“These corrections give opportunities, bring in valuation correction, some kind of sensibility in valuations which had gone beyond understanding. As a result, these corrections give money, which was waiting on the sidelines, to come into the market,” says Kunj Bansal, CIO, Karvy Capital. Edited excerpts:
Do you feel happy that the market is correcting from the top and froth is coming off? Are you looking for buying opportunities just yet?
In a rising market, we always forget that there is another community, another segment in the market which is of the shorters. So, for them, it is the time to be happy. Secondly, yes in all the rally of the last one-and-a-half years, leaving aside the last one-and-a-half months, we all had been wondering what is happening to valuation, why the market is continuing to go up, why there is no correction, how long it will go, to what level it will go etc. We have the answers now. One should be ready for these kinds of corrections because you very rightly pointed out that these are the kind of corrections that will and do provide strength to the market. These corrections give opportunities, bring in valuation correction, some kind of sensibility in valuations that had gone beyond understanding. As a result, these corrections give money, which was waiting on the sidelines, to come into the market. For the short term investors, it could be scary. For me, it is not. This is a healthy correction and could continue for some more time. I do not know how long and to what level but if that happens, that will continue to be good because the valuations will keep becoming more sensible, more attractive and the money will get an opportunity to come in.
Do you feel happy that the market is correcting from the top and froth is coming off? Are you looking for buying opportunities just yet?
In a rising market, we always forget that there is another community, another segment in the market which is of the shorters. So, for them, it is the time to be happy. Secondly, yes in all the rally of the last one-and-a-half years, leaving aside the last one-and-a-half months, we all had been wondering what is happening to valuation, why the market is continuing to go up, why there is no correction, how long it will go, to what level it will go etc. We have the answers now. One should be ready for these kinds of corrections because you very rightly pointed out that these are the kind of corrections that will and do provide strength to the market. These corrections give opportunities, bring in valuation correction, some kind of sensibility in valuations that had gone beyond understanding. As a result, these corrections give money, which was waiting on the sidelines, to come into the market. For the short term investors, it could be scary. For me, it is not. This is a healthy correction and could continue for some more time. I do not know how long and to what level but if that happens, that will continue to be good because the valuations will keep becoming more sensible, more attractive and the money will get an opportunity to come in.
Does it make sense to add positions if IT were to fall?
Yes, you have added a good rider that if it were to fall. Why I say that is based on Accenture’s guidance. If we go back and look at the September quarter results commentary by the management of various Indian companies, there is a clear demand growth which is visible in the whole sector and that is what we were being told by almost all the management across the size of the companies. In fact, Accenture’s numbers have not only been good but there has been a positive surprise and that has what led to today’s rally in the IT sector over and above the rise that had already been taking place. But with these kinds of corrections in the market, it is very difficult for any sector to withstand the market tide. This correction will provide an opportunity for the IT sector investors to buy into the IT sector on correction. They should because irrespective of these market headwinds, the sector tailwind will continue and will be visible in the December quarter numbers, March quarter numbers and thereafter as well.
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