The Indian equity market is in a long-term bull market, but a deep correction is on its way, says Dipan Mehta, member, NSE, BSE.
Mehta says investors have continued to be loyal to realty and gold despite having underperformed.
"This is a long term bull market and we should get easily 15-20 percent kind of returns on a compounded basis over the next 4-5 years may or may be longer depending upon how the reforms unfold and what growth rates we are able to achieve, where the interest levels are. However, one has to build conviction and be patient in stocks. Those who are able to master these two aspects will turn out to be true winners in this bull market," he adds.
Below is the transcript of Dipan Mehta's interview with CNBC-TV18's Sonia Shenoy, Latha Venkatesh and Anuj Singhal.
Latha: Give us a Diwali gift, what would you invest in, what is your best Nifty case or even if it is a non-Nifty set of stocks, what Diwali gifts would you give your investors, your clients?
Mehta: I will give you a list of stocks in various sectors. We are very bullish on the NBFC sector and over there I think microfinance company SKS Micro , housing finance companies like LIC and Repco and consumer finance like Bajaj Finance they appeal to us and I think they have a good shot at being outperformers. Within Tech our favourite is Tata Elxsi . In pharma we prefer Glenmark and in the FMCG sector Jyoti Labs and Emami could be outperformers as far as the peer group is concerned.
In the large cap I think the preference has to be for telecom stocks. We saw Idea Cellular 's numbers and looking forward to Bharti Airtel as well, I think these two stocks could really outperform apart from of course the private sector banks. So, that is where I think we are kind of seeing our exposure sectorwise. We may be little bit underweight in the large cap tech stocks and a bit cautious on the large cap pharma companies considering a lot of investors are overweight over there and base effect may mean that the performance year on year may not be that appealing.
Sonia: For a lot of retail investors who are watching us right now what would your advice be to them at what stage are we in in the bull market and is this still a time to be buying in the market now?
Mehta: I cannot say at what stage of the bull market we are in. I think it is a long term bull market. As we go on ahead I think targets will be met and new targets will be set per se. My only advice would be that you have to stick into stocks, into equities. Anytime over the next 6-12 months or so there will be a deep correction and your conviction in stocks will be tested.
The only thought which comes to my mind is that gold and real estate have underperformed over the past 12 months or so but you do not see investors selling gold or getting out of real estate.
I think the same kind of expectation or strategy should be there for equities as well that when there are corrections not to get flushed out, not to get scared and sell off but to remain invested and may be increase exposure to equities. So, that is going to be the big test for investors and traders as well.
My sense is that this is a long term bull market and we should get easily 15-20 percent kind of returns on a compounded basis over the next 4-5 years may or may be longer depending upon how the reforms unfold and what growth rates we are able to achieve, where the interest levels are. However one has to build conviction and be patient in stocks. Those who are able to master these two aspects will turn out to be true winners in this bull market.
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