trading ideas: Look for trading opportunity in next 3-4 trading sessions; the recovery should be equally sharp: Sandeep Tandon

“If the small cap index does not peak from a long-term perspective, the opportunity in India is even more meaningful when we talk about sectors such as primary sample units, media, textiles or even capital goods. Even energy or utilities all qualify for this. This It is the part of the market that one has to look at and there is great and deep value even in these stocks.” Sandeep Tandon, This is, quantitative investment fund.

I have been building on real estate which is a multi-year cycle. Look at numbers that resist like Vardhman Textiles. Should one look at those industrial textile type stocks or those based on fossil fuel energy that are traditionally as deeply valuable as NTPC and L&T?
Let me answer this question from a broader perspective. The concern on everyone’s mind is whether small stocks have peaked and I will answer that question that way because I think small businesses haven’t peaked. There are no indications of the classic euphoria the market needs. We didn’t see that until September 2021 either. We have seen orgasm only in selected pockets.

So if the small cap index does not peak from a long-term perspective, the opportunity in India is more meaningful when we talk about sectors such as primary survey units, media, textiles or even capital goods. Even energy or utilities are all eligible. This is the part of the market that one has to look at and there is great and deep value even in these stocks.

We’ve talked about some of the eligible names from a deep appraisal perspective that have received a lot of interest. It has peaked and people will take some time to absorb that and maybe six months after that, when they see the massive underperformance, the postpartum analysis will be very easy at that point. That’s what’s revealed and I can tell you from our data that we look at it from a global macro perspective and that our predictive analytic models do indeed support that the cycle has peaked for growth stocks.

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I am not saying that there will be a vertical drop in one direction, but that no movement in the market will be linear. We will see sharp spikes in these names but one has to be very careful whether that is buying on the dip or selling on the rallies. For me, growing a stock is selling on high and value is buying on dips.

Will Indian IT or tech qualify as growth stocks because it’s not like US tech stocks where there’s a complete disregard for cash flow, and a complete disregard for what’s going on in terms of profitability? Indian IT companies are mature companies with business growth of 15-20%; They make a lot of money and do a lot. Can we classify them as growth stocks and say that growth is down and technology is going down?
Even if you look at Indian IT companies, they are not cheap now, they all trade in 35-40 times. Some stocks are traded up to 60 to 90 times. So from an evaluation perspective, it’s not very attractive. If one can’t describe it as being too aggressive or priced to the sales multiplier that some tech stocks have seen in the US market, my view is that sentiment is globally correlated. So, if the NASDAQ is doing poorly now, it is quite normal that the Indian IT performance as an indicator is underperforming than the value basket.

I am not that negative attitude to Indian IT companies; May it be in time, there will be value. The only thesis I’m trying to build is that they don’t qualify in our model as an essential, they do qualify for a tactical situation. So we like to play it that way because according to the predictive analytics and adaptive asset allocation model we’re talking about, they’re all in favor of this cycle peaking.

So, the question is that if they are not a superior performer, should one want to have that kind of offering in the portfolio? I would avoid this stock. Yes, in due course, I am a buyer with these names and when the stocks correct sharply, I will definitely make tactical bets on these names because in the end you have to improve on these opportunities also when the fear is unusual and the short positions are unusual. This is the time we would like to take advantage of it.

What is your proprietary indicator telling us about budget trading. There is no pre-budget recovery this time around. The last time the markets rose after the budget. Can we see the opposite or could we see a post-budget hike this time around?
Let me give you a perspective from the point of view of surrender or from the point of view of the fear index. There are no classic signs of giving up as of yesterday. However, the fear indicator is starting to rise, but it is probably only 30% of what we saw in December 2021. This means that it has the potential to correct more than the current levels but in terms of the time cycle, we expect that in the next three or four trading sessions, if S&P VIX has bottomed, it should peak after this Fed event and then Indian markets should peak too.

It is not necessary every time that the fear index rise to this extent. – Since the market is relatively light, commitments are on the lower side and people are quite skeptical. With this background, I don’t think that the Quantitative Fear Index or the Capitulation Index will rise to the level needed because there is no major crisis like what we saw in December or what we saw in March 2020. So it could be opportunity trading and in the next three or four trading sessions, when it hits Global markets have bottomed, the Indian market should also start to recover and the data shows the recovery could be just as steep.

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