Markets are looking good. Are we now in that phase where markets are disregarding bad news and overreacting to good news?
Yes, I think it is a phase of the market. A total lack of interest had started to come into the markets as the markets were languishing in the 15,300- 15,500 range. A feature of this result season was the market was relatively oversold. Ideally good results should be rewarded and bad results punished. But after
was punished for bad results, we have not seen that actually happening. So while reported quite bad results yesterday, the stock is up because of management guidance being slightly bullish.
Right now, the markets are in a phase of glass half full and not in the phase of glass half empty. We will see this play out during this entire result season where the good results will get rewarded and sectors where expectations are low might do better. IndusInd was such a beaten down stock. Even if the results were not great, because they were not bad, the market is rewarding it because of cheap valuation.
How are you looking at the entire capital goods space? L&T is something that we just flagged out and a lot of these other names; , , Cummins are all sitting at 52-week high levels. Is the best over or is an upside possible for some of these counters?
I am quite bullish on the capital goods sector overall because the capital expenditure cycle in India has just started this year or last year. So, some of the stocks like ABB and Siemens, which are the market leaders, have shot up. Now valuations are not so attractive but then on any correction, they look good.
L&T was the only large company which was not participating and now it is participating. It was extraordinarily surprising why it was not and now suddenly it is participating which is good for the overall market as well as the sector as a whole. So I am bullish.
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L&T was like . Despite good news, good orders, decent execution, debt under control, interest cost moderating, it was still not performing. It has started performing now. Even at these prices it is cheap. The peak was around Rs 2,200 some months back. At around Rs 1800, it is 20% off the peak and so I would not be surprised if it eventually reaches its earlier peak in the next one year.
Is this market at its extreme on both sides? Rs 3,000 for Metropolis was extreme but Rs 1500 is also an extreme on the downside?
We would have liked that it is extreme. Normally I would agree with that but then with big players like and announcing that they are getting into diagnostic space, it is going to become tough for many of these companies to increase prices and hold on to margins because when large players come in, to get initial market share they will keep the rates down.
Also, it is not an industry growing at 30-40%. Overall the growth was just 8-10%, the organised sector was taking away market share from the unorganised but with such big organised players coming in, growth and margin become an issue. I would think it could be a value trap and I think people should stay away, watch out for the next two-three quarters, see how it is going and then take a call.