See lots of investment opportunities from 2-3 years’ perspective: Vikas Khemani, Edelweiss Securities

In an interview with ET Now, Vikas Khemani, CEO, Edelweiss Securities, shares his views on the market. Excerpts:

ET Now: If I look at the macro headline, the rupee has plunged and if one looks at valuations, valuations are stretched. There is no good news, but despite lack of good news, the markets are still holding on.

Vikas Khemani: Very well put. When most of the bad news are there and the markets were holding on it, it is also one of the indication that a lot of bad news is factored in. I tend to feel that the markets are making a base. If you see most of the things which have gone wrong have gone wrong in the recent past and now macros seem to be stabilising. Your inflation is coming down, interest rates are coming down, currency is a bit of worry, but I guess that is definitely an India-specific worry which is getting addressed. So all those things in my opinion are in the price. Things will only improve from here. What will be the speed of the recovery, pace of the recovery, only future will tell. But I feel that unless the crisis kind of situation is there, the markets are sort of bottoming out here. From the two to three years’ perspective, there are a lot of investment opportunities out there.

ET Now: What should be the tactile approach to the markets right now? Are there spaces or stocks which are looking interesting to you?

Vikas Khemani: In any market there would be stocks which are interesting and it depends on the time horizon what you are playing at, what kind of risk reward you are playing at. So in my opinion, time is right now. At least given the way we are looking at it, time has come where one has to start moving away from defensives in a slow and steady manner because recovery will happen. It will take some time, but slowly you have to look at sort of sectors or stocks where balance sheet is not all that sort of bad, but if the recovery starts happening, they will be bigger delta. Secondly we feel that if the risk appetite is very high, when the up move starts or bull run stars or when the recovery starts, then probably big money would be made from the stressed balance sheet which will get repaired or corrected over a period of time. So a classic case is the PSU banks as your stocks are trading at 0.5 times book, 0.6 times book and because markets are building a lot of credit cost and bad asset quality, but when things start improving, you will see a multi-pronged improvement both in profitability as well as the asset quality and that will create sort of re-rating of those stocks. The only thing is that in this approach you might get huge amount of pain in the next three to six months because you do not know when the recovery will happen and how long it will take and at what pace it will be. So if one is prepared with that kind of risk appetite, then one can go in the second bucket where if you take a three years’ approach, definitely there will be good amount of money to be made.