Give us a general sense of where you see the markets headed, given that we are now in the sixth or even the seventh consecutive phase of consolidation, depending on how the market opens today. What is the general sentiment you are seeing in the market right now? Are there any sectors where you believe the correction has been sufficient to merit a fresh look, in terms of how attractive they appear?
Ambareesh Baliga: Sentiment is clearly weak right now. If I’m not mistaken, this is the first time in close to a decade that we have seen the markets slip for six weeks in a row — not a single week in the last six has shown an uptick. So, from that perspective, the sentiment is weak.
Technically, if the market slips below 24,250, we could possibly see a decent downside because that level might trigger some panic selling. Although there is a decent amount of liquidity, psychologically people may get tired and panic if the market falls below 24,250. So, that is one key level to watch out for.
Regarding tariffs, what’s emerging is that GDP may not fall more than about 0.35% to 0.6% — this is a very broad estimate. But digging deeper, certain sectors will be affected significantly. These include textiles, gems and jewellery to some extent, seafood, and some engineering companies that depend on US exports but don’t have manufacturing facilities in the US.
You really cannot generalize across sectors. For example, among auto ancillaries, several large companies have operations in Europe, Mexico, and the US, so they may not be as affected. But those without such presence will be impacted, and this could have long-term effects since shifting operations or gaining new customers doesn’t happen overnight.
While some government schemes might provide positive sentiment, these effects won’t immediately reflect on the balance sheets. These are the specific sectors and stocks to watch carefully.Otherwise, if the market holds these levels, we could see a decent bounce back after this fall. But if it breaks down further, the next support level is around 23,500.
What is your takeaway on SBI and Tata Motors? Tata Motors’ PV figures have been quite disappointing, but what about SBI? Would you call it neutral?
Ambareesh Baliga: Yes, I would say SBI is neutral. I don’t expect much upside over the next two to three quarters. At the same time, for banks overall, we need to consider their exposure to the textile sector, since that could be affected. Canara Bank has decent exposure to textiles, SBI to some extent, but I don’t think SBI will be affected significantly.
Regarding Tata Motors, yes, the results were disappointing, but the stock has already corrected significantly, so I don’t see much downside from here.
What about the capital goods space? Recently, companies like Cummins and Siemens have reported strong earnings. What is your overall view of the sector and your preferred picks right now?
Ambareesh Baliga: In the capital goods space, yes, I have been positive. One stock you didn’t mention is BHEL, where earnings were not up to the mark. We could see further downside there — maybe another Rs 30-40 from current levels — but it could become a buy at those levels.
On the other hand, Siemens is a good buy even at current levels. ABB is another stock where we could see a decent upside, possibly around 20-25% over the next nine months.
What is your view on the fundamentals of NBFCs? If you zoom out and compare NBFCs, PSU banks, and private banks, where would you place your bets in the financial sector?
Ambareesh Baliga: Within NBFCs, you can divide them into two groups. One group is mostly gold loan companies; they should continue doing decently well, although interest margins might compress somewhat, as Manappuram’s management has mentioned. Overall, the quality of their loan book shouldn’t be significantly affected.
The other group of NBFCs, however, could face pain in the retail loan segment, with a possibility of rising NPAs, so investors need to be cautious there.
Comparing private sector banks and PSUs, I expect PSU banks to do decently well. I see credit growth picking up strongly, especially in the corporate segment, as the government may push for increased capex because of tariffs. PSU banks are likely to benefit from this. Over the next two to three quarters, we should see a decent amount of credit growth.