Largecaps have made a roaring comeback and so have the midcaps. How deeply are you invested? Are you sitting on cash, are you participating fully in this very strong rebound?
It is a great matrix for our economy and companies at this point of time. The optimism all around is a great reflection of what is happening on the ground. In terms of the percentage of holding, we are almost 100% invested now. Earlier, we had recommended one should keep some cash in hand and buy the dips. The dip was bought in. The relief in the market and the ease with which the Evergrande fiasco has played out, has given fresh confidence to the financial stocks and today it was a day for finance.
A few of the non-finance stocks like Reliance have gone up but today is a day of finance which has been a laggard in the last couple of months. Now it is a case of binge buying on what was left behind, which in this case were the bank stocks. By and large, they were the ones which were not participating. There is a lot of optimism. We are seeing Covid numbers going down dramatically and therefore the country has remained open.
Globally also, things are opening up in a manner of speaking. After the Evergrande crisis was tackled, VIX came down. So, be invested fully but since dips have to be bought in, keep a little bit of money aside.
How is your portfolio positioned right now? If you are fully invested, how are you getting into the laggard financials? What is the complexion of the largecaps and midcaps you have? Could you share the portfolio construct for the next six, eight, 10 months?
In March, most of our portfolios were devoid of banking stocks. By and large, we are still underweight on banking. I think that is one sector which has got a problem in terms of competition, in terms of demand and the new fintech coming in.
We saw the rally in because it is supposed to be the largest fintech. We are still underweight on banks and that is the biggest sector. We are heavyweight in metals at this point of time; we are also quite heavy on real estate because real estate has concentrated into just four-five companies in a country like India and these will play the India theme.
This kind of monopoly does not exist anywhere in the world except Hong Kong and we know the kind of valuation these companies can get at that point of time. So we are heavy on real estate, metals. We are neutral on FMCG which we are not buying any more though we have got some FMCG stocks in our portfolios.
The stocks we are actively buying are pharma because that is the next stage of the rally that has not performed so well after a stellar run. The only sector we are underweight is banks at this point of time.
Is it the 401K moment of the US that is playing out in India?
Well answer is yes but you it is also showing little ugly realities of which side is that the Indian HSI sector, the MSME sector which was a big generator of revenues and employment. That sector is getting wound up completely. Whoever is making profit, is not investing back in the business but saying let us put it in the stock market.
There is a big movement of people setting up and expanding their businesses in the stock market. That is very good for the stock market but today the bad news for the MSME and the general economy is at a lower level because people are not reinvesting back in the segment. We are now into the festive season, the best consumption season in the country. The next three months will be make or break in terms of the fundamentals though PE expansion can continue.
This market so far has moved primarily on PE expansion. One cannot say earnings have expanded except metal companies but primarily on PE expansion the question is will that get mashed up by the actual consumption growth in the next three months. It is good for the economy that investors are coming into the market but bad that instead of doing business or setting up plants, the smaller sector is investing only in the market and getting away from productive assets.