“On the market construct itself, I think there is bound to be volatility in a rising bull market that we have had not only in India but even in the US. There will be days of sharp corrections and people will just have to get used to them,” says Abhay Agarwal, Piper Serica.

If this is truly the Amrit Kaal of India, how can investors really maximize by betting on stock markets?
Till last week, we have used half of that in this correction because we saw some of the stocks correcting. Post results, I think what we are seeing is that for some reason, the result season is turning out to be very volatile. And I do not know what investors are trying to read into quarterly results. But the sell-offs are quite sharp. The rallies are quite sharp. So we are trying to make use of that volatility as much as we can to improve our long-term returns. But again, there is limited scope to doing that. On the market construct itself, I think there is bound to be volatility in a rising bull market that we have had not only in India but even in the US. There will be days of sharp corrections and people will just have to get used to them.

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Are you looking at opportunities which lie in the middle of a buyout kind of a war for some media assets which is happening because if one were to really just ignore this buyout transaction, there is some inherent value in the business as well. The large part of the market believes that if the earnings start supporting the story, it could be many times over. And last evening, referring to Zee, the management seemed to have indicated that the aim from here on is 18-20% margins, frugality and business growth. If they walk the talk this time, can this business get re-rated going forward?
That is a great question. I would like to just put a disclaimer before that that this is not a buy recommendation. And we have recently, over the last week or so, added the stock to our model portfolio with issues and other stuff. So we wanted to ignore that noise for the time being and look at only the core business. And if you look at the core business, one of the leading media franchises in the country, profitable, not leveraged, trading at a $2 billion market cap, looks very small. The value looks quite small in terms of what it can be if the technical issues are sorted out. And I think there would be a desire, we are hoping at the management level, promoter level, lenders, other large shareholders, to resolve this matter and make sure that the most important thing, which is the asset itself, the business itself, continues to grow. And I think it is a good timing, getting into an election year where ad expenses are high. These guys have very good properties, even online OTT space. So I think there is always a risk, but I think where the stock is positioned right now, the rewards are more favourable than risk right now.

Moving on, what are the names which you already hold, which you have added in the last one week or you are very keen to add if there are sharp corrections on the way in those names?
Sure, I say again, not a buy recommendation, but we have discussed this earlier. Dixon is what we have had in the portfolio since its listing, and we have made very good returns on it. We have always held our model portfolio allocation constant there.

But the recent addition has been Amber, and after we bought, it actually shot up, and then it corrected sharply post results. I think people were expecting too much from the quarterly results, and probably that is why some of the short-term players exited.

And we used that opportunity to again add back, increase our allocation to the stock. So I think that is one space that we are very bullish on. The second space is large-cap pharma companies like Divi’s, Dr Reddy’s. I think these are very long-term plays that will be multi-baggers from here on. Market is ignoring them. So these are the two spaces that we have been adding in this time.

I would like to scratch that point of pharma a little more because, even Aurobindo Pharma, today the details of 483 have come in and the stock is taking it on the chin. But bulk of the loss or the cut actually happened last week. I want to talk to you about, beyond this 483 or one plant getting into trouble, even if you adjust for that plant. If you look at Aurobindo’s EBITDA, this time around 1600 odd was strong on a Q O Q basis. Last time it was 1250 odd. And many others, some of these big ones, the profitability improvement is a whole lot. You are playing them for next two-three years. Are we in early cycles still because they have run up 20-25% from the recent lows?
I think they have run up to a point where they were oversold. And then I think investors were looking at long-term value creators at a very reasonable valuation. They got in and the run-up has been because of that. But I think there is plenty of juice going forward and I think some of the key reasons for that is one, the biggest reason is there is a pricing respite in the US market.

Secondly, the USFDA has been friendlier compared to earlier. And I think the Indian companies have also learned a lot from the earlier USFDA inspections and they have improved their manufacturing capabilities and quality standards to stay on the right side of USFDA.

And the third thing that is happening, the most important thing is that almost all the companies have a very strong product-like pipeline going into 2024 both in the US and in India. And like companies like Dr Reddy’s has a pipeline of more than 100-125 new launches. And all this hard work that has been done over the last two-three years by these large pharma companies is not visible yet.

The result is not visible yet. The analysts are also not willing to make a bet or call for success till they see it. So I think I am pretty hopeful that these pharma companies will continue to surprise on the positive side over the next two or three quarters, which will lead to a valuation multiple re-rating also along with earnings growth. And I think that is where the investors will see pretty solid returns from this space.

Have you started work on any of your, and any oil and gas company for that matter? A lot is being spoken about, especially the upstream side of the oil and gas companies and how low valuation they are trading at. Anything which catches your attention there? Are you working on energy?
I think energy is a very big space that will give a lot of opportunities. So we are constantly looking for plays in energy space. One of our recent additions was Amara Raja a couple of months back. In the large oil and solar space, we have not yet made a bet because our experience is that while the PSU companies there that are the leaders are very competent players, but still there is that political overhang about capital allocation and removal of profits from the company.

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