Indian shares are unlikely to breach the low levels hit in the months of July and August, said Hiren Ved, director and chief investment office, Alchemy Capital Management. The two government measures—corporate tax cuts and move on privatisation—were not expected by the market, he said in an interview with CNBC-TV18.
Explaining the recent losses in the markets, Ved said, "We still have to negotiate some difficult aspects in the economy. We continue to see shocks from NBFCs and there is continuous pressure on real estate as a whole sector and to negotiate all that it will take bit of time."
According to him, the biggest benefit of tax cuts will go to largecap Nifty companies and it would largely be financials and FMCG companies among others.
“Although autos may have bottomed out, it would still take time for them to start moving. They will have to consolidate here for some time,” he said, adding that one may see pressure on margins for autos because they may have to give higher discounts to clear up the inventory. Once BS-VI comes into play and all the inventory is out of the system, margins may normalize, he said.
Alchemy Capital is a buyer of consumer companies despite valuations, he said, because of the straight tax benefit and good monsoons. So, the benefits of both this allow more space for them to go, he said.
When asked about their approach to banks, he said there are two things that will matter in financials – one is how much of the credit quality stress is already recognized by market and two, what is your capital position.
“Only those financials who have the ability to raise capital at attractive rates and where incremental stress book is a very small part of their total book, they should be fine and the rest will struggle,” he added.
With regards to paint companies, they own Berger Paints and Asian Paints, said Ved.
Outside of private banks and consumer space, one would have to be stock specific, he said, adding that there are opportunities in spaces like services, high quality midcaps – some auto ancillaries with domestic and export leg and, liquor companies look good.
First Published: IST