Indices Open Higher | EU-UK FTA Could Become A Positive Catalyst For Market: Demeter Advisors

Ajouté : 2026-05-21

[00:00:00]Ashwini Agraval is with us, founder and partner at Deita Advisors. Ashwin, good morning. Good to have you with us here.

[00:00:04]Thanks for joining us. Uh so they must there's been so much if I can use the word dispersion right with some stuff getting hit some stuff doing exceptionally continuing to do exceptionally well through this period uh since you know oil prices have spiked where are you seeing uh these these opportunities lying? You know, one thing we've completely put on the back burner is this India US uh trade agreement. We have US Secretary of State visiting uh later this month. Uh and we don't know if before that they'd want to you know prime up a kind of a framework agreement or some such thing but we'll see. But are you seeing anything out there with with where things have taken unusually large hits unwarranted in that sense?

[00:00:51]>> Uh morning Prashant and thanks for having me here on the show. Uh you know the the very interesting part like you pointed out is the disperate move in individual stock prices despite the macro news being fairly sobering including the weakness in the rupee uh and uh you know fall in the FX reserves and inflation prints and so on. Um so my sense is that you know the low that we saw in early March uh led to a lot of stocks getting beaten down quite significantly where valuations have become quite attractive and now as the earnings reports are flowing through and the management sound constructive notwithstanding the challenges on the global front um you know stock prices are uh sort of reacting to those commentaries and to the numbers uh this is a very much uh you know bottom up uh you know individual opportunities top down nothing to get very excited about kind of a market uh something that you know India has often seen in the past I mean whether it was uh say 2018 to 20 or it was 2011 to 13 or it was you know a long uh period between let's say 1994 all the way till 2003 so you know it's it's a bottomup stock selection market where valuations are cheap earnings growth is showing up uh you'd better buy uh because you know the the stock prices ultimately reflect what's happening to earnings. Uh coming to the trade agreements I mean let's see what comes out of that.

[00:02:25]Um I mean I think you know in the on a medium-term basis I'm fairly constructive uh about uh the effort that the government of India has put into trade agreements including the FDA that was signed with the UK uh which should come into effect uh pretty much soon. Uh what's happening with the US and hopefully uh you know the putting into effect the EU trade agreement uh sometime in later into 2026 or maybe in 2027. So you know that will obviously give wings to India's exports wherever we can. Um and I think uh that that will be a positive that the market seems to be not focusing on at this point.

[00:03:05]>> Uh Ashwi uh so you know it's all about bottomup ideas now. So do you want to tell us at least one sector where you're very bullish on which could be the theme to ride from here on valuations is still reasonable there is earnings growth and one sector which you will completely avoid.

[00:03:22]U morning Reema. Uh I think the private banks uh you know private banks are very attractive on valuations on a 5, seven, 10 year basis. Um they are now trading at valuations which you saw towards the bottom of the COVID lows. Um with uh credit data picking up uh you will see an improvement in credit growth.

[00:03:44]Deposits are a challenge but rising rates also help spreads in the short run. uh so I think uh you know asset quality continues to remain very benign so earnings growth is the story here with very reasonable valuations and I think that's one area where I'm reasonably positive about now you're not going to make like gang buster type of returns you but you'll make say 18 to 20% a year with the front liners and maybe a little bit more uh with smaller names and you know that's not a bad return to make in a market which is going nowhere. The other area which is a new one for me um is uh the FMCG names.

[00:04:23]I mean they are actually indirect FMC inflation plays. So what happens in a lot of the FMCG companies is that prices go up as raw material prices and energy costs feed through but as the input costs normalize the price cuts don't happen. So with a lag you will see uh margins increase. In the short run, you'll see faster nominal revenue growth as inflation uh gets priced in and medium-term you'll see faster earnings growth. So, you know, that might be an area that investors are uh can look at.

[00:04:56]Valuations are punchy there for sure. Uh but I think you know this is an environment where earnings growth and topline growth will get rewarded uh given how difficult uh you know the earnings environment remains. So those are the two areas uh that I would uh I would look at. Um you know I'm not a huge fan of themes. Um so you know the themes that have been focus have have been in focus for the last couple of years are AI defense and so on where valuations are completely nuts. I mean 100 times 150 times stuff like that. I mean I'm I can't pallet those uh I don't have a pallet for those those valuations. that generally speaking, anything that is uh hot so to speak and has excessive valuations is usually a source of frustration over medium-term investing and that's the stuff I like to avoid.

[00:05:48]>> So no defense in India and in AI because we don't have those pure hyperscaler type AI names. I presume you're talking about the data center uh the companies which are linked to the data center play because you said valuations are completely nuts here.

[00:06:01]>> Yes, absolutely. So I don't want to take any names but u yeah and defense there might be a few things out there uh but you know a lot of the stocks are very very expensive that have already reflected the so-called defense play notwithstanding that they are not direct plays and they are indirect plays for the most part. Hi Ashwani good morning good to see you Ben I didn't hear anything about tech what about the tech names uh you know lot of pessimism on those names one argument is wellrun businesses good cash flow yield uh they have good amount of you know cash they're doing buybacks the other argument is why do buy there's no growth there's so many headwinds which camp are you in >> so Nigel we've actually been doing a lot of work in this area and um you know it's it's a function of how much deflation do you see on the top line and how much of that can be offset uh with higher rates for consulting type assignments on AI and costs saved uh by not recruiting at the bottom of the pyramid. Uh you know we've come out a little bit constructive though you know uh due disclosure we we are working on this and I don't have any exposure here.

[00:07:10]I haven't had any exposure to IT services in a long time. Uh but I think it's looking interesting. Uh I think the tailwind from the uh from the uh weak rupee uh I think the net kind of balance tilting in favor of earnings turning positive with that aspect as well as I think you know there will be some migration on AI that will require support from IT services companies. So I think the next few years are assured after that we don't know. So the terminal value is in question but right now given the underperformance given the valuation support given the rupee tailwind I am a little getting a little constructive >> but as of now you have no exposure you said >> I I don't have any exposure as I said I've been working on this last week trying to get our heads around the problem and let's see where we show up >> so incrementally if you have 100 rupees to invest right now Ashwini how would you do it >> um I think you know uh rea there are a lot of bottomups bottomup ideas I mean I mentioned private sector banks. I mentioned FMCG. I'm working on IT services. There are a lot of places in the midcap, small cap world uh which are going a begging. Um they're not sector specific and I think I think you know one has to dig deep figure out where the earnings growth uh is is showing up where the balance sheets are strong uh where you trust the management and take individual uh individual exposures. I don't think this is a market which is a broad brush sectoral market barring two three areas that I uh see which I've spoken about. Uh I think it's a bottom-up market and that's that's how I want to play it. And there plenty of places actually you know again if you look back over the last 18 19 months that we've been in the dold drums there are plenty of names which are down 40 50 60 70%. And I mean if those businesses are not dead, I mean and let's assume that you know uh in September 24 maybe they were expensive. Today they wouldn't be cheap. So I mean I I think you have to look among among among those fallen uh stocks and see where you find comfort. That's how I think about it.

[00:09:21]>> All right. Uh Ash, where are you in terms of the metal stocks? uh you know one school of thought is you already seen a big runup but the other school of thought is that in fact you know the these stocks there has been very very low focus on capacity addition and suddenly now you have some capacities that have got hit as well also if you look at the way precious metals have moved up industrial metals have you know lagged them by quite a mile and now there is that call that maybe in fact there'll be a bit of a catch up do you expect a melt up or do you think it's run its course the metal stocks >> uh so you and Nigel again in the Indian context when you look at India what metals do you play I mean the big sector that you can actually pay play is iron and steel and um that is one sector unfortunately where uh the arguments that you spoke about don't really apply so I think demand for steel will continue to be quite robust but there's enough supply and I don't see you know how a global AI team or a reconstruction team can help cement so can help ste so let's leave that one out copper, aluminum, lead, zinc, you know, these are some of the things that we're talking about. Copper being the hottest of them and copper, you know, there's no real play in India in terms of over barring Hindustan copper, which I don't own. I tend to avoid government-owned companies. Um, and in aluminum, I think there might be something out there. But again, uh, you know, there's no significant capacity addition coming up there. So, how do you play growth purely on price is the question. So I have tended to avoid metals uh in my investment portfolio because I find uh these to be large global themes u very difficult to forecast too many moving parts that's been my historical uh you know bias uh and I tend to stay with that and my sense is that look I need maybe 25 names in my portfolio um and and I can find them elsewhere so why bother and that's uh unfortunately that's the stance I'll stick with Ashman, we leave the conversation here.

[00:11:24]Thank you very much for joining in. Uh we've got so many managements to chat with to talk about the FI20.