How are you analyzing the market? You have been in the market long enough, managing your portfolio as well as client portfolios and have witnessed a lot of cycles.

Where exactly are we right now as far as the market cycle goes? Surely we have been hit by the pandemic and there was a sudden crash in the markets globally which got adjusted to COVID-related slowdown ahead in a month’s time.

But where do we stand right now?There are three types of cycles which an investor has to deal with.

One is the economic cycle, one is the market cycle and one is the business cycle, which is for individual companies and sectors.

In the economic cycle, I think there will be a lot of disruption happening at least for the next two quarters; we will know what happens with the coronavirus issue.

If we are able to maintain what we are doing right now, I think we should be okay.

Again there is a chance of a second wave and we do not know that yet.

So the economic cycle I think will face a tough challenge. There is something called the market cycle.

So what has happened is despite a stoppage of the economy or a slowdown, you are seeing markets bounce back more than 20% from the lows and the broader market bounce back more than that; individual stocks are up.

I get questions daily about why this is happening.

The economy is almost closed then why stocks are going up.

So that is the market cycle for you.

It could be fueled by liquidity.

There could be some belief that we will come out of this issue with much less damage than a lot of other countries.

There could be capital flows to our country.

So the market is pricing that in or it could be just plain liquidity flowing through.

So we see that a weak economic cycle is there and that will result in a lot of business cycles also becoming weak. How are you advising your clients to approach this cycle or what is your own activity? Have you raised cash levels lately or were you caught equally like many others on the Street? Are you waiting it out or have you started buying high quality stocks that are available at the lower level and at better valuations? How are you approaching things?I am an investor who always has cash.

So I had 35% crash in the portfolio even before this crash happened and obviously the rest of the portfolio also suffered.

But I was able to deploy some cash when markets went down suddenly; a lot of which I have already taken out.

Now as individual stocks went up 30-40%, it is prudent to take some profits off the table and that is going to be my strategy for the next one year at least as we are going to have these challenging times.

We might have these run ups which we should take advantage of by booking profits.

So that is going to be my strategy.

I think I will have 20-30% cash in my portfolio. There is also an opinion on the Street among professional investors and HNI investors that the market and economy are completely delinked right now.

Market has rebound 20% from lows whereas the uncertainty on the economy front has only worsened.

So the market actually deserves to trade much lower and perhaps retest the March lows.

What are your thoughts on this point?As I said in my opening statement, we are having an economic cycle and market cycle working different ways.

Economic cycle is going down whereas the market cycle is going up.

That could be because of liquidity.

But it is very difficult to gauge what is going to happen in the next three to six months.

Since the picture is not clear on the coronavirus, that is the single most damaging issue which we are facing right now and we still do not have the data on it to be able to guess if we will come out of it in one quarter or two quarters.

But if the situation does not deteriorate much for India, I think gains we made last month may hold.

But if this elongates for maybe a year or so, then I am sure that we will retest those lows.

So as of now, you have to have an open mind as things can go either way.

Just be positioned enough.

You should be able to have cash in the portfolio is what I think and moreover our approach is basically to be stock specific.

So we look at individual sectors and take calls accordingly. Where do you stand on this opinion of value investing versus momentum investing? This argument keeps cropping up; in this kind of market, what style of investing works better?We have seen 2000; 2018-19 is where the momentum of investing or basically buying expensive stocks at any valuations kind of theory worked out and value investors actually suffered a lot.

But then times change.

I think now is a good time where I think value investing might do better; our kind of investing to be honest.

We clearly struggled in the last two years because we are very focused on valuations and a lot of these good companies obviously were out of our valuation range.

Luckily for us, a lot of them have corrected a lot.

Some of them are still expensive; not in our valuation zone.

But if these quality companies also correct and come in the valuation zone, we will not be hesitant to buy these.

For us, value is most important and that saves us also at times.

Really large NBFCs are correcting from 10x and that can also be brutal and you still do not have conviction to buy even at 4x move is what we are seeing.

So there are still pockets of very high valuations in the market.

We are going to stay away from them but we are not averse to largecaps and we have some largecaps in our portfolio where we see valuations are in favor.

But at the same time, there is an argument that when things turn, the largecaps are the ones which will outperform initially and then maybe the smallcaps and midcaps.

I am not sure of that theory.

At least the last two weeks are showing me that the broader market is doing better than the largecaps and the fact is in the largecaps, you still cannot have conviction because if things turn worse, they may fall much more than the stocks in the broader universe which are at very good valuations.

So they might also correct but they might not correct as much as some of these large caps. Talk to us about potential winners of this cycle from here on.

What are the kind of themes, sectors if not stocks which you are betting on?Yes so if you guys remember from the December interview, telecom is one sector which we have really liked since middle of last year and that continues.

We see a very long-term trend in this sector and that has been corroborated yesterday as Facebook invested in Jio.

It is a landmark deal.

So that is one sector which we think will do well and it can be a sector to own for many-many years.

Apart from that we like cement.

About last month, we bought a lot of metals because a lot of stocks were at peak pessimism.

Some of the stocks were available below their cash value; some of the good companies, lowest cost producers in their field.

Sometimes in a month, if you get a 50% return, we are ready to take some profits off the table.

So metals is one.

Pharma and chemical will continue to do well and maybe I can talk a bit on sectors to avoid, which I think is NBFCs; they will struggle for some time except a couple.

Airlines and hospitality are the sectors where there could be long-term disruption; so these are the sectors we will avoid. This article first appeared/also appeared in https://economictimes.indiatimes.com/markets/stocks/news/telecom-cement-pharma-top-sectoral-bets-in-this-market-jiten-parmar/articleshow/75325723.cms