Dear Readers,

Vallabh Bhansali, known by many as the face of investment banking in a host of public issues, has brought many companies to the market including the likes of Infosys, which have become household names.

While you may come across many analysts on business channels who keep blabbering day and night and change their outlook on market with every passing second, Mr. Bhansali is no average Joe and it always pays off in the longer run listening/reading view of such market veterans.

In his recent interview (the transcript of which is reproduced below) on one of the business channels, Mr. Bhansali spoke in detail about his view regarding markets. While we would suggest reading the entire transcript (especially if one is serious about making money in the stock market), however here are a few important points:

Once the government’s need for bonds raising becomes clearer, credit markets will also settle. Money will start flowing back into business so over the next three-six months I see this settling. There is definitely slower growth coming and that is not good news for most people but qualitatively this will be better.

Consumption led growth will continue so we could look at 6-7% growth irrespective of investment cycle getting kicked up or not. We may have three-six month period where real world may seem very bad but there will be fantastic investment opportunity because I am sure the cycle will turn.

I am seeing that when people have lost so much interest in stocks, volumes have come down, is a time to start looking at the markets.

One can never predict that exact bottom in the market. But when I look at PE multiples for smallcaps, midcaps and larger companies, I get a sense that when you look at governance of some these companies it is first rate governance.

In the next three-six months we will see liquidity tightness and earnings getting impacted. But that’s the twilight zone which is fantastic for investing if you have the appetite. If you don’t have the appetite for that kind of patience and risk wait for couple of more quarters and then jump in

Q: How are you reading the global situation because we have had a global pullback? Do you continue to be anxious about how things might play out from here?

A: I am increasingly less worried. I am seeing that leadership has kind of galvanised. Leaders in Europe are trying to do what they believe is good for their country rather than for themselves. They are all risking of being voted out even now, almost eminently in the next elections, which is a wonderful thing for the world.

Despite the provocation and persuasion of government people want to adopt a newer lifestyle based on frugality and savings and so on. We are heading for slower growth in the world but much better quality of growth. Once the political climate settles in Europe and in America we are going to see a much better world.

Q: So you don’t subscribe to the fear of the fact that things look similar to 2008 both in terms of recession concerns and the fact that there will also or either be a financial crises globally?

A: I see that the real economies everywhere are not doing as badly as the volatility in the financial market seems to indicate. The world is getting reconciled to slower growth. So there is big issue of banks in Europe much more than currencies and countries and this has to play out. As far as credit availability in terms of having dollars is concerned, having appetite to lend those dollars is a different matter.

Once the government’s need for bonds raising becomes clearer, credit markets will also settle. Money will start flowing back into business so over the next three-six months I see this settling. There is definitely slower growth coming and that is not good news for most people but qualitatively this will be better.

Q: You spoke about leadership in Europe but the big problem seems to be leadership in India and all global investors we speak to seem to be very concerned about what is been going on for the last few months. How bigger headwind do you see that as?

A: These are very big cycles and they have to play out and we have to be very patient about it. On one hand we are seeing some kind of policy crisis and on the other we are seeing unprecedented action to tackle corruption. Things that have happened were completely beyond imagination. I would like to complement the government for showing the nerve to do some of the things that they have done.

Given the policy jam and very extraordinary circumstances one can be sympathetic but all the same we need policy action. We are seeing some breakthrough on GST and government taking a stand on Africa and giving them money. So, some action has begun indeed. I really wish that this policy logjam somehow goes away but yes it is a crisis.

Q: How badly do you think growth might get affected, not just for this year but for next year which is what a lot of people have been talking about or worrying about because of the lack of investments which are happening in the economy today?

A: For couple of years I have been talking about governance and not doing anything about supply side growth. Consumption led growth will continue so we could look at 6- 7% growth irrespective of investment cycle getting kicked up or not. But in such a large country and consumption market this cannot remain suspended for long. We may have three-six month period where real world may seem very bad but there will be fantastic investment opportunity because I am sure the cycle will turn.

Q: The observation though has been because of the quantum of the fall is looking like an intermediate bear market both for us and globally. Would you agree with that observation?

A: I do not understand this language too much but I am seeing that when people have lost so much interest in stocks, volumes have come down, is a time to start looking at the markets.

Q: What is your own sense of when the best time is to do that though? Would you do that now or do you fear that there could be another wave of capitulation that may hit markets?

A: One can never predict that exact bottom in the market. But when I look at PE multiples for smallcaps, midcaps and larger companies, I get a sense that when you look at governance of some these companies it is first rate governance even if the overall governance leaves lot to desire I am getting whatever I want. Therefore I would definitely start looking at companies whether I invest immediately depends upon case to case.

Q: Big problem has been inflation and interest rate situation. How much longer do you expect that to remain a worry for the stock market?

A: It will take a while for liquidity cycle to bottom out. Even if interest rates hike gets suspended with the next raise or the one after it doesn’t matter. In the next three-six months we will see liquidity tightness and earnings getting impacted. But that’s the twilight zone which is fantastic for investing if you have the appetite. If you don’t have the appetite for that kind of patience and risk wait for couple of more quarters and then jump in.

Q: A word on infrastructure space because there the pessimism has been the highest. How would you be approaching it as an investor now?

A: We shouldn’t confuse sectors with companies, sector will remain very attractive. There are all kinds of players. There are some very new players in this business. Infrastructure will be an attractive space to invest in particularly if baby and the bath water both have been thrown out. This means good companies have been devalued along with others not so deserving. It may be a good time to look at those companies.

– info@katalystwealth.com