you still sticking to long IT?Dinshaw Irani: No, actually because we became negative IT sometime in Feb. We were long IT from July of last year onwards, fairly bullish, but sometime in Feb, we realised that two things actually. One was obviously the uncertainty going on in the US. I mean already most of the IT guys are calling out that discretionary spends are not picking up at all out there, that is obvious because the way the new admin is creating so much uncertainty, businesses obviously will hold back. They will not be spending too much, so that was one big concern. The second one which we always thought was going to assist IT in a big way was AI, but along the way, we realised that AI is becoming a disruptor for that particular space.
So, as a result, sometime in Feb we got rid of all our IT stocks. We just have one which is actually classified as IT, but it is more to do with the auto space, so that is why we are holding on to that one. And when we did that, we raised a lot of cash along the way because at the end of the month we were at 20% cash, but fortunately the call on IT went well and markets kept collapsing, so we waited.
By March beginning, we started deploying the cash again and we have been happier that way. I mean, IT has gone down, the markets have gone up and whatever we deployed that trade has worked perfectly for us. So today, I do not think we have any cash lying with us.
There are a lot of other small pockets which are now coming to forefront. Consumer durables, it touches everyone’s life, but consumer durable companies in India are not very large. You have this entire two-wheeler space which is making a comeback. You got consumer discretionary stocks which are making a comeback. Anything which looks appealing to you, which in a sense was not the great trade of last three years, but could be a great trade for next three years.Dinshaw Irani: So, actually in the consumer durable space, unfortunately, the way the liquidity had been sucked out of the system, I think that affected consumer durables to a greater extent. If you see the unsecured lending had gone down by banks and with the new governor coming in, obviously, that space is looking far better because the first thing that the new governor did was infuse liquidity in the system and that helps in a way.
But I do not see that picking up in a big way anyways. It is going to be a steady pace. Unfortunately, in India, consumer durables are mostly limited to AC companies in a few pockets here and there. I do not see that space picking up in a big way. Anything that has underperformed last year and is expected to do well, which you will not give me brownie points for, is obviously the financial space.
Banks are the only space that we feel are looking pretty ripe for a good run henceforth from here on as such. Obviously, NBFCs within those will look far better when we are talking about the lender space because if interest rates are getting cut, that is the area, that those are the guys who really benefit going forward so that way.
And you did speak about IT, spoke about banks, spoke about consumer stocks. I wanted your view coming in on the entire capex theme and especially when you talk about capex, about capital goods space. What is your view on that particular front because these were a part of the narrative stocks, which actually saw a massive rally last year as well. And in line with the rest of the market has corrected now.Dinshaw Irani: Yes, actually, the fact is that capital goods, the ones which are to do with the domestic space, the domestic expansion space, they are going to do well as compared to the ones which are export-oriented or to do with PLIs as such. So, we expect the domestic space to do better because that is the need of the hour. I mean, you need a lot of capex, not only from the centre, but also from the private sector as such. And if that comes about, that is when you will see employment picking up, that is when you see demand coming back in a big way, so that space looks exciting, but as I said be very careful here because you only aretalking about domestic-oriented stocks which you should be looking at rather than anyone to do with exports or PLIs.
I think the government also has realised because they are trying to refurbish that scheme, they are trying to make it a little bit more attractive, but frankly, even in the PLI space the world has, instead of shrinking now, the world needs more of on-shoring.
So basically whatever is outsourced is low-tech work which is outsourced, so I do not think that space will look exciting even in the future.
150 points higher for the Sensex. So, we have had no returns in the market this year. When we will close this year, will we have positive returns? See, no return is also a great outcome from negative returns. But are we in for a positive run now till end of the year?Dinshaw Irani: So, you are talking about the calendar year or the fiscal year?
Dono ki baat kar lete hai. 3 mahine mein kya farak padta hai.Dinshaw Irani: No, fiscal and calendar are two different things. So anyway, fiscal, I do not see much of a run happening from here. I mean, whatever we have seen the markets doing, they have done fairly well. Given that after collapsing, they give you a flattish return in that way. But going into the year as such if you look at the CY returns, calendar year returns from Jan to December.
First half will not be that much of a half, anything to write home about. But going into the second half of the year, if things work out the way they do, if the tariff wars just fizzle out, I mean, I am sure the Trump administration also is aware that it is going to harm them more than it is going to harm the competition.
So, I am sure they will be very selective in that space. And if that happens, the things will look far better going forward from June onwards. And why I am saying June onwards is because June was when the real slowdown hit us. I mean, as in, if you look at the earnings growth, in the June quarter it was a very low single digit kind of earning growth and in September it was a negative earning growth.
December, again, it was low, low-low single digits, in fact, close to percent that the earnings growth. So, the base becomes much more exciting for the earnings to start picking up and that is what all investors look for, earnings growth. I mean, you already re-rated. After that massive re-rating that one saw till September, we were massively de-rated again by end of Feb because the world rallied and did not, in fact, this was the first time when India fell in isolation of the world and that needs to turn somewhere.
And my feel is from June onwards, when things start looking pretty good, that is when you will see flows from FIIs coming back, domestic investors coming back in a rush and stuff like that. So, party time from probably June onwards and nothing before.
I wanted to get your view or a sense on exactly what is happening when you talk about the SIP picture, given the fact that over the last few months, we have seen a slight decline in the SIPs, the redemptions have gone higher. What is your view? What is the sense are you getting? You think the confidence is coming back in the markets?Dinshaw Irani: Actually, that is what was very disappointing because SIP is one route that the investors should be tinkering with, because all along the whole idea of an SIP is that you need to average on both sides of the market. You need to average on the way up and on the way down itself,
And frankly, I mean, when you are averaging on the way down, that is when your IRRs really shoot up, that is when your returns really look exciting in a longer-term basis, so that was the disappointing part that most of the SIPs stopped at the bottom of the market and probably they will come back given the way the markets are, but as I said, the markets will remain choppy. And frankly, our feel is this is the way forward for all retail investors.
I mean, if you are looking at savings, this is one portion that you should be tinkering with and one thing that I would like to highlight out here are the distributors, which are assisting their investors.
They did a phenomenal job, because bulk of the shutdowns that we saw in the SIP space were more of direct investors and the ones which came through the distributors, they were handheld by them and very limited amount of shutdowns there, so they have done a phenomenal job going forward, so hope that works out.
