Investors should adopt a barbell approach by having cyclicals as well as growth sectors in their portfolios, says global investment strategist Jonathan Schiessl in this interview. Edited excerpts:
It seems like a rising tide is lifting all boats. FIIs have poured more than Rs 3,000 crore in Indian equities in just four trading sessions. You think there is a reason to believe that the momentum is going to stay intact?
The dollar has been quite weak. So a lot of developed market investors are looking to reposition their portfolios. Emerging markets are looking pretty good. India looks a little bit on the pricey side as compared to some other emerging markets. When big foreign money moves into emerging markets, India will get its share of cash. So I think the outlook looks pretty okay.
Do believe that the market is getting a little pricey? Where do you think there are pockets of froth building up and where is it that you would recommend investors to take some profits off the table?
Well, I guess the issue is time frame. The market is quite an interesting one globally at the moment. In the US and China, tech stocks underperformed for a few months. We are probably getting to a point where the tech sector is beginning to look interesting again, particularly in western markets. We have been asking investors to adopt a barbell approach. You should have some value on the cyclical side, but you should also have some growth sectors as well. Valuations are headwinds in the short-term, but for anybody investing for the medium or long term that should not be an issue.
What is your view on IT midcap stocks?
IT midcap looks like a good space. It has done well. Structurally as well as from a trend perspective, it is a sector which will continue to see good growth. In the midcap space, you have to do more homework to understand the specialisation and strength of the company. In the short-term, rupee appreciation might be a headwind.
What is your own sense on the recovery in commercial vehicles space?
There is an argument that you have had a couple of bad years and there is some pent-up demand. I am not sure of a very strong short-term recovery. I think it will be more gradual because in the short-term there are headwinds from rising raw material prices and energy prices. It is going to be difficult for all commercial vehicles operators, particularly truck makers, to push up prices. There is some latent demand in the sector.
You think it will be the same for passenger vehicles too?
Yes. The sector has taken a hit. The bad news is already (reflected) in the stock prices. The numbers were also very light. Again, there will be latent demand but it will take time to come through.
Is there anything interesting within the metals basket that catches your eye?
It has seen quite a significant move already. So the question is whether it is sustainable or not. Is this really a part of the new super cycle? We cannot say with utter confidence that we are in a new commodity super cycle or this is more related to pent-up demand from COVID issues. If the dollar weakens, then commodities and gold look quite interesting. In addition to that, there are certain major economies in the world that are looking to up infrastructure spend.
Most of the steel space looks quite interesting. Copper and some precious metals also look pretty good.