Trump impact will not be as bad as the market has expected: Ajay Bagga, market expert

In a chat with ET Now, market expert Ajay Bagga advised against rush buying of pharma stocks.

Edited excerpts.

Would you suggest fresh investments into the brokerage names?


It's worth looking only if it is a brokerage backed with a wealth unit with an NBFC. Pure play brokerages are very high in correlation to the market and it becomes really very volatile depending on how the market volumes are going. Overall, there are disruptive players, which are driving down the brokerages, so if you really analyse the so-called brokerages, the value drivers are coming from a lot of the other businesses like wealth management, like the asset management or the NBFCs, which are embedded or investment banking. I would not really look at these as pure play brokerages.

What's your thought process on Pharma?

FDA inspection is a wakeup call to the managements to get compliances in place. Some of the reports have been quite pathetic and really reflect bad. It has really made us a nation of cheats. So clearly I would not buy pharma in a rush, whatever the valuation is and this is from somebody who used to recommend a lot of pharma stocks in 2014-2015. We made lot of money but this has been a big miss.

Do you think auto ancillaries with the export focus are here to stay and expect a further rally?

The export-focused auto ancillaries will do better than the domestic ones. Pricing power is lacking in the auto ancillary space and for companies like tyre companies, with the input costs rising or staying up, their margins are under pressure. For these export-oriented auto ancillaries, the good thing is the global macros are doing well; Indian macro also recovers quite fast, three months down the line. Our capex might come take another 12 to 18 months maybe 24 months, but the demand will come back and we have to really position ourselves based on that. So yes, despite the talk of the border tax a lot of industries will approach Donald trump for solutions.

There is no easy solution unlike the rhetoric, which he has unleashed in terms of the border tax. Even in terms of the Mexican wall, they are trying to figure out how to get out of all those pronouncements. Tata Sons' incoming chairman also mentioned that the market is getting too spooked by all this talk of H-1B and all, the actual impact will not be as bad as the market has factored in. So, if leaders like that are saying, it will not be as bad as the market has factored in and that gives support to our auto ancillaries.

In Europe, recovery is strong, with the ECB remaining quite focussed on easing and continuing the QE.