Stagger your investments; 3 pockets may give good returns: Nitin Raheja

How are you reading into the overall market at the current juncture? Global factor have led to a spike in volatility. Does this remind you of any past corrections or is it very different?
The market will look different to investors at every different point of time. However, underlying themes remain very similar. Thia has been a market which has been driven by unprecedented liquidity pumped in by central bankers over the last many years and every event has meant more liquidity and so we have seen this big rerating in terms of valuations and PE multiples, which is now starting to see a correction.

We are getting into a phase where we might sit and argue about what will be the number of interest rates that the Fed might or might not do, but the point is the direction over the next one-one and a half-two years is very clear and it is that QE is winding down, liquidity is going to get tighter, and interest rate cycle is directionally on an uptrend.

Now when things like these happen, as an asset class there is derating as far as equity is concerned and that is what we are seeing now. We are expecting that over the next three-six months, this trend will probably continue and we will remain range-bound markets and choppiness is going to be there. There is a risk off trade and certain sections of the market, which were very frothy, are going to see much more pain than other sections in the market.

Anecdotally, this market has been correcting now for the last four to five months and post touching the new highs in September, it has been on a downtrend. The broader depth of the market, probably 70-80% of companies, which are part of the CNX 500 index, are trading anywhere from 10% all the way up to 50%, away from the 52-week highs, This is a trend that we believe is going to stay here at least for the next quarter or so.

These are events which are very difficult to time. So let it just settle. The world is fine but we are going down, our midcap index today suddenly has started to underperform. Should one not look into this much and only when things settle, start buying, even if it means paying a slightly higher price?
When one tries to time such things in the market, it never works. When do you know that the market has created a bottom? Evennow, we are probably about 8% or 9% away from all-time highs. But individual stocks have corrected by 10% to 50%. So we will have to play this more as a bottom up stock picking market, where you feel the valuations have corrected and where it is becoming reasonably attractive to start making your entry in the markets.

All we are telling our investors is to please stagger your investments as such because you can never time this market. If you were waiting for that trigger to happen in 2020 when the Covid came about, before you knew, the market had gone up 10-20% from the bottom. The idea always is that in the market, one is gradually investing over a period of time if one is a new investor. If you are an existing investor, you are essentially taking some profits where you have obscene levels of valuations and play and is waiting it out.

You were telling us that you are advising your clients to buy in a staggered manner. Which are the pockets that look interesting to you?
I continue to believe that this is going to be a very bottom up market. But having said that, we are clearly seeing that the entire financial pack and more so the large private sector banks or even some of the large domain focussed NBFCs are the ones where we feel that the entire price value equation stands very attractive. This whole sector has suffered over the last three, four years post IL&FS from one event after the other.

As economic growth comes back, we believe credit growth is also going to come back faster and these guys are going to be able to garner and capture market share at the cost of the mid and the third tier players. So the entire segment and sector looks very attractive. We like the entire building materials, home improvement sector. There the peripheral impact of the boom in technology services business is playing out and showing up quite dramatically.

We also like some of the consumer finance businesses and consumer oriented businesses I think the so called opening up trade. So those are some pockets where we see the corrections have been good where the growth looks far more visible and balance sheets are of quality which can meet the challenges over the next few years as you see a tightening of liquidity.