Market Guru in talk with RJ Salil Acharya of Radio City: People can invest in Capital Goods, Defence, Paper And Sugar stocks when the market falls

Sugar stocks should be termed as ethanol stocks and green energy stocks, as the higher crude is, the higher amount of ethanol will be mixed, to bring down our cost. It is a story of ethanol due to which sugar stocks are buzzing, says Anil Singhvi, Managing Editor, Zee Business. During a candid radio podcast, 'Kadak Currency’, with RJ Salil Acharya, Radio City, 91.1 FM, Mumbai, Mr Singhvi said people looking forward to investing in the stocks should wait for a correction in the market, due to an unknown factor, and then can buy manufacturing-related stocks, defence shares, paper stocks and sugar stocks.

RJ Salil at the start of the podcast, 'Kadak Currency' said unable to understand what to do, i.e. it will be made or fall or should be created or should stay away as the global signs are different while India is running very differently. However, the signs are completely different from the world and we have said earlier as well that we cannot stay insulated or stay away from the global factors. So, there was a big move and people had expected that some changes will be brought to the interest rates to tackle the inflation that is increasing at a continuous pace. What is your take on this stance of the Reserve Bank of India (RBI) as well as the ongoing global tensions on income tax? Mr Singhvi said, there are two things (i) inflation is not limited just to India but it is spread across the world. American inflation has climbed to its highest level in 40 years. If you are feeling that the price of food and edible oil are very high and an increase in the prices of crude has made petrol and diesel expensive then have a look at nearby countries, like Sri Lanka and Pakistan among others where the conditions are that bad that you will think even to have a cup of tea. Inflation has reached such a situation in these countries. So, this phenomenon of inflation is spread across the world, it is not ours alone.

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In his next question RJ Salil said, is it just because of the Ukrainian war or something else is a reason for this? Mr Singhvi said, there are two reasons (i) economic activity is increasing, which is bringing growth across the world and when growth comes, things get expensive. So, it started from this point and (ii) the Russia-Ukraine war is fuelling the fire, as the fight between the two has rapidly increased the prices of crude, gas, coal and food items. So, these two factors have worsened the situation. The second thing is ours, the price of foods and eatables is also increasing in our country of its own. So, there are global impacts as well as there are certain supply issues in our country as well due to which the prices of edible oil have risen more than enough and the government is trying to control it. So, the local inflation can be brought under the control but the imported inflation like the crude is not in our hands. Thus, the fuel, petrol and diesel, prices will come down only when the Russian-Ukrainian war will come to an end. So, certain things are not in our hands due to which the RBI Governor has said that the interest rates will not be increased. Generally, when the demand is strong and there is inflation, the interest rates are hiked to reduce inflation as people will reduce their expenses. This is a commonly held belief in the economy but he, RBI Governor, has said that it will nothing is going to happen with it, the interest rates will go up which will weaken the currency, so we will not do anything and allow the global situation to settle down and when there is some improvement in the Russian-Ukrainian situation and commodities including the crude, then the situation will improve in our country as well.

To which, RJ Salil said, should we expect it for a short term and how ready should we be with an expectation that slight changes can be witnessed, and is it discussed one in three months or six months or a year? Mr Singhvi said, discussion occurs every one to one and a half months or can say that it is discussed six times a year. But the RBI Governor has signalled that he is not in a hurry to increase the interest rates. He will observe the data and his stance is accommodative, which means, will see when the situation arises. There is no hurry for the same. So, all is well. The RBI Governor would have not presented a policy that is better than this under such a situation.

RJ Salil said, but the market didn't react to this accordingly as it would have behaved bullishly with it. Were people expecting that it would not be increased? On many occasions, I have seen experts saying that the Indian markets are running in a different direction and on a different path and have a belief that everything will go unidirectional and if it is falling then also the domestic institutions are buying. Are we in such a situation? Mr Singhvi in his reply said, India is walking on a different path and will continue to do so. Have a look in your nearby areas, there is a shortage of food and drinks in Sri Lanka, Pakistanis are fighting among themselves, what is the situation of Bangladesh and Myanmar. Have a look at the situation of Afghanistan and Corona is spread in China. Nepal and Bhutan are small countries, that are struggling with the internal situation. India, surrounded by all these nations, is the only country that is doing business and whose economy is running. So, there should be no doubt that we are different. Keeping ourselves away from all these factors, today, we are focusing on business, manufacturing and exports. Our foreign reserves are the highest and our GST collections are also the highest. So, you can assume the strength of our economy and we are not indulged in all these factors. Yes, there are certain issues, as we are linked with the global markets and we are also globalised, which will have some impact. But the local markets are very strong due to the economy and also due to our money. Earlier we were in a situation where we used to see stars in the day when there was a selling from FIIs, which means a huge fall was witnessed but now the situation is that we are asking FIIs to sell as much as they want. Our Retail Investors are the third superpower. The first is the FIIs, the second is the local mutual funds and the third is our retail investors, who are standing strong and are buying continuously. You can see that the markets are hardly 800-1,000 points away from their lifetime highs. So, this is a strength of our markets, our companies and our economy that is visible in the market.   

Continuing the podcast further, RJ Salil said, in the last one week to 10 days, we are seeing an unexpected buzz in sugar stocks, power stocks and others. So, it is just a result of a rise in ethanol prices or the government has taken some decision. Can we, now, think about it and make some profits or should stay away from it because they have already gone up 20-30%? To which Mr Singhvi said, they have moved up by 20-30% but make sure to buy it when they come down. At the same time, stop terming sugar stocks as if you will term as sugar stocks then will never be able to buy them. They are ethanol stocks and green energy stocks, so, the higher crude is, the higher amount of ethanol will be mixed, to bring down our cost. So, it is a complete story of ethanol and if you will leave these companies by the name of sugar then they will start making losses. At present, all the sugar companies are making money just through ethanol and the story of ethanol is here to stay. If crude will be expensive then everyone needs green energy, which means you will have to buy it. There is a buzz. There is a buzz in tea and coffee stocks, paper stocks, midcap IT stocks and textile stocks. But your entry point should be correct, let the market cool down as it came down below the 16,000-mark a few days back, and you bought it. So, you can time these. But these are the companies which should be bought. At the same time, I would like to see, that the upcoming corporate results for the fourth quarter and the financial year 2021-22, will give huge shocks to the companies whose raw material costs have risen a lot due to global reasons. So, search for opportunities to enter in this result season amid the accidents and big falls that are expected to happen.

To which RJ Salil enquired about Mr Singhvi's recommendations where an easy entry can be available. To which Mr Singvi said, 100%, the first is manufacturing-related stocks and are termed as capital goods stocks; (ii) defence shares, (ii) paper stocks and (iv) sugar stocks. Wait in these four categories and if the market is impacted due to any external reasons, it can happen, although we are aware of certain reasons like the rate hikes in the US among others, we are not aware of the global geopolitical tensions, and if it increases and few more parties become a part of the tensions or America talks about any sanctions or something else or Russia says instead of you I will apply sanctions on you or something else. These are something that can spoil the mood of the market and we are not aware of it. When the market will fall due to an unknown reason then we should keep these four sectors in our mind and buy.