The present correction that the stock markets are going through would not have come as a surprise to Saurabh Mukherjee because he had already foreseen it.
In my last piece, I had sounded the alarm that Saurabh is looking very circumspect and is pessimistic about the state of the market. Saurabh had issued the grim warning that the markets are headed for a “difficult time” owing to a host of factors such as lack of reforms, no pick up in earnings, stagnant economy etc.
Anyway, a true stock picker should be able to find bargains in any market.
In his latest chat, Saurabh has advised investors to seek “areas of safety in the midcap universe”. He says that the entire agrochemical space is an “area of safety” owing to the government’s policy of cutting minimum support prices (MSPs), which will lead farmer to shift from wheat and rice towards fruit, vegibales, poultry and dairy products and create greater demand for agrochemicals.
Saurabh points out that the best stock in the agrochemical space is PI Industries because it has considerable earnings visibility.
The second “safe area”, according to Saurabh, is the mid-cap Pharma space. He points out that the government’s policy of direct benefit transfer will spur demand for pharma products.
Saurabh emphasizes that a population of $300-400 million people below the poverty line will be able to access subsidies for the first time in their lives. That in turn will result in a dramatic increase in demand for local pharmaceutical products.
Saurabh’s favourite mid-cap Pharma stock is Torrent Pharma. It is a good stock to invest in, he says, because there will be no earnings pressure over the next 6 to 12 months.
Saurabh has reiterated his grim warning that for other stocks in sectors like banks, auto and industrials, a six-month long pullback is on the cards.
So, you better brace yourself for a turbulent period over the next several months.