Expect financials to outperform for a few more months, says Old Bridge Capital

Kenneth Andrade, the founder and CEO of Old Bridge Capital Management, spoke to CNBC-TV18 about market fundamentals and outlook.

“I think the market has been pretty selective over the last couple of quarters and I don’t think it is going to be very difficult as we go forward into the remaining part of this year. It is a financials driven market. We have got an earnings driving the entire financials part of the entire piece and that is going to stay for a little while before the rest of the market takes off. From a broader category in terms of the midcaps, most of the companies are doing pretty well out there. I don’t think there is any financial stress on those markets. So it is a matter of time that that segment of the market bounces back but timing that is going to be a little difficult,” Andrade said on Friday.

In terms of agricultural theme, Andrade added, “There has been a lot of policy initiatives already on the ground. We are looking to take one-two initiatives to merge the food chain with the fuel chain and that takes a little bit of time. So what initiated itself about two years back essentially will come into play over the next year or two. That takes care of some part of the entire problem that exists. All said and done this year, especially in a few crops that are there on the ground, we have already seen a reasonable amount of price pick up in certain segments. You hit rock-bottom as far as pricing is concerned on individual crops which happened last year. I am not too sure that going into the next year you will see the same kind of price erosion in soft commodities in 2019 and 2020. That should answer some of our near-term problems as far as agricultural distress is concerned,” he added.

On the non-banking financial companies (NBFCs), Andrade said, “Our sense is that whatever measures will come through will just bring stability to the entire business. However, if I take a longer-term view on that part of the entire environment and if you have looked back into the last decade, this entire decade was fuelled by leverage into NBFCs and that leverage into the consumer cycle that created this large consumer-driven economy that we had in the last decade. If you are looking at stabilising that market right now, it necessarily has to go into the consolidation bit. So my sense is that a few companies like in every sector do come back very strongly and continue to get the incremental amount of market share in the entire space, that will continue to happen.”