The Hindu Business Line : Time to suspend decoupling theory, says Notz Stucki

Mr Anil Singhvi, Partner at Notz Stucki, said he has maintained for long that the decoupling theory does not work. He said it’s a global village and the meltdown is because of global cues, reports CNBC-TV18.

Excerpts from CNBC-TV18’s exclusive interview with Mr Anil Singhvi:

You have been a bit circumspect about the market. But has it reached a level where you see some value or do you see more downside here?

For quite some time I have been saying that this decoupling theory will not work. I think we live in a global village where if there is an army strike we all are going to get into a problem. Similar things have happened, we in fact are seeing a meltdown here because of global cues and not because of the local problems. But I think that still we need to see some more corrections coming in because excesses were there between November and December and in those two months, people were buying stocks as if they were no tomorrow and last week they sold as if there is no tomorrow. So you are going to see both reactions, which were there earlier for the bull phase and now we are going to see for a bear phase. So I think we are still set to see some more blood on the street.

Give us one word on the space that has troubled the market the most these past few months — power — and how you would approach that whole lot now?

Power stocks to me is like fixed income bonds, I do not know why the stock market was looking up when in the power stocks there is so much of euphoria and I think now when the correction is coming in, people seem to be saying that power stocks look cheap but I think that they will look still more cheaper than what they are today. They will correct more because in most segments of power you get a very fixed return, you do not get any huge upside on that. And replacement values — if you look at it, most power stocks are still trading at one-and-a-half to two times of the replacement values, which I do not think would find any buyers or justifications.

How would you approach the entire financial space now, not so much the banks, but the way a couple of the brokerages have seen buying, and some of these NBFCs as well, anything that you would buy from there?

No, I do not think today we are looking at any of the financial services sector because I still believe that they are highly overpriced. They all seem to be talking about unlocking value and I really hate this term called ‘unlocking values’. Finally investors should be able to see the value in the stock — I do not think company should be really doing the amalgamations, de-mergers to unlock values. I think in the financial services market, particularly the broking houses and all still are quite overvalued.

Another sector, which I feel is overvalued, is real estate. I think too much of excesses have come in the real estate sector and people talk about land bank and NAV and I think it is like bank having a fixed deposit and saying that we have a huge fixed deposit but I do not have any borrower for the money.

A similar kind of situation will happen with these real estate companies: they will have land bank with no buyers for the finished products.

Where do you see value now? Can you think of two-three spaces where because of the overall market fall stock prices have got battered more than they deserve to, which presents buying opportunity?

I think IT is one area where people have gone unnecessarily bearish on. I still think that the IT industry will do much better than what most people expect so I believe that IT would be one area. Second is cement. I still think most cement plays are available at single digit P/E. So IT, cement and to some extent autos — these are three sectors are where I believe that investors’ expectations are very low and I think they will have much better surprises and pleasant ones, in fact.

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