Even the private sector banks in the last seven days, for the first time have shown some weakness in the heavyweights like HDFC and HDFC Bank. This is something that we have not seen on previous occasions and that also tells me that this time it is a little different and the stance which the FIIs have taken in the derivative segment is also hinting at a possible extended correction.
The top sells at the current juncture would be banks, oil and gas and metals and these three are the pockets that have done phenomenally well in the last many many months. If they come off 5-7% it is absolutely normal from a bigger picture perspective.
Historically, markets follow a cycle. Every sector has an up day, down day and sometimes there are multiyear trends and sometimes there are multiyear declines. How do you think 2018 will be different from 2017?
If 2018 can be like 2017, that will be best for investors because we have seen one of the cleanest uptrends in many many years. Hardly has even the smaller moving averages been tested. That tells you how clean and how shallow the corrections have been. I for one would be very happy if we were to mirror this move in 2018 but I do believe at elevated levels of 10000 and beyond, it is going to be a lot more challenging for the index to register sizable gains.
I think 2018 is not going to be an index story anymore. Yes the index can appreciate 10% but 10% is talking about 11000-11200 that is not very big but if you look at stocks and sectors, I think that is where the action is going to be.
2018 is going to reward people who are carefully picking stocks and I am sure there are many sectors, segments in the market which have a great set up.
So, infrastructure is one story that we like because that index is coming out of a seven-year base and I see the next couple of years belonging to infrastructure and realty and many multibagger potential names are out there.
Logistics is something that looks very interesting. Thus Nifty correction is a great opportunity to top up on logistics stocks. Textile as a story is working very well. If you look at chartically some of the top names in the textile space have done phenomenally well and I think this move is going to continue and some of the midcap cement and sugar stocks also have a pretty interesting set up.
So one should concentrate on pockets and really ignore the index because the index might just remain in this range for a long time unless it finds triggers to go substantially higher.
What is your take on real estate? Is this a seasonal rally or are there long term patterns indicating that a new bull run may have not started in Indian real estate sector but Indian real estate stocks are in a bull run?
Well it looks like and this is definitely not seasonal in nature. This is a secular run that is starting off in the real estate stocks and it is going to rub off on the midcap names as well. If you really look at the top two or three names, just see how these stocks behave when there is a corrective phase in the markets. They are actually outperforming while in the past, every time there was a Nifty correction, real estate and infrastructure stocks were the first to go down and make new lows. That has stopped happening and if you look at the long-term charts for the BSE Infrastructure or the real estate index you will see that it is coming out of a seven year-eight year base and typically when this happens it leads to a monster rally of say 100-150% on an index level so that will obviously lead to much bigger gains for stocks
This is something that we spotted early in the year in metals and oil and gas and we handed it out to our clients and now we see the same structure playing out in infra, realty and logistics which I just explained so I think these are themes wherein one should buy and hold and not really look at trading returns because there you might get out very cheaply.
Very quickly on to some of the other sectors that you like as well and I particularly I am intrigued by your view on logistics and infrastructure. Is the downside capped here? Is it going to be a V-shaped recovery for most of these names?
Yes, I think the downside is definitely capped. On an index level. we have not seen any major correction in 2017 so this correction actually gives investors the time to actually research and take their own time to pick stocks because in a running market, it is very difficult to create a largish position in some of these stocks because they are slightly illiquid but beside the two sectors which we have talked about, another one which we are liking right now is technology.
Technology as a space was in a band for almost six months that band has seen a breakout on the upside and we have seen stocks like Infosys do very well recently obviously on the back of news but the charts set up suggest that in this possible corrective phase for the markets technology could outperform so that is one place where one can again go a little heavy looking at what has happened in the last six months. So 10% move on the technology index is something that we see in next few months.
IT is one such case in point but I am going to take a leave from your favourite quote by Phillip Fisher which is saying that the stock market is filled with individuals who know the price of everything but the value of nothing. Where else are you finding value if you had to stick your neck out and give us that one big wealth creator or value creator for 2018 what is it that you are willing to bet your money on?
Well unfortunately compliance does not allow me to give you names of specific stocks but I think logistics as I said repeatedly is one space that we like aside of that I think some of the chemical stocks, textile and chemicals those are very interesting stories which could do exceedingly well in 2018 and there are some of the smaller names that could move up 100-200% in value so these two smaller segment names something that which we like unfortunately I cannot give you names.