Are you surprised by this move in the market, the type of resilience you saw, and the fact that it covers all the losses from the April 2nd tariff announcement?
Anshul Saigal: Looking at volatility in the market and comparing it to the commentary that companies offer it at private meetings and meetings they do for outcome calls, it was clear that there is a big dichotomy in how companies view their future and how the market is responding in terms of price.
Of course, some of that was a huge gathering of the market over the past two years, and they had to consolidate a bit of what happened, but when this plays, you’ll see that a downward trend is overshooted in the market seen in February of this year in November last year. We believe that the strength of the firm’s evidence is very robust, so if this is fixed at all, it is a long-term trend blip, and that the long-term trends in these markets will remain very robust.
In the margin, our belief was that tariffs are also positive for India, and likewise, once it passes, you will notice that volatility is the best time to buy India and that they have played in the market in the last 40-45 days. We believe that the market still has a lot of value in terms of unpriceeded growth and that if you choose the right stocks in this market, you have the money to earn over the next 1-2 years.
When talking about the fact that we saw this recovery in tariffs and the market, what is your view on the fact that we see a lot of uncertainty?
Anshul Saigal: Yes, you have a lot of uncertainty, but uncertainty gives you an opportunity. You don’t get the opportunity when things are certain. Because the price is really built for that certainty. Looking at the tariffs you mentioned and the uncertainty around them, let’s look at one sector in particular and talk about the details. Let’s take a look at the textile sector. Currently, India corresponds to saying only 12% to 15% of total textile imports into the US in certain categories. Other categories are low categories from 3% to 5%.
China is the main importer to the US. Exports to the US to India will be more competitive if there is a much greater relative impact in China compared to India on tariffs. But anecdotely, I was talking to someone else the other day, and this gentleman had been receiving one inquiry on these label presses in India for three to four months. Last week, he received four inquiries. It tells us that even domestic manufacturers see that textiles are getting a considerable demand and that they are prepared for it. For textiles and many subsectors, which are only a small portion of India’s global imports to the US, India is more competitive and tariffs will be beneficial for India in the long term.I’m wondering if that’s the player listed.
Anshul Saigal: It’s not the listed players, it’s the private company I was talking about. But it was eye-opening. Because demand is tempted by segments that are clearly high value items and very specific items for one industry.Other than that, where are the opportunities in this market, or what would you rather avoid?
Anshul Saigal: That’s a very appropriate question. It’s both about where the opportunity is and where certain segments of the market should be avoided. What happens at the opportunity wisely as a result of tariffs is that there is the issuance of capacity to the United States. The same trend is seen in Europe.
Europe has often increased its defence budget from 2% to 5% of GDP. This means that manufacturing requirements within Europe will rise. Now, if you make both of these together, first capacity, and defense equipment, etc., the demand for metals can rise significantly.
Therefore, companies that are profiting both for volume due to price may be future beneficiaries of the future as trends are not so positive over the past two years, and today they are trading at a very low rating.
This can now be recycled through metal manufacturers and metal distributors. There are many other opportunities in this area. However, I think metal as a category is very attractive. On the other hand, the tariff situation creates some uncertainty in CAPEX for a particular segment and is also spending on technology for a particular segment.
If you notice, the results for high-tech companies are very slimy. Their explanations are also slimy. For one, it’s a bit off rating, but it’s still very expensive. We believe it is a segment that takes us a little longer to enter and will avoid it. In Pharma, CDMO is another segment that appears to be very interesting in the context of how small India is. It is 3%-4% of the global supply, and China is 50-60% over the shoulder before India. It could be a transfer to India over a period of time. These are some segments that we see opportunities.
What do you think about what we’ve heard, such as TCS, Wipro, Infosys? The outlook is bleak. Considering the fixes are also very steep and very extended throughout the IT pack, do you think they’ll make good contra plays?
Anshul Saigal: The commentary is weak, but the numbers and guidance were very weak for both companies you mentioned, but TCS in particular made some very interesting comments. They said they believe that ordering activity has not stagnated. It’s just been postponed. They believe that US financial companies are simply postponing their decision due to uncertainty in tariffs.
But each time this uncertainty drops, they will hurry back as they are at the top of every CEO’s mind, given that technology will become interesting at some point. But for individual investors like me, it’s not so appealing to see this space for absolute returns when the sector is trading 25-30 times despite being consolidated over so many quarters.
Growth is between 1% and 4-5%, but you can find better opportunities. I don’t necessarily have to be in technology, and I can catch up on future trends that will bring far greater absolute benefits from here. So for me, it’s not a very attractive sector. But for those building a professional portfolio, at some point the technology can clearly be interesting.
