Devina Mehra Advises Stock Investors To Be ‘Hareish', Not Bullish Or Bearish

As central banks around the globe struggle to fight inflation, First Global's Devina Mehra says investors should be agile.

“This is the time to be, as we always say, that don't be bearish, don't be bullish, be hareish,” Mehra, chairperson and founder at First Global, told BQ Prime's Niraj Shah in an interview. “Move fast but be willing to change direction because life is only about probabilities, and right now the crystal ball is less clear than at many other times when you are in the middle of a cycle that is clear."

Global benchmarks are rattled by inflationary concerns and central banks from India and Europe to the U.S. are increasing rates. The Reserve Bank of India is again expected to hike policy rate this week. That's when the fallout of Russia's invasion of Ukraine threatens to slow down the global economy.

“Inflation appears somewhat persistent," Mehra said. "That will be the overhang on policy and therefore on the markets also, but nothing happens linearly.”

However, the markets have already factored in interest rate hike of 50 basis points, according to Mehra. "The question only is not that how much they will hike this time, it is how many hikes more."

India View

India will continue to outperform world markets as it “started out performing only relatively recently,” according to the managing director of First Global.

“2021 was one year where after a very long time India was in the top 10 markets; it was number six in the major markets which has come after like five to 10 years of being number 25 and number 21 and so on," she said. "That might persist.”

Mehra expects index earnings to come “under pressure” because the “economy is under pressure” from rising interest rates, shrinking GDP and household incomes. She also highlighted rupee depreciation as a “big risk” this year.

Key Themes

Mehra said her the firm continues to “overweight” on IT stocks. “In 2020 when FMCG was the flavor of the month, I had said that why not IT because that has the predictable margins plus a dollar hedge plus not as high returns as FMCG but still reasonably high return ratios and yet the valuations are a fraction.”

While the IT stocks haven't performed well in this calendar year, the rupee depreciation may help boost margins. “I think their user industries will still continue to invest in, at least not cut back and the other problem which had happened for them was employing costs going up and I think we have passed the peak.”

Other themes include textiles, telecom, capital goods and “certain parts” of chemicals which need to be looked at by “dis-aggregating” the sector as some companies witness increase in input cost, she said.

Watch the full conversation here: