Indian investors’ investment approach remain deeply segregated by the eras they started their careers. Those who started before 2000 are concerned about the high valuations in the market. In contrast, those who began after 2010 see the steep multiples and cyclicals of stocks like Asian Paints and DMart as the new norm.
This generational divide shapes their approach to investing and their understanding of market dynamics according to Dhiraj Agarwal, managing director of Ambit Capital Pvt. This split is more than just a matter of perspective, he said.
The post-2010 investors are unfazed by the high valuations, having only witnessed a market where such numbers seem to be the norm. Whereas, those who started earlier remain cautious, struggling to trust the current valuations with their understanding of market fundamentals.
“Both the buckets are confused. The first bucket is not able to wrap their head around the valuation. The second bucket just can’t understand what’s happening to cyclicals and industrials,” Agarwal told NDTV Profit’s Niraj Shah in an interview.
Agarwal also said that investors from the mid-period from 2000 to 2010 hit the sweet spot although the period only produced a handful of them. He further discussed Accenture’s recent guidance reduction and how smaller Indian IT firms are poised to quickly adapt to the AI trend. Agarwal also touched upon the promising valuations in the private banking sector and analysed the ongoing rally in fertiliser stocks.
On Friday, the Nifty IT extended its rally for the fourth consecutive session to hit its highest level in three months after Accenture Plc.’s third quarter results showed that its generative artificial intelligence deals gained steam. All constituents of the index rose, with Persistent Systems Ltd. leading gains with 5.23% intraday jump.
Although Agarwal believes that the days rally is a short-term movement, he sees a lot of smaller IT companies having a head start in the generative AI sector. Agarwal believes that the size of the company and its ability to adapt to new and evolving trends are directly proportional.
“Whether it is the R&D, whether it’s cloud computing, specific sectors, which are doing well, design work and now, probably AI. This has been a trend even in the last few years, that some of the smaller mid sized companies growth rates actually doubled that of the large cap peers,” he said.
“Persistent System and LTI— both these companies have grown at almost double the pace or slightly higher than the large cap peers. So it’s been proven not just in the AI context, but everything new and every smaller area which is evolving in the Indian space,” Agarwal said.
Moving on to the banking sector, Agarwal mentioned that although the current valuations are large, “attractive valuations do not mean that upsides are large,” he cautioned.
Private banks have consolidated a lot of funds in the past three years and are neither cheap nor expensive, he said. “I think it’s a better place to be from an asset allocation perspective, whether they’re private flows or mutual fund flows. Hopefully, large mutual funds will also get some inflows now,” he said.
The hike in minimum support prices, decent cash flow with farmers, and a good monsoon season are all contributing to very strong fertilizer demand. Around 2021, Ambit Investments had a good hold in the super rally of chemical stocks.
“We’ve been thinking for the last six or nine months that this is very close to the bottoming cycle now because we are seeing the surplus capacity getting absorbed and the demand supply situation, which had gone into low supply, and new products starting to get corrected, and it is slightly difficult to time,” the managing director said.
Fertiliser stocks are seemingly at their inflation point, and the investment company is “structurally positive” on the sector. Following nearly two and a half years of fund consolidation, the demand-supply situation has rebalanced, with some sub-segments showing signs of demand revival.
“Speciality chemicals and agro are showing signs of a good demand-supply balance,” he said.
