Domestic liquidity and FII flows likely to lift all segments including midcaps: Arvind Sanger

Synopsis

Arvind Sanger from Geosphere Capital Management indicates renewed investor interest in non-US markets, particularly India, citing improved growth prospects. He notes that while the previous quarter was unremarkable, positive developments like receding geopolitical tensions, supportive RBI policies, and a rebounding US market are boosting confidence.

"Investors are again looking at non-US markets and India seems to have again come back into focus as an area that is shaping up to be a good growth story this year. I mean, that is the bottom line that the quarter is behind us. It was not anything great to write home about. But hopefully, the worst of the slowdown is behind us," says Arvind Sanger, Geosphere Capital Management.

Any friends, any family members you know who bought yesterday? I mean, it was big number yesterday.
Arvind Sanger: No, I do not, but I guess, I am not watching the day-to-day action in the markets that closely. I just think that a lot of bad news has come and gone on the India front. You had the skirmish with Pakistan that is behind us. You had this slowdown that is slowly looking like in the rearview mirror. RBI has been supportive. So, things are coming together and the US market has had a very strong rebound. It has already crossed the pre-April 2nd levels. So, a lot of good news has gone there. So, investors are again looking at non-US markets and India seems to have again come back into focus as an area that is shaping up to be a good growth story this year. I mean, that is the bottom line that the quarter is behind us. It was not anything great to write home about. But hopefully, the worst of the slowdown is behind us.

India has always been a midcap delight. Will money flow through towards largecaps this time or do you think it is going to continue to be the small and midcaps which are going to find the funds flow in?
Arvind Sanger: Well, FIIs are generally going to start with the largecaps and maybe go to midcaps. It is the domestic money that is going to drive the mid and smallcaps. So, to the extent that the domestic money is also following the FII money and the domestic money never really obviously went away in a big way, but as liquidity flows in, the rising tide is going to lift all boats and there are, for us at least, some of the better growth stories when we were kind of a little more nervous in the last month, we were maybe a little more largecap oriented, but even our buying into this selloff has had a little bit more of a midcap flavour to it. So, again, all of this depends on if growth is coming back, then mid and smallcaps are going to outperform.

You said you bought last week and you bought a little bit yesterday. What are you buying and where are you locking some gains?
Arvind Sanger: Well, ours is more a bottom-up individual stocks that we have had eyes on. So, we have one domestic healthcare, pharmaceutical, retailing type of company that we have had an eye on and which is very much below the radar screen of all the hot money, which is the kind of companies that we like and things were attractive there. We have bought in the last few days into a domestic cement stock.

So, we were looking at domestic facing stories where things have gotten interesting and where we think the valuations have got attractive and we are seeing some fundamental drivers. So, I would leave it at that in terms of the type of companies we are buying, very domestic facing, special situation mid and smallcap and not really necessarily dependent on big macro factors.

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