A lot of the participants believe that perhaps the peak has already been made and the triggers with respect to, let us say, election or Budget, they have already priced in. What is your take on what should be the realistic return expectation for this year?
KR Senthilnathan: We always believe that the elections and the other events are a source of volatility and this volatility should be used for our gains rather than thinking of the market topping it up, etc, and always there is an opportunity in the markets. Eventually, there will be a sectoral rotation and we have to pick the right stocks and be in the right place and we can still make money. We can make a long-term return of 15-20% in these markets, given there are certain sectors and certain stocks available at right valuations.

You are talking about sector rotations, picking up the right stock. Where could one look at right now in the right time at the right place?
KR Senthilnathan: There are two ways of looking at it. We have to look for the stocks which are having sales growth and margin expansion or the other way of looking at it is while there is a little bit lower sales growth and not much of margin expansion, but is it still available at a discount? If it is available at a discount, then there is a chance of making money and there are certain sectors which have been lull for a longer period of time and those are all the sectors which are available now.

For example, there are certain sectors which we can look for or to start with something like agrochemicals and even footwear industries. I will not say it has bottomed out, but these are all the sectors which are coming on our radar.

Sectorally, where do you see opportunity because to my mind, select few private banks fall under that category, wherein there is still some value on the table in stock price moves?
KR Senthilnathan: Obviously, private banks are very attractive in terms of relative valuation. But at the same time, other than private banks, even other sectors also offer opportunities. There are certain stocks which are available at a 20-30% discount from the peak levels and a slight change in the earnings can surprise us.

What is your view specifically on metals because it has been one space that institutional investors tend to stay away from just because of the cyclicality and the timing of it being difficult. Is this metal cycle going to be any different?
KR Senthilnathan: If we take cyclicality in terms of the metals sector as such, it is the worst performing sector in a two-year perspective, two-year perspective. It has given around 10-11% CAGR. Leaving the one-year aside, Today, the news is China PMI has been improving, manufacturing index has been moving. So,, there can still be a chance. But in the metal sector, we cannot remove the cyclicality. So, every time we have to evaluate and then only we can take a call. But we can make some kind of money in those sectors as well.What is your thought on the chemical sector? It has been under pressure in terms of earnings that have come out so far this year. Nothing exciting has happened. Are there some green shoots for the sector?
KR Senthilnathan: In the last quarter, when we analysed the BSE 500 which represents more than 90% of the market capitalisation, one of the sectors which has eroded the margin is the chemical sector. The chemical sector is among the worst three sectors which have eroded the margins. In another one or two quarters, that margin erosion will go away and if sales growth kicks in, then eventually the green shoots can be seen. Further down, we can potentially make money on that as well.Is it a given that one has to be exposed within the entire PSU pack to get the best out of the current bull market?
KR Senthilnathan: In PSUs, we do not have much exposure as of now. PSUs were undervalued and we played to an extent with certain stocks. But as of now, we feel it has been reasonably valued. And we find that some other sectors and some other stocks can be a potential money making opportunities in the coming years rather than the PSUs.

What are those spaces?
KR Senthilnathan: One of the neglected sectors we have been looking at is the ICE segment in auto. Everyone is moving towards EVs, but we have always believed in ICE also. In the ICE segment also we can make money. There are certain stocks which are trading at attractive valuation, have good balance sheets and are derivatives of ICE. Eventually, a small change in the growth rate can potentially give good money on that.