As the Indian equities tumbled amid the coronavirus pandemic, investment adviser Milind Karmarkar said this was an opportunity to buy good quality stocks that have fallen to a reasonable level.
“Companies which were trading at a multiple of 50x for FY22 are now trading at a multiple of 25x. If these companies are capable of growing at 25-30 percent, barring the six months, then probably they have bottomed out,” Karmarkar, director and senior fund manager at Dalal & Broacha Stock Broking, told BloombergQuint in an interview. “But again markets are all about greed and fear. It's difficult to take a call on the markets, but for good quality stocks, which have fallen to reasonable levels, this is the time to start nibbling in these stocks.”
The Indian equities have tracked the worst global selloff since the 2008 crisis as the novel virus outbreak threatened to push the world into a recession. Both Sensex and Nifty 50 have tumbled more than 35 percent from their January peaks as Covid-19 cases in India rose to over 1,000, including 29 deaths.
“Price action is one thing and the second is how the company is likely to do going forward,” Karmakar said. “Look at companies where balance sheet is really strong. I wouldn't mind starting to accumulate consumer companies with strong balance sheet now when it comes to investing for long term. But it has to be a very slow process.”
Here are the other key highlights from the conversation:
- The prices at which consumer stocks have gone, advise is to sit tight.
- Consumption space will return and return fast. Non-discretionary will come up first and retail-centric banks will continue to do well. There is an opportunity to buy as many companies in these segments have come down.
- What is crucial is to look at long-term growth prospects. Look at businesses and how long they can grow at reasonable levels.
- Look at financials from a going concern basis. Don't see any major impact in longer period.
- If the virus prolongs beyond May 15 there might be impact on the retail-focused finance companies.
- Financials segment is tricky but if you are getting 1-1.5 times of the book value (excluding the impact of NPAs), then it's a reasonable time to buy.
- Quite positive that there will a cure within the next six months.
Watch the full interview here:
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