2 weeks Ago
Anshul Saigal , Founder, Saigal Capital , says even a bear market is a narrow bull market. So if there are 950 stocks going down, then there will always be 50 stocks going up. History tells us that these are quality businesses where earnings growth is bucking the trend and is going strong despite the markets losing steam.
Now, that is the scenario that has played out, which is 3-5% market down. Saigal says he would look for companies with a relative certainty of growth. Seems like the first bout of profit took place yesterday after a fabulous September? Anshul Saigal: Yes, the first real correction that we have seen in the markets after a really strong month.
But that aside, if we look at the longer-term picture and we go back to Covid times, from Covid, towards the end of Covid and the start of the Covid lockdowns, we saw that the markets went one way and up, whether it was smallcaps, midcaps or largecaps, they just went one way and up after the crack in March 2020 in the markets. We witnessed FIIs coming in with great gusto between April of 2020, all the way till 2021 November. And thereafter, in 2022, we witnessed a cool-off in the markets, particularly the Small Cap Index from the top to bottom fell at one point as much as 29%, ending calendar year 22 at about 13-14% down.
This fall was on the back of FIIs taking money out of the markets at that time. Come 2023, we witnessed that investors came back in the markets, particularly the HNIs, they came back in the market with great gusto and they started buying in the markets. As a result, between 2023 and 2024, the Small and Mid Cap Indices went up as much as 70-80% and so the broad-based rally that we have seen in 2023, 2024 has been just tremendous.
Where we stand today is a point where the HNIs, that is the high net worth individuals , are not in an investment phase, they are in a phase where they want to book the humongous profits that they made in this period. Many stocks are up 5, 10 times in the last one-and-a-half odd years. On the other hand, the FIIs have been out of the market for most of this year and only in the month of September have they come in with some sort of inkling to buy India.
Now, this is an interesting setup where because of this sort of dichotomy in flows, we may see next year being a tough year or a consolidation year for small and midcaps, while the largecaps continue to hold where they are, they are relatively placed more attractively versus small and midcaps. So we may even see largecaps going up. But because the flows into small and midcaps are going to be tepid, we may see consolidation in that area of the market over the next year.
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And history tells us that mostly these are quality businesses where earnings growth is bucking the trend and is really going strong despite the markets losing steam. Now, that is the scenario that has played out, which is 3-5% market down, I would look for companies where I have a relative certainty of growth. Of course, there is no 100% certainty, but with a high probability, I can estimate the next one to two years of earnings growing well.
I think that there are multiple pockets in the markets where this can happen. Manufacturing, capital goods. In general, media as a space will also look quite attractive going forward.
The rural economy will pick up slowly over the next few years. You Might Also Like: Nifty eyeing 27,000-level in short term, 3 stock ideas for the week from Rupak De Even the FMCG space , which has consolidated for the better part of the last two-three years, looks interesting. Banking at this time is quite reasonable as regards the growth that we anticipate over the next two years.
So, these are some pockets that I will be seeking opportunities in and it will be a much more stock specific approach rather than a top-down sector specific approach that I will be taking. (You can now subscribe to our ETMarkets WhatsApp channel ).
