How are we doing?
We are good, we are good. No one cannot complain in this market, right?
Cannot complain, actually.
The ones who have not participated – a big crowd, actually. They are complaining a lot. They are calling it too fast, too quick, too expensive. Ignoring the macros. What is the right way of looking at this market? Stay with the trend because trend is your friend?
Absolutely. That is something we have been speaking about. At the end of the day, we give targets. The target is not important. The important part is the direction. The important part is are you invested? And there is a strong case to be invested in India. Globally, India is probably the only market at lifetime highs.
Yes. We discussed this last time.
Number two is you go into the sectors. You look at the market breadth. You will find barring IT per se, every sector is 2-3% from lifetime highs. Market breadth is on a 52-week high, 52-week low basis. One cannot really fight the trend. What is expensive, what is cheap is very subjective. We can discuss PEs and what should be the correct PEs forever. But the fact is the direction is up. My job as a fund manager is ultimately to have stocks that are running faster than the market. That is how I will outperform and the clients will outperform.
So, spending too much time on where the market is, if you still have doubt after seeing so much evidence, then it is a question of belief and that is something which I have learned from Rakesh ji (Rakesh Jhunjhunwalla) over the years, that the biggest wealth creators have belief in India. Even through all the corrections that we have seen, they were invested. Yes, they experienced pain. Every investor would experience pain. But the fact is that do you believe or you do not? When the numbers in the markets and all the statistics we put out are showing you so, the question is that am I in the right stocks.
In the moment of despair, which is somewhere in the middle of last year, when markets were puffy-duffy, you said Nifty will be at 21,500. That had looked like a very tall number but now we are almost there. Time for you to take your levels higher now?
I was so expecting that question.
He said do not focus on the targets, focus on the direction – 21500 or more? Atul was the only guy who talked about even 20,000 and 21,500 that time, more like a very high watermark number.
Right. See, the thing is that it always has three stages. In the first stage, when you say it, people laugh at you. There is disbelief. There is genuine laughter. They will be polite on your face, but say this guy is crazy. I do not know what he smokes.
You do not smoke but.
I do not smoke. What do I drink? So, the fact is, then you get to a stage of acceptance. You know, once we broke 19,200, we made a new high and then people thought it was possible! And then you reach a stage when people say: “What else? Stretch it.” So, you go through these stages and you realise that the first thing I said ultimately is the direction. You and I are not buying the index. We are buying stocks. The important part is, am I in the right stock? Am I in the right spaces? Am I in the right sector? I think that is very interesting. The index is not really showing the actual bullishness of the market.
The two biggest components of the index– banking and IT – actually have given muted performance. If you adjust for that, you will find that the market, the Nifty is way beyond the components per se, as the broader market is telling a different story.
So, there is no bubble, there is no euphoria, there are no overbought conditions according to you in the market?
For me, the red flags are global. What is concerning me is the way commodities have been going up, especially crude. And energy has a very big inflationary impact. You are seeing that in US bond yields, you are seeing that in the US dollar. I feel that the risk to our Indian markets is more global and that will get expressed by, if you have a global kind of correction happening or you have aggressive FIIs selling.
If you look at Indian markets, if you look at charts or if you look at statistics, you sense that bubbles, honestly nobody ever knows. is only in the future someone will say, oh! that was a bubble and it was obvious. It is never so obvious. If it was obvious, there would never be a bubble.
Rakesh Jhunjhunwala always made an important distinction – crisis bol ke nahi aata hai (Crisis comes unenexpectedly). All of us thought in 2021 and 2022, inflation is going to be the bugbear. With that kind of an inflationary environment, markets can never go up. But everybody knew inflation was coming up. Similarly, this entire crude impact in terms of moving from $85 to 90, 90 to 100. 94. 94, It is not a great situation. But will this trigger make the market collapse? I do not think so right?
Globally, sooner or later, it will have its impact. The difference is that India has stood out. As we are talking about global statistics, the domestic investor has emerged as an amazing force. Last year also, global markets were off. Sometime in October or so, the S&P 500 was making 52-week lows. And we were near 52-week highs. In my life, I have never seen such situations and people said, Oh! this decoupling is all bull humbug. You know what happens when decoupling happens. We get thrashed.
Ultimately, what happened, those markets moved up to 52-week highs and we moved to lifetime highs. So, in that sense of the term, it is true that markets are cyclical. They have a way of surprising you. Who thought that we will be talking about commodities? But the big danger point for global markets and markets in India will have a knockdown effect is commodities.