There is a sell-off across asset classes globally, so risk is off the table, said Kenneth Andrade, founder & CEO of Old Bridge Capital Management. “The existing pandemic has created challenges as far as trade and commerce is concerned and no one knows how it will pan out over couple of years. These are near-term challenges that we are seeing but nothing remains perpetual. So, it’s a matter of time before things settle down,” he added.
In an interview with CNBC-TV18, when asked about Indian equity markets, he said, “I don’t think we are sitting in a bear market but we are seeing a correction in the cycle and we probably move on from here.”
When asked how they would approach the whole banking space in India post the Yes Bank debacle, Andrade said, “In the last decade, the first to die down was the asset part of the market, which were the companies that expanded their balance sheets and the contagion was left at the end of it for the financials to pick it up. So it’s the entire economic cycle that is playing out and the guy with largest amount of stress is feeling the heat.”
He further said that many financial stocks are trading at 1x price to book and provide an entry opportunity. Also many metals and utility stocks trading at sub 1x price to book, he said in an interview with CNBC-TV18.
“We will continue to remain positive on select private sector banks and that’s because of the opportunity that they can consolidate the market. So the top 3 or 4 names currently account for about 20 percent of the entire banking book and they are the only ones with access to capital and growth capital. If they execute well, they have a long horizon of growth,” Andrade further added.
Speaking about broader themes to buy in the market, he said, “When you get the corporate sector starts investing there is a biggest bump up in GDP and that was close to 8.5 percent growth in 10 year GDP cycle. This decade has been closer to about 7 percent and the first cycle that we saw in the Indian economy was about 5.5 percent. So, necessarily you need the government and the corporate India to come back into the entire cycle because that is chunky flows that creates the entire economic cycle to come through.
“We have held up through a consumer cycle. I cannot imagine that if you do not have corporate investment cycle, you will be able to do a consumer cycle in perpetuity,” added Andrade.
“If I go back historically, smaller companies become large. All the companies that did extremely well into a bubble cycle never existed 20 years back. So, all the newcomers that were there last 10-15 years actually created that cycle,” Andrade added.
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