Home > Finance > Market: Next bull market in India a couple of quarters away: Vikas Khemani

Market: Next bull market in India a couple of quarters away: Vikas Khemani


What could be in store for next week? In this truncated week, we had a couple of really good trading sessions. Is this a sign of better things to come or is it too early to tell?

It is too early to say anything because the volatility in the market is unprecedented; things are evolving every single day. We have seen some sort of short covering led recovery rally but everybody knows that the economic impact of this pandemic will be far-reaching. Some countries have already announced significant measures to tackle the economic slowdown and India has yet to come out with that. We will have to wait and watch what kind of announcements and measures are being taken to arrest the economic impact, and this, in my opinion, will be very key. There is no doubt that the next two quarters will see a significant drop in economic activity, GDP and tax collections. It is going to be on a negative spiral but if good measures are taken, like the ones in the US, Japan and other parts of the world, we can see that getting arrested but the markets are not coming back in a hurry in my opinion. You will see these kinds of rallies and some kind of correction depending on the news flow. One should not start believing that we are back in the bull market. It will take a couple of quarters of reasonably good consolidation and recoveries from there. I would rather still be more cautious about believing that we are back to the good markets. Yes, there are lots of good quality companies to buy and opportunities; from a macro perspective, a lot of indicators are falling into place and where we are getting closer to the value zone. A lot of interesting franchises are available at very interesting prices. But one has to also keep in mind that risk could appear, you should not believe that risk has gone away and this risk would still be around and one has to come out well-managing risk.

We are seeing a staggering rally within pharma and some of the healthcare names. Have the retail investors already missed the bus? Or do you think because this sector was so under-owned and undervalued, we have only seen a minuscule bit of gains and there is still an opportunity to buy into any of these names?

Pharmaceutical sector has been facing a difficult time for the last five-six years and we have not seen any meaningful returns from that segment. This is predominantly because the international market was in difficulty and not growing. We are beginning to see two things: one is the domestic market have started growing which earlier was facing a little bit of a slowdown and there were pricing issues. So, now that is doing very well over the last couple of years and will continue to grow now. International or developed markets are getting better. There is a lot more hope that you will see pricing and volumes getting better there. There could be some relaxation on the regulatory side. That is the kind of hypothesis market is making and we also believe in that.

Secondly, if you compare with anything else, the valuations are far more attractive. Most of the pharmaceutical companies are trading between 15 to 22 times kind of earnings. If you compare it with any other sector, you will see they are quite expensive. This segment still has a lot more steam left. We are just seeing the beginning of the cycle for pharma. It could last at least three-four years. On every dip, pharma should be bought.

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