Enam Holdings' Sridhar Sivaram Picks Global Liquidity Rally Bets

While a global liquidity rally is underway after the market corrected in 2022 over fear of inflation, the economic conditions are not conducive for a sustained bull run, according to Sridhar Sivaram of Enam Holdings Pvt.

The current risk-on rally saw markets across the globe perform really well, Sivaram, investment director at Enam Holdings, told BQ Prime's Niraj Shah in an interview.

The Nasdaq surged over 35%, while countries like South Korea and Taiwan saw a rally of about 20%. India participated in this rally as well but not to the extent of the other markets, Sivaram said.

While only seven to eight stocks contributed to the exponential rise in Nasdaq, most sectors in India were responsible for the rally in the benchmark NSE Nifty 50, he said.

This broad participation from most sectors and stocks was a healthy sign for the country, according to him. India's participation in this rally might continue for another three to six months as the impact of the sudden jump in interest rates and the reduction in liquidity takes some time to flow through into the real economy, he said.

"Are these economic conditions great for a sustained bull market? I would say no, because we are still seeing rate hikes in the U.S. Even in India, we will not see a rate cut at least for another 12 months," he said.

Sivaram highlighted that there are several headwinds if one looks at the broad macro picture globally and for India. "But currently, we have a strong risk-on rally and India is participating," he said. "This is the time to relook at your portfolio."

If there was a global correction in markets, India would also correct, he said. Sivaram mentioned the U.S. banking crisis in March, during which India did reasonably well. Indian banks did not correct as much as many of the other banks in the emerging markets and the U.S., he said.

Sivaram doesn't see any reason why India would not do well over the next decade. "It will continue its outperformance because we have seen a lot of structural reforms in India in the last five years, the benefit of which we will see over the next 10 years."

However, he is looking to exit the information technology sector. "It is a call that has gone wrong." Despite the I.T. sector’s results not being great, the stocks in the sector performed very well, he said.

Generative artificial intelligence is disrupting the I.T. sector as 30% of the country's I.T. force falls within the 1-3 years' experience bracket, which means that they work at the lower end of I.T. and software development, according to Sivaram.

A lot of this work was coding and "as we know, one of the disruptions that generative AI has got in, is the coding space", he said.

Sivaram said the I.T. sector is expected to have a follow-on impact on the manufacturing sector. According to him, a lot of the engineers who might not be required in the software space might find utility in the manufacturing space.

The electronic manufacturing segment is the most impressive, he said. "Apple itself has an ambition of $100 billion exports in the next 2-3 years," he said. "They are not even $10 billion today and most of it is in the unlisted space."

Sivaram also considers the defence sector attractive due to the Union government’s offset policy, which requires that 30% of the manufacturing of a global order has to shift to India over a period.

Over the last 3-4 years, the country has pushed the pedal to enforce some of these contracts, which resulted in a lot of the global majors setting up their manufacturing hub in India, he said. "As the ecosystem starts getting built, we will see more and more manufacturing happening in India."

Sivaram considers the PSU basket as the dark horse. While such stocks only had a "deep value" initially, now, they may see growth coming in, he said. "We think that there is still a lot of opportunity there."