Where to Invest Now? | IT Crash | Bank Stocks | AI Opportunity | Dr.V.K Vijayakumar | Geojit

[00:00:00]Today we are joined by Dr. VK Vijayakumar, chief  investment strategist at GEOJIT to navigate today's highly uncertain market landscape and  uncover where the smart money is moving. In this episode, he breaks down the sharp IT sector  selloff, explains why posing your mutual funds SIPs could be a costly mistake, and analyzes  where the new 35% gold and silver allocation for equity mutual funds can act as a true safety  net. Welcome sir. Thank you Abilash. [music] So there has been a sharp sell off in the IT  sector. Which sectors look attractive now?

[00:00:42]This year the worst performing index has been  the IT index when the anthropic shocked the world with their claude cork. Indian IT companies took a  very big beating because most of their businesses will be impacted. Many segments not most many  segments of their business particularly coding will be impacted. So the index is down by around  20 to 25%age. But midcaps are doing well there particularly some midcaps are doing  well but large caps have been impacted.

[00:01:23]Similarly, the real estate sector has been  impacted. 13 to 14 percentage correction.

[00:01:31]There has been 9%age correction in banking  index. But then bank stocks have been doing well.

[00:01:39]Banking sector is doing well with good  credit growth and uh decent profits also.

[00:01:45]But because of FII selling, bank index  performance has been poor negative 9.5.

[00:01:53]But then there are some segments which are doing  exceedingly well. The best performing index I think is the power index which has appreciated  by 25%age in this weak market. 25%age return year till date. Similarly the metal index has jumped  by 15 to 20%age giving excellent returns. These segments will continue to do well particularly  power will continue to do well because uh due to this data centers big investment is  going to happen in already started in data centers in India by the global MNC's. So power will  continue to be in demand. But then some segments which are likely to do well going forward.  One is contrarian investing. The best sector the next one year will not be the sector which  performed best during the last one year. Perhaps the worst performing sector can turn out to  be a good sector also. That also is possible.

[00:02:56]So the uh banking sector which performed poorly  in spite of good profitability and good revenue growth is a contrarian investment. Now you have  to wait for good returns but then if you have a waiting period of 2 years and 3 years  that is a very good bet. Now similarly pharmaceuticals pharmaceuticals is a strong  and steady play as far as India is concerned.

[00:03:22]So many companies already have done well they  will continue to do well with more than 12%age earnings growth uh in FI27 that is possible.  Automobiles is one segment which has benefited substantially from the GST cuts affected last year  and although also the income tax relief provided by the government uh through the budget last year  and also the low interest regime because of the uh repo rate cut by the RBI also helped in the boom  in the automobile segment and that is continuing.

[00:04:02]There might be some slowdown in some sub sectors  like the medium heavy commercial vehicles but then altogether the industry is doing well.  I was looking at the automobile sale numbers of May the last month May passenger  vehicles have done exceedingly well and also segments like large commercial  vehicles of some companies are doing very well.

[00:04:30]Two wheelers in some segments are doing well and  the valuations are not excessive. So automobiles is one segment which investors can look look  to for investing. Then there are the platform companies which are now which have corrected  and are available at uh decent valuations.

[00:04:54]Then there is other sector which is the capital  market related sector. The stock exchanges, multicommodity exchanges, depositories, wealth  management companies. These are the sectors which are very resilient and likely to continue  their resilience in this year. So equity mutual funds are now allowed to allocate 35% of their  investment in gold and silver. Uh, can this be a safety net for investors in the event of a market  crash? Well, CBI introduced this change perhaps anticipating big volatility in this uncertain  environment. If things turned from bad to worse and if there is a correction a sharp crash in  the market then well exposure to safe haven gold will bring some stability into the portfolio that  may be the reason why say we introduce that change but personally I feel that mutual funds even  though the small cap midcap and flexi cap funds can in theory increase their exposure to gold and  silver up to 35%. They are unlikely to do that because these metals are performing  poorly this year. This year in dollar terms gold is down 22%age. In dollar  terms, silver is down 43%age from 121. So instead of imparting stability to the portfolio, it will  cause more uh u depreciation in the portfolio.

[00:06:31]Therefore, you need not u invest  in funds which have 35%age exposure because this segment is not doing well and  particularly in the present context when dollar is strong gold and silver are unlikely to  perform well. When dollar is weakening they will appreciate. That is a broad classification. So  one has [snorts] to be careful in this change.

[00:06:57]What are the threats to the economy and market and  what are the opportunities? The possibility of a below normal monsoon but a below normal monsoon  is not a threat. But if it becomes a a droughtlike situation then it can be a problem because  agricultural output will be declining. But during the last three years we had very good monsoons.  The reservoir levels are very comfortable.

[00:07:25]But then 55%age of the acreage and the food  grains are now under irrigation. Therefore uh even if there is deficiency in rainfall it is  unlikely to be a problem but if there is a drought it can be a problem. Coming to opportunities, I  would say it is more a a desire on our part more perhaps a wishful thinking in the short run but  it is likely to happen in the medium to long run the AI trade artificial intelligence trade. The  big beneficiaries are as I have explained before South Korea and Taiwan who are the global giants  in this computer chips and memory chips. They are the giants. They are making all the money. Not the  supercalers in the artificial intelligence space.

[00:08:18]There we do not know who will make big money,  who will lose out. Sometimes there are reports that it will be a winner takes all. One or  two companies making all the profits, others uh losing out completely. But these chip  makers are making money and that is why Cosby is up 166%age year till date and Thai X is  up 102 percentage year till date. So but this will not continue for long. We know from our experience  in the market that no sector continues to rally for long. there will be sectoral rotation and  in there are experts who believe that there is a valuation bubble uh in some of these stocks.  Personally I believe the valuations are not high but uh unexpected things can happen and there  can be uh big there can be disruptive technology which which can reduce the demand for these chips.  We do not know in that case there can be a big sharp correction even crash sometimes when there  is a correction Samsung is declining by 8%age SK highness is declining by 12%age in one day so even  without a disruptive technology so that is that is uh one possibility so if there is a correction  in this AI trade then it can turn out to be assuming that it will not be a big crash that  will rattle all the markets. If it is a orderly correction then money will start moving into  nonAI stocks in which India is a very good player.