Why Ravi Dharamshi Is Bullish In A Narrow Stock Market
The corporate balance sheet has never been so strong and healthy, said Ravi Dharamshi
While Indian equity benchmarks are scaling new highs, the momentum is not broad-based. Yet, Ravi Dharamshi of ValueQuest Investment Advisors, is bullish on domestic markets.
"The biggest reason we are bullish on this market is because balance sheets are not a problem," Dharamshi told BQ Prime's Niraj Shah in an interview. "The corporate balance sheet has never been so strong and healthy."
While earnings growth has paused because of margin pressure in the last couple of quarters, India's profit cycle is still expanding, the chief investment officer at ValueQuest said. Growth, too, is not a problem as companies have a full order book and the "confidence to invest in the future".
Key Themes
Dharamshi sees opportunity emerging in export-oriented sectors like information and technology as "valuation has become much more attractive".
"The pain over there is going to last a little bit longer with a further 10%–20% valuation correction," he said. "A couple of more quarters down the line will bring more opportunity."
The pharma sector is facing a structural challenge with major pricing pressure and valuations have "almost reached rock bottom". "This could be a space to look at, but yet we are not seeing any catalyst emerge for the value to correct itself," Dharamshi said.
Around 90% of the ValueQuest portfolio, which benchmarks itself against BSE 500, is oriented towards domestic companies from financial services, manufacturing and consumer, and a bit of the ancillary and real estate sectors, according to Dharamshi.
"The old portfolio definitely stays invested there. The new money that is coming is being distributed in the same proportion, and we are not deploying more money as yet," he said.
The consumer goods sector became "slightly more attractive" despite margin pressure because of the recovering rural market. Still, FMCG is not the "space that excites us. We are more excited about footwear retail and food retail", Dharamshi said.
He advises caution about specialty chemicals since the valuations are on the higher side. "The story on the chemical side remains very attractive from a five-year point of view."