So, one needs to be a bit careful and I have seen that in times like this you just wait for a few more weeks or months and once you know exactly which way the wind is blowing, then it is better to take decisions on your portfolio.
Help us with your take on Titan because what we have seen in the quarter gone by the company did register a double-digit growth across segments, but they are already talking about a sluggish consumer demand at least at the lower price point owing to the high gold prices. But the market is definitely looking forward and trying to factor in what will happen in the next couple of quarters. Do you believe Titan trading around 50 odd PE multiple one-year forward, this sort of a valuation is sustainable in this market and what is your look out in the Q4 numbers?Dipan Mehta: So, disclosure, we are invested in Titan and even at these levels and despite a positive kind of a report for the quarter, I am a bit sceptical. Overall, my view is again getting a bit negative on the market because of the uncertainty and already Titan is seeing slower growth rates going forward. So, I would just wait and watch. I do not think I am looking at selling my holdings in Titan as should other shareholders because end of the day it is a secular growth story. And if you have a longer-term horizon, three to five years or so, this company can still outperform. But from a fresh investment perspective, I would put a pause on Titan and actually every stock also. I think just wait and watch and put a pause on fresh buying. Investors need to be extremely cautious in these kind of times.
Just want to get back to the point that you were making earlier, that this is a sell-on-rise market. Do you sense that one should just be sitting on cash and get into capital protection mode till the dust settles down on which way this entire tariff situation pans out.Dipan Mehta: Yes, absolutely. You summed it up pretty well that first of all, if there is a pullback or if the US steps down on its demand for reciprocal tariffs, if there is a pause for 90 days, all of these things will mean the stock prices may rally. But one thing is certain that we are going to be living in an era where there will be tariffs on US exports and that cannot be good news for US consumers and for the rest of the world as well because eventually it will lead to a global slowdown and that is going to impact India as well.
So, I am seeing the events how they are unfolding and I see a lot of similarity to 2008 which is why I look back on my experience in 2008 and at that point of time if I had the wisdom of an event earlier, I would certainly have gone lighter and had more cash in the portfolio.
And unless there is a go back to zero customs duty, I would still feel that investors need to get into capital protection mode at this point of time, but it is a very-very fluid situation and who knows how accurately it will play out. But if there are going to be tariffs, there is going to be a recession. If there is a recession, then stock prices will go down, that is the simple equation.
Soon, we are going to be stepping into earnings season. In fact, this week itself, you have got IT trickling in. You think from now up until say the next one or two months one should use this as a time to do your homework, earnings will be out, assess where you have growth and comfort in valuations, get your buying list ready.Dipan Mehta: No, I think that my consistent message is that unless we have a complete resolution on these tariffs, we are in for very-very tough times. I was there in 2008 and this is exactly what happened, the Lehman Brothers crisis started and we thought that okay India is insulated, it would not be impacted, nobody expected such a deep recession, but it actually happened. At that point of time, what was the situation that the global financial and banking system just kind of froze and this time what is happening is complete paralysis of the global trade. So, in such a situation, you are bound to have a recession.
Look at what all the economists are saying, all the market gurus are saying that you are heading for a recession and when you head for a global recession or a slowdown, India will not be spared, so do not be in a hurry to buy.
In fact, have a strong look at your portfolio and see where all you can liquidate, that is what I am trying to do just now. I am having to look at my portfolio. If we have any tech shares, I am trying to sell; any company which has too much exposure to exports not just to US, exports to any market, you need to sell or go underweight over there.
Just hold on to the cash as much as you can and do not get fooled by these rallies which come through, they are opportunities to lighten up on positions because if there is going to be a recession which is getting more and more likely, then it may be a long one. It usually lasts for two to four quarters, maybe even longer, markets may bottom up before that but it can be quite brutal.
And I have seen two-three of these corrections in the market on the back of a global geopolitical or a financial situation and from my experience I can tell you it is not pretty. So, investors should be extremely cautious. Do not make buying lists just now. Do not get fooled by 25-30% drop in stock prices also. They can go down even further. And now is the time to shore up on the cash levels.
Just to the point that you were making that liquidate wherever, whatever would have a global exposure in your portfolio. But what about the domestic facing sectors in one’s core portfolio? How is it that you should be analysing them?Dipan Mehta: First of all, the export-oriented businesses, for them, it is a double whammy. So, earnings also will go down and PE multiple also will compress. For domestic India-centric businesses, maybe earnings may not go down as much, but look overall consumption and sentiment in India certainly will get affected.
But more importantly, you may see valuations being compressed and that is really exactly the issue over here that although the business, like for example, banks and NBFCs we were quite positive on them and they may certainly do well over the next few quarters, RBI is going on reducing interest rates, liquidity has improved, but the valuation multiples will compress for banks and NBFCs and this is true for even engineering construction companies. It may be true even for retail companies, for hospitality, hotels.
So, when you have a risk off trade as strong as it is just now, then you have to factor in a sharp correction in PE multiples as well. So, earnings is not so much of an issue over here as much as that is the compression of the PE multiples.
