Stock Market: Long & Short of Markets: Value is back. Also, can you make a losing bet in this market?


Record low interest rate regimes across the economies, and a push for infra by global governments may not be enough to sustain the valuation divide going forward, says Dalal Street veteran Prashant Jain. This comes after a decade-long under-investment in capital intensive or core businesses. Read more on Prashant Jain’s take on value rebound, probability of a losing bet in this bull market, outlook on smallcap space and financials in this week’s edition of ‘Long & Short of Markets’.

Fed rate hike shouldn’t matter for equities?
Despite the Fed’s move to shift rate policy much earlier than expected, markets just took a small breather before continuing its upward journey. This means, global markets are seeing this broad based rally as a recovering fundamentals in the economy and not just a market buoyant on central banks induced liquidity. According to Ajay Tyagi, equity fund manager at UTI MF, any rate hike is an endorsement of the fact that the economy is on the right path.

Path for financials is foggy
Despite being fairly capitalised and provisioned to tackle the pandemic, financials may take a hit on the growth side, opines Deepak Shenoy, Founder, Capital Minds. In an interview he said, despite the Supreme Court’s order regarding the removal of NPAs where they restricted declaring NPAs came in as good news, lack of moratoriums for businesses this time may create more stressed assets for financials in the next 6-8 months.

History may not repeat, but it does rhyme!
Looking at the smallcap cycles in the past decade, the smallcap index has rebounded around 290% twice from their respective crashes. This time, the index has rallied 182% so far. This corresponds with some of the smallcap firms posting their best-ever quarterly and yearly performances in the recent earnings call.

Value is back! This time for long..
Prashant Jain, CIO, HDFC AMC, is of the view that values have seen a stretched underperformance in the past few years, and from what he has seen, longer the period of underperformance the more sustained and sharper should be the outperformance. Talking about one of the important supporting factors for value resurgence in this interview, he says the corporate NPA cycle is clearly over for India.

What is the probability of a losing bet in this bull market?
This bull market rally has been one of the sharpest and the most broad-based rally in the history with every two out of three stocks among the 2,346 listed stocks doubling its share price in the last 12 months. But what was your probability of losing your bet in this bull market? It’s just 4.6% or one out of twenty stocks that failed to earn any returns!



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