A stock-specific approach is best suited for the current volatile market environment. That's the word from Raamdeo Agrawal, Joint MD of Motilal Oswal Financial Services. In a freewheeling chat with Bloomberg TV India, Agrawal shares his investment mantra and lists out stocks and sectors that offer super-normal returns.

What do you think about the current global market situation?

I am always optimistic — so is the situation now. You have to understand the current situation. Every time it is new. This time again it has so many flavours — while it looks to be very slow, there is widespread disappointment and global challenges, there are companies which are doing very well. What has happened is that the first decade belonged to the global commodity boom — prices of oil and other things went up by almost 5-6 times in 15 years. From $25 a barrel, oil in 2003 went up to $120-$130 and created global crisis. Nobody knew what the cost of iron ore is — it went up from $20-25 a tonne to $180 and then again to $45-$50. I think that was an era of commodity boom. After 20-25 years, commodities came and redefined what growth means and what the global economy means. It was all over China. Now China emerged, it has become very large economy almost close to the US. In that environment, you made some money, lost some too. I think the second decade is redefined again by completely different phenomenon — the collapse of commodity prices. In India itself, there are lots of large companies ONGC, Tata Steel and Vedanta — all of these companies are getting hurt and their earnings are going down. There are another set of companies which are a bit beneficiary of the same trend like automotive companies whose raw material prices are falling. In case of power companies, their coal and gas prices are falling. If you look at a whole lot of consumer companies, all of their raw material prices are falling. Inflation is low. So we have to look where the opportunity is. Which way the wind is blowing and where exactly the corporate profit growth is happening.

But FMCG companies are struggling. It is not looking as if people are spending whole-heartedly. Isn’t that a problem?

Yes that is true but because the investment growth is not there, job growth is not there, slightly lower inflation is there and the economy is unstable. I don’t know how they calculated this 7.5 per cent growth, but we don’t feel 7.5 per cent growth is there across. Whether it is the cement demand, power demand, auto demand, credit growth, we don’t see 7.5 per cent growth effect.

There must be a different way of calculating and I think they have changed the methods. So I think that is the missing point. I would think it might be 3-4 per cent where things are not going down but are not flying either.

We have started seeing transmission of rate cuts by the banking system. Do you think that is going to push up consumption, investment and demand?

On the monetary policy side, I think we still have some space left. We have a brilliant central banker who has given stability to the local currency, which is important and it has been his first priority. After this, his new challenge would be to bring the growth back. That is work in progress. How fast we can get to sub-5 per cent interest rate. I am sure after some point monetary policy would be fully used to bring back the growth.

Where have you found growth in this current stagnant environment?

We go company-wise. We are not excited about any sector per se. I try to see where growth is imminent like aviation. That is one sector growing at 20-25 per cent and more. There is a boom out there as people prefer this transportation these days. IndiGo is a wonderful company coming in here. It has a huge competitive advantage. In six years, this company from nothing has got 30-35 per cent market shares. So, while everything is very dull something is happening here.

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