Samvat 2079: Investing In Volatile Times & Stocks And Sectors To Bet On: Manish Bhandari Exclusive

In this segment of Samvat 2079 with Market Masters, Manish Bhandari, CEO, Vallum Capital Advisors speaks on how to approach the market, investing in volatile times and top sectors and stocks to bet on. Listen in.

David it’s a pleasure having you with us as well thank you very much as always for joining us with all of that perspective as you do well we have manish bhandari ceo of valum capital advisors joining us right here in our studios manish great to have you with us here thank you very much you know before we uh hit air i was telling you i remember exactly a year ago uh

You would come on the program sat right there and you’d basically call the peak for chemical stocks and it as well i remember chemical very starkly because uh i think that that warps the peak uh and and stocks of course did very poorly after that so so what’s on your radar today what’s the expectations on what we expect from you and what our audience yeah it was

Too much of exuberance which was floating around at that point of time and so was the case in the for the i.t companies also and that it played out because you have a stock return as a combination of a good fundamental as well as an evolution so you can have a situation where the evaluations were running quite ahead of the cycle and which was the case today if i

Have to ask if i have to see look back and say that if i have to stretch my imagination and see that what goes in next two or three years that we could be bracing for a flat market and i do i keep on hearing about the debates what you have about a decoupling or recoupling also and i i don’t buy any decoupling theory that yeah you can have a portion of a domestic

Economy which is decoupled from a fundamental point of view but still you have a the economy is actually partly decoupled the market the index absolutely so index don’t don’t decouple you can’t have a situation where you have a worst of the coming through for the developed markets and you are you are expecting different options would you have imagined in your

Lifetime have you ever seen a market it like this whether whether the us is down 25 30 percent and here we are six percent away from all-time highs yeah manish that is incredible isn’t it yeah this is and it’s sustained now we’re almost towards the end of this year now yeah uh so i mean what what do you make of it that is to to the to a limited extent a little bit

Of decoupling maybe not completely yes yes but then you kind of stretch this uh for this argument for next two or three years or so yeah and uh if the index has done well so you have a possibility of time value corrections also and something similar what happened in september 2009 post the recovery which happened in the lehman post the lehman crisis and until 2000

September 2013 or so before the new change of regime happened so those are the also also the possibilities and outcomes which could happen if the index has done too well uh for uh for a period of time so manish let’s take uh the theory that india is not decoupled and it’s going to be impacted by what happens in the us and europe etc now in the past crisis we saw

Some severe eps downgrades out here in india when the global financial crash isis took place india faced eps downgrades of nearly 25 percent in the 2018 uh you know tightening cycle india’s downgrades were about 15 17 so far the eps downgrades have been very limited to a few sectors on the whole maybe two three four percent five percent at best do you get a sense

That if we are going to be impacted and this situation continues for a lot longer we’re in for eps downgrades absolutely you have a you have the exports slowdown which is visible now and if you have a situation look at the backdrop to the whole context today you have a huge dollar crisis globally and now this time it is coupled with the food inflation heading to

A different level altogether so most of the world crisis if you look at global crisis happened when the dollar index has gone up substantially or the dollar shortages have happened in the process if you look at eight or seven or eight or ten crisis in the last 30 40 years or so so what maybe global market is expecting global market is expecting uh dynamite fishing

Which is mean to say that there is a big whale which is sitting and you have you do hear about a crate sways or something else maybe tomorrow or so so till that settle down then the global market doesn’t settle and then for us to expect anything meaningful out of india it won’t happen and what also happen contrary to the old fact is that if you have a high food

Inflation then naturally there will be a demand destruction or above effect on the other sectors and which will get reflected in the i.t or many other sectors which is a discretionary consumption sector also so that will sweep into some kind of uh eps downgrades over a period of time so i won’t be waiting for it to happen and then to react to it you have to take

Some kind of leap of faith in the process hi manish uh thanks so much for coming down to the studio a little away from you guys but you know as you said it as well as chemicals the last time we chatted you said there was some froth that was building and i mean you got it pretty much right because those have been the big underperforming sectors but the other one

That you spoke about was relative if i remember correctly as well as textiles both of them dull sectors you know for the last 10 years or so but suddenly those sectors have come to life do you continue to remain positive on those uh you know sectors and do you believe there is a bit of a catch up for these names so you are making a two cases one is about the business

Case and second thing about the stock price case yes so mostly in the textile you have the spinning companies uh you have a garmenting companies and big brittany are there and the third leg of the textile companies which did well at that point of time were the home textile companies yeah and if i have to look at uh the situation today most of these companies are

Struggling for some quad reason or so you have one of the biggest wealth destruction which is happening globally because of the equity market destruction because of the bond prices destruction so for home textile companies which is a discretionary comes consumption in u.s and the global markets is is really going to be a struggle uh struggle and on a spinning side

You have a problem with the high cotton prices globally the the cotton prices are shooting through roof and then up and down and again maybe at significantly high level so i i don’t see that the textile from a stock market perspective will deliver your super relative returns at this point of time relatively high better returns they don’t want they won’t deliver a

Relatively better let us know the stock market perspective no money shall ask you what about the reality space the real real estate or you know as an asset class or uh you know as from the stock market perspective as well play directly played by the finance teams or play the ancillaries out there real estate yeah so uh good that you still remember last time i did

Had a positive view on the real estate which i changed after after a long period of time but if i have to look at from a real estate stock price or point of view just look at what has happened in last one year you have the one of the biggest inventory sell downs or the clearing of the inventory has happened so you have one of the best return on capital employed

And the rocs and incremental rocs which has already happened to these companies unless until you are able to catch up with a similar kind of earning uh earning trajectory or maybe earning upgrades i don’t see any any great time for the reality stocks to really significantly outperform the business will be good enough from a stock market perspective i don’t think

So it is going to be a is going to be a muted returns for these companies you know you’re sounding cautious but what you said right in the first answer is what scares me you said uh you said we perhaps are in a period like 2009 onwards all the way to late 2013 and we were just looking at the index results at that period right we closed 2010 december 31st 2010 at

About 63 300 and we exited 2013 at about 6300 a 200 basically with 200 point change in in three years is that what i i mean obviously it won’t repeat exactly i don’t know which chart gives you a linear return for the equity market it doesn’t have the chart none of the chart gives your linear returns and that’s what our expectation is every day we come to morning

And say that there’s some linearity of the returns answer is no you have patches and what are equity investor supplies in terms of our owning an asset which is which is expected to deliver your super superlative returns is the volatility in the process or the patients came in the process so you would have or the patches which will which so which are those patches

Let’s get to what you like manish what do you like in the in the market right so i can be great absolutely so i if i understand what are the themes which are now uh where the the sand is shifting is i see a trend where i’m a believer that the venture capital or the startup investing has been seriously challenged and it will get challenged further at least from the

From the stock markdown perspective so who are the going to be the winners when i look at the situation who are going to be the winners are the companies which can really buy out many of these companies uh uh the startup companies and their know-hows and integrate with the brick and motor companies and i saw just yesterday i saw one interesting company a v mart we

Just bought a significant lime road and lime road has been in existence for maybe a decade or so it’s a wonderful tech team and for a brick motor company like a vmart to go back and says okay i want to buy you out completely is that very interesting phenomena and when i look back and say see what marico has done for years and years together they have built a lot

Of competences and so at least so what happens is that if you have a deflated asset prices at least on this tech side you will find many of these companies which will make the crossover and integrate those companies because what happens in tech companies either you have one or two which really holds the rules otherwise for rest of them there’s no value unless but

I don’t understand so how is that a how are you making money in the process i mean you were so you gave it the example of we march yes you’d buy v mart on the back of this oh absolutely absolutely you have an acceleration of the adoption of the tech for the company a brick motor company like v mart by at least they have a leap of at least four or five years they

Would have never had a competence to build this uh themselves and suddenly you have a leaper because you have a value sitting on at this point of time so it will be an individual stock specific game so i don’t see a sector which can really give a shakeouts so this you’ll have to buy once the news comes out right there is no way to know absolutely absolutely you have

To have an evolution that uh so you refer to prashant you refer to a period of 2009 september till 2013 september may be roughly so there were enough companies which gave your superlative returns while index was up just 20 basis point upwards so so it is going to be an index it is going to be the stock uh market pickers paradise it’s not going to be in a you can

Take a big leap of faith on the individual sectors so easily you spoke about a period of high in food inflation as well right that typically means good news for farmers therefore should you look to buy some tractor names or maybe on the fertilizer i’m just trying to understand the kind of theme you know broad based or you give us some names that look attractive to

You yeah you’re putting me in a fix now i’m giving the names but at least yeah very interesting question uh we have one of the best times at least on the on the on the food names which are the the the the the the cotton is up or many of things but what is what has been missed by the overall market and why there’s a rural slowdown so if i have to look back just see

What has happened is that the yields have compressed for many of these right the acreages have compressed we have one of the one of the most intriguing times when you have the once in a century you have a three la nina back to back which only happened third time in the century so what has it impacted is the yield of the crops so finally what farmer is a losing when

You have the volume which goes down so you have to compensate significantly on the price side so it is it is going to be a tug of war in the crops where there is the eels which have gone down and the prices has gone up but yes i i would make a strong case that the agree sector looks interesting uh from the perspective that the india is going to be india subsidized

The agriculture and we are turning out to be a significant agriculture exporter in the world and that’s a that’s a strong currency what we have at this point of time in our hand and there would be companies which will become a beneficiary rice companies uh in the process will become a beneficiary you are doing a huge exports producers you mean producers producers

Yeah at least at least who not fertilizer or green ports or no because the cost of production has gone up gone up substantially for these companies also yeah manish it’s a pleasure thank you so much for dropping by i mean i’m sure nigel or the newsroom and we also have a lot more questions but we’ve been asked to wrap so you must make another visit and we must

Continue this chat uh thank you thank you to you your family your team thanks thank you thank you very much

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Samvat 2079: Investing In Volatile Times & Stocks And Sectors To Bet On: Manish Bhandari Exclusive By CNBC-TV18