Don’t be overweight on any sector: Dipan Mehta

The market can correct by 5-10% at any point of time but the next two, three years look very good and markets can easily deliver 15-20% return, says Dipan Mehta, Director, Elixir Equities. Given that it continues to pour in Mumbai at least, are markets in good stead barring the intermittent dips?When I was a teenager, I noticed that when it rains heavily, the stock market does well. June, July and August are great months for the Sensex. Somehow, all the business and trading activities come to a standstill. A lot of outsiders tend to focus on stock trading but this time, monsoons may have come early for the market and I think we are in a great zone at this point of time. The earnings season has been fantastic. We exit with more ideas than when we entered and there is a great deal of optimism which is being backed by solid inflows, globally from FII as well as domestic investors. I have a good feeling about this market. It can correct by 5-10% at any point of time but the next two, three years look very good and markets can easily deliver 15-20% type of returns over that period of time. I am very positive and there is scarcely a sector where the prospects appear to be dim or are in a stagnation phase. By and large, all segments are doing very well. After many years of being in a vicious cycle of one sector pulling the other sector down, we seem to be in a virtuous cycle where one sector will pull the other sector up and so on and so forth. ET Now: Given that the long term fundamentals of the market remain intact, what can those who are looking at fresh entry buy right now? Dipan Mehta: A lot of themes are well discovered but that does not mean that those themes have run out of steam. All these themes are shaping up well and if you get in at the right price, they still have a lot of upside to offer. I think almost every sector is offering good potential and so the best strategy is to diversify the holding into many sectors. There was a time when only software would do well or only pharma would do well and there was a long period of time where just 10 or 12 stocks were keeping the index up and the rest of the market was just correcting. But now, we are in a fantastic phase where almost everything is doing well and multiyear laggard industries like sugar, like capital goods or steel have started to turn around. A lot of sectors are facing structural changes because of the pandemic, because of what is happening in China and now their prospects suddenly look very good for the next two, three years or so. Of course, the government also has done its part in terms of giving incentives to sectors which have been down and under. So, the best strategy in times like these is to diversify the portfolio into many sectors. Do not be overweight in any particular segment or industry and look for good quality stocks and they could be midcaps or large caps. Wherever one finds value, good corporate governance standards and balance sheet, invest there. The returns will be very good. Try not to chase the sector or the scrip of the month. Buy only after doing your homework. Did you have a look at the overall fundamentals and the matrix of Shyam Metalics, Sona Comstar as well as KIMS IPO?From a retail investor perspective, all of these are good and they should certainly apply for it but the allocations are very low. So if you are a very small investor, then only it could make a difference to your portfolio. HNIs go for leverage and apply for these IPOs. I am not sure that is a very good strategy because the interest does not really cover sometimes even the listing gains which they place. I avoid all IPOs unless it is a super IPO, the last one being Nazara Technologies. Most of these other IPOs may have that froth for two-three months but eventually they start to settle down and the existing listing companies that are available will be cheaper than the new IPO listings and will make great returns when you buy on listing or using leverage and paying the interest.

from Economic Times https://bit.ly/2THNjPN
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