'Hindenburg allegations won't stop prevailing bull run in Indian markets'

It's more of a stock specific market rather than sectors now, says Kranthi Bathini, Director-Equity of WealthMills Securities

It was an eventful weekend with the US-based short seller Hindenburg Research alleging Sebi chairperson Madhabi Puri Buch’s involvement in the Adani group matter. KRANTHI BATHINI, director-equity at WealthMills Securities, told Rex Cano in an interview that he still recommends equity as the preferred asset class with significant allocation towards large-cap stocks. Edited excerpts:

What's your interpretation of the latest Hindenburg report? Can the events derail market sentiment if things got uglier?

Things like these, which are either rumours or allegations, at most can impact the market in the short-term; but in the longer-run, Hindenburg's allegations will not stop India's growth story or the prevailing bull-run in the Indian stock market.

 

What's your reading of the current market? Preferred sectors?

The Indian stock market has been resilient and resurgent despite the recent geo-political worries. The market has been able to withstand selling pressure backed by strong domestic liquidity flow and upbeat trading sentiment back home. The recent June 2024 quarter corporate results, too, were without any negative surprises, thus creating a positive outlook on earnings. Sectorally, we prefer private sector banks, healthcare and consumer staples. In the medium-term, it is better to avoid shipping and chemical sectors.

What are the possible risks that could turn investors cautious on Indian stocks?

It seems like the equity investment culture has been developing in India like the West. Most of the young investors, the so-called the generation Z, are looking for long-term investment and are confident of a growth in the Indian economy. DIIs, too, are flushed with liquidity. Any global slowdown, a recession in the US or unstable geo-political environment can make these investors turn cautious towards stock investments.

 

Do you see higher short-term taxes, new trading derivative / F&O norms impacting the market sentiment and volumes?

We do not see much impact on the short-term capital gain tax hike on the market, as equity returns in India are attractive both from a short-term and long-term perspective when compared to other relative asset classes. New F&O trading norms will have some impact on the retail volumes in the derivatives segment, but we need to see at least a couple of quarters to gauge the actual impact.

What would your advice be to investors at such times? Any safe havens where investors can seek refuge?

There is complete divergence in this market. High price-earnings (PE) stocks remain such stratospheric valuations on the back of strong corporate earnings and robust liquidity flows. Mid- and small-cap stocks, too, have been resilient despite high valuations. It’s more of a stock specific market rather than sectors now. Having said that, valuations in the pharma, healthcare, fast moving consumer goods (FMCG) and private bank space seems attractive; whereas, insurance related stocks look reasonably valued from a medium-term perspective, as do defence stocks. Select defence stocks can be accumulated on dips due to their earnings visibility.

In terms of diversification; which are the other assets that one should consider for investments, say for a 3-5 year period?

We would recommend equity as the preferred asset class with significant allocation towards large-cap stocks; and timely rotation in mid-caps/ sectors as the crux to generate alpha in the stock market. That apart, investments in gold and silver can help an investor thrive through a low interest environment.