Time to diversify portfolio, not bet on equity and real estate alone: Saurabh Mukherjea, Ambit Capital

 "We have almost a polar fascination, either we are in real estate or we swing the other extreme and go to equities. The in-between asset class which is what fixed income products are I do not think have been adequately explored"

I would have started off with your views on the economy but since we were just talking to a pharma company and since pharma is not such great news let me just start off with that. The space is in a bit of conundrum. There are pockets which are seeing lots of pressure. There are some sell -out that we are seeing and between all of that, we have seen some very interesting listing. So. it is an active space. There’s a lot of interest but a cloud over how the performance will be. What is your though ..

The FDA issues are what they are. I do not think any analyst can pretend to fully understand exactly how much longer the FDA will have to work on the Indian pharma companies to force them to clean their act up. What is very clear is that the American economy has been recovering for a year and a half. In all likelihood, Donald Trump’s fiscal stimulus in February will give the American economy another leg up. The Japanese economy also seems to be recovering, ditto for Germany and to the extent we  ..

More than IT, historical records suggest Indian pharma gives you a linkage to growth recoveries in the west and in that regard not only is the pharma sector reasonably well insulated from demonetisations aftermath but also it gives you a positive western economic recovery link. So of all the sectors in India if you ask me, this is one sector where there are large liquid companies reasonably well run from an accounting perspective and leaving aside FDA threat, a sector which is in good shape. Whi ..

More than IT, historical records suggest Indian pharma gives you a linkage to growth recoveries in the west and in that regard not only is the pharma sector reasonably well insulated from demonetisations aftermath but also it gives you a positive western economic recovery link. So of all the sectors in India if you ask me, this is one sector where there are large liquid companies reasonably well run from an accounting perspective and leaving aside FDA threat, a sector which is in good shape. Whi ..

Firstly, if you look at the overall index level, it has been a long time since India has delivered at the index level. So this combination of weak economic growth in India or weakening economic growth in India alongside a fairly strong American recovery plus a rise in American bond yields t is unlikely. That backdrop, will lead to the index showing runaway performance. At the index level for a long time, now that the market simply has delivered so it has been a stock pickers’ market. Historicall ..

I do not think the full impact of demonetisation has been appreciated by the stock market. Leaving aside this quarter’s earnings which will obviously be badly damaged by demonetisation, even Q4 and potentially Q1 next year will have demonetisation related impact. I will say it is worth being cautious even on small and midcaps and leaving aside small pockets export centric pockets such as pharma, such as some elements of manufacturing which have an export leg to it I think leaving those pockets a ..

My reckoning is for three-four months, FII outflows will continue. During that period, id DII inflows continue to be as healthy as they have been over the last 12 months then the market could potentially hold up and broadly at current levels say 26000-27000 on the Sensex.

But my fear is that if some stage over the next three-four months, the DII also will dry up as the domestic retail investor will become circumspect because he can see what is happening out there in the economy. If the domestic retail investor pulls back and the FII money continues to go out, then you do have a potential for say 10% downside in this market over the next six months.
It is not as if there are two separate hermetically sealed compartments, they are almost joined at the hip. The markets are underestimating a) the government’s willingness to go hammer and tongs at the black economy and b) the amount of interlinkage that is black and white and that obviously affects the economy. For example, non-bank lenders who are lending to companies whose cash flows are potentially in surrogate income rather than real income. Similarly, listed entities who are outsourcing ma ..

I think you make actually a very valid point there. Historically or if you take India over the last 10-15 years, our main concern has been Indian investors portfolio. It simply has too much real estate in it and it has too little equities, too little of say a fixed income instruments in it.

Over the last year-year and a half, it has become reasonably evident that real estate is not really going to be a great idea in terms of long term returns in the portfolio. Investors have started swi ..

[sOURCE:-ET]