When we spoke a few months ago you were bullish about it. You were bullish on cement. You were bullish in FMCG. Are those calls still unharmed? They’re contracalls, but are you still playing?
Niresh Shah: That’s why we are a more bullish Midcap IT company, who believes that we are leveraging AI more quickly and providing our customers with cheaper and better solutions. At FMCG, it is headed towards consumer discretion rather than consumer staples. Roti, Kapada, Makaan Ab Sab Logo ne regay kar liya hai, The Healthcare, Travel, Tourism, Hotel, QSR I focus more on things like that.
With tax refunds being rolled out and it’s all repetitive, we remain bullish on consumer discretion. Then there will be a reduction in EMI burdens thanks to a 1% interest rate cut, and eventually sometime in 2027, there will be an eighth pay committee to put money into the pockets of central government employees.
Putting this money together in the consumer’s pocket will require consumer discretionary space to move more than expected. As a result, we continue to remain bullish on sectors such as MidCap IT, consumer discretion, banking and financial services, and chemicals.
Two phenomena unfolding in the market. a) There was a gust of wind from the IPO. So, as of last week, I had over 20 IPOs, as well as both mainboards and small businesses. Types of valuation a) they are coming, and b) other trends in the market can be a sudden discount on trading in this promoter block and offloading stocks occurring, and sometimes market valuations. What are you making it?
Niresh Shah: So, one is grateful to promoters and IPO companies because they provide the supply. If they didn’t provide the supply, we don’t know if we’re in a position to buy the market. Secondly, in IPOS, one must be highly selective. Just because your company’s IPO is coming, you won’t go there and invest. If there is a better version available in the secondary market, why do you enter the IPO? So it’s very selective in IPOs and, fortunately, many IPOs are coming. Not all of them will be successful. Not all of them become value creators for shareholders. Undoubtedly, as a mutual fund, we are approached by all IPO companies.
We have to put our resources in place and we have to work hard to get the right company. Promoter sales, OFS, big discounts, that’s the market. We don’t agree with the promoters or they don’t give us any favors. We must come at a fair price in our opinion for the transaction to be made. Many promoters are undoubtedly considering their valuations and selling them in the market, but the majority of them have returned to the market via PMS, AIF, mutual funds, family offices and direct investments. So, in a sense, when looking at one side of the equation, remember that here is the second aspect of the equation.
Let’s take a look at two differentiators. The differentiators from the last quarter to this quarter had a good monsoon so far. The monsoon comes early. The rainfall distribution was fantastic. The second is rich fluidity. In fact, liquidity is currently surplus. These are two factors that we didn’t play in the last quarter. Now they’re playing in June. When will the impact of this appear to be revenue?
Niresh Shah: So, while monsoon is sufficient, it is unlikely to appear by December 25th. July will be a month in which rain is extremely important in terms of distribution, spatial distribution and quantum. By the time Kharif crops get into action, production volumes for September-December, festival season and Kharif season should be combined. In terms of liquidity, RBI plays on the front foot in terms of providing liquidity, inserting some core equivalent liquidity over 10 laks, but credit growth remains in single digits. It’s not even in double digits. So fluidity is like dam water and is very good. It gives confidence. But in the end, the water should flow into the faucet. The pipe should be clear. And unless we see the investment cycle recovering, the benefits of liquidity may not appear to the economy as we would like to see. But remember that it is always important to put water in the dam. Expect the dam to flow into the tap, not to have no water.
If you have to ask you what an ideal investor strategy should be at this point, given the market is so close to the highest level ever. Nifty Bank is also traded at the highest level ever. An ideal portfolio is something like an ideal portfolio given the positive aspects of revenue expectations in the market. We live in an uncertain geopolitical environment, and highly selected sectors give you the comfort of its assessment and growth. What advice do you have for investors?
Niresh Shah: First and foremost, investors are easing their expectations of return. It is unlikely that returns over the past five years will be repeated over the next two to three years. The market is either quite valuable or quite valuable, and it is unlikely that a valuation from the market will occur, so returns from the market will link to revenue growth, and the growth of the opinion revenue growth may be at double digits low. So, first and foremost, relax your return expectations. Apart from the second equity, there are asset classes, REITs, invitations, debts, mutual funds, performance credits, AIFs, precious metals, indexes, or ETFs. Obviously, you need to diversify. Maintain asset allocation across debt, fairness, products and real estate. Don’t justify everything because equity over the past five years has been a huge benefit. Therefore, we follow the dharma of asset allocation and ease the expectations of returns. That’s a recommendation for investors.
But if you really had to stick your neck out, which of these asset classes would be the best performer of the year, would you think?
Niresh Shah: Therefore, making short-term calls on a one-year basis is always difficult. But let me say that the expected returns from all these asset classes are likely to be in a very narrow range over the next year. One is not on the X side. The other is on the Y side. The gaps become very narrow, so maintaining asset allocation is extremely important.
