Market in a phase of time correction; recovery to be gradual: Sanjay H Parekh

"It is a very-very good liquidity provision they have done. Now, followed up with another repo rate cut and changing the stance from neutral to accommodative and clearly directionally telling that we are pro-growth now," says Sanjay H Parekh, Sohum Asset Managers.

The verdict is out. If you look at the RBI stance, there is a 25 basis rate cut and with the earlier liquidity infusion and now the stance also changing to accommodative and what the RBI governor said, it is very clear that RBI wants to have abundant liquidity in the system. Going ahead, how is this likely to shape the markets? Also, inflation has come off sharply. The food prices that were sticky earlier on, that has also moderated. So, going ahead, if you put aside the tariff war news, I mean, you cannot, one cannot overlook that, but if just the Indian picture, the picture for India has to be looked at, what do you see for Indian markets now?
Sanjay H Parekh: RBI did a phenomenal job. The respected governor, after taking over, clearly infused liquidity that was required through CRR cuts or swaps or through OMOs, etc.

So, it is a very-very good liquidity provision they have done. Now, followed up with another repo rate cut and changing the stance from neutral to accommodative and clearly directionally telling that we are pro-growth now.

And the best part is that inflation is well in control for them to do this, because if inflation were to be higher, even by, let us say, 50 bps or 1% more, then they would certainly have not accelerated it and may not have changed the stance.

So, now, it is a pro-growth stance. And of course, balanced way which RBI always does, but it will really help to stimulate a growth slowly because the world is quite in a chaotic scenario. So, in that chaos, even inflation, you cannot have a very long-term view because if there are some supply chain disruptions, it can impact us as well, so that with the chaotic world that we are into, we are certainly in a very-very good shape and RBI has been very-very helpful to the markets.

The comfort that the investors are finding, at least in today's trading session, is the defensive pack, case in point being the staples as well as some of the other consumer good companies. Help us understand that at this point in time any sector preferences that you have or any comforting area that you are spotting at this point?
Sanjay H Parekh: So, one is what is happening in the global scenario. And very clearly, each of us would look at what is our global exposure to our portfolio. And as of now, obviously, the less it is, is better. And more you are domestic driven, it helps.

But only caveat is that while global scenario is quite chaotic and we do not know what will be the second order effect. While initially we are better placed, it is coming out very clearly, and we could benefit also on a relative basis.

But what it could have the ramification on global growth, the global slowdown, if China has excess capacities, how would it try to push that supply and how do we protect ourselves as an industry? We will have to see. And if the global growth slowdown is there, there could be impact on fund flow as well. So, we need to be navigating it very carefully.

A little unfortunate is that our growth rate in this quarter will be flattish. We are coming out of low growth and this year, full year, maybe we will end up with 6-7% growth rate for Nifty and it can only slowly recover in in this environment.
So, we have seen downgrades in earnings for even 26 and right from 1200 to now 1170, 1160, and then 27, they have ranged from 1300 to 1350. So, the good part is there is a good time correction that we are going through. But we are in a chaotic world.

So, it will be a very slow process where as our earnings recover, as the globe gets better hopefully and then there is more confidence and then the market looks up.

I would want to get a sense on where are the pockets of value for you. Largecaps have corrected considerably, there is a valuation comfort there. Would you be buying into the smids space just yet given the correction that we have seen, would you be wary of it? And if yes, then within the largecaps, what are the sectors that you are looking at?
Sanjay H Parekh: So, our positioning is we are domestic overweight, global underweight. So, our exposure to global like IT is 6.5%. Pharma, we strongly believe will be insulated, but today Trump did make a statement that even that is not insulated, so go through it.

But even if it comes in the measured way, they can may be able to pass on is what we think. So, pharma is again where we have around 3-3.5%. But the rest is all domestic. So, domestic plays, certainly there could be impact on demand, like discretionary space.

If the overall markets are weak, you do see some impact on demand and there, anyway, EVs, you are able to see that growth rate are tepid. Financial are relatively better of. While they also will take some pain because of this rate cuts, because asset repricing happens faster, while a deposit repricing takes time.

So, we will see some more pain there as well in terms of growth rate, but they are on asset quality piece better placed.
So, in this environment, financial looks far better. Telecom is again one area where we are overweight. Capital goods, we are overweight because there again it is more domestic, except of course, the largest name has exposure overseas and there could be some ramification of crude being lower and impact on demand on the largest layer in capital goods. But by and large, we think we will see it through there.

Oil and gas we are underweight, we are zero. FMCG, problem is again quarter is weak and valuations are not cheap. So, we would not want to hide there and that is the overall stance we have.