In a chat with ET Now, Sanjay Guglani, CIO, Silverdale Capital, says prefers consumer goods simply because the urban consumption has held up strong and if we have a La Nino this time, we shall have an uptick in rural consumption.

ET Now: Looks like there are no concerns in the world. All the naysayers are saying that the China fear is over and now it is time to party.

Sanjay Guglani: I wish it was so true. The short sellers were squeezed and given the current global environment, we shall continue to see higher level of volatility. Such gyrations give fantastic opportunities in terms of investments.

ET Now: Walk us through your current positioning because currently there are two aspects to Indian equities. For those who believe in the quality and the consumer side, they are still backing the consumer names and the FMCG names. For those who believe that a genuine economic recovery is around the corner, they are buying industrials and cyclicals. So which way are you leaning?

Sanjay Guglani: We at Silverdale are basically relative value bottoms up pickers. So we do not go by the broad trend. Having said that, we prefer consumer goods simply because the urban consumption has held up strong and if we have a La Nino this time, we shall have an uptick in rural consumption. In terms of industrials, we are very careful because we expect better green shoots before we venture there.

ET Now: So for an average viewer, what happens to the markets going ahead because as we said it is not just India rally? It is happening across the emerging market pack, across the economies which get impacted by commodities, Brazil for example. What happens? Are we entering the fag end of this bounce back or can this continue into April?

Sanjay Guglani: We believe that we are seeing the potential — a bottoming out of commodities. We do not think it is a dead-cat bounce at this point of time because a dead-cat bounce typically lasts for about two to three weeks. But is it confirmed that we are seeing the bottom? The answer is no. We need to test the bottom before we can be sure about it. So the ideal way to play around that would be in terms of being proactive in terms of booking profits, looking for specific company-led factors rather than a broad-based approach. So it will be much better for average investor to look at specific companies rather than betting on the sector per se.

ET Now: How critical a role would the RBI policy play? Most experts that we have been chatting with, say that a 25 bps rate cut is something which is already in the price. So does it seem like that would disappoint the markets or would it completely be a non-event so to speak?

Sanjay Guglani: I agree that 25 bps cut looks most likely and I will also agree that the 25 bps has already been priced into the various things. Would there be more than 25 bps? Obviously, I believe the market will be surprised. The crirical thing is to look at it from the RBI point view, look at the steps the RBI has taken in the recent past and those are the steps which most of the investors have not understood whether it is in terms of MCLR (marginal cost of funds-based lending rate) which they would be lending out there.The banking sector makes the maximum amount of money and also the maximum losses. The key is to know which particular bank to back and at what time. So the Q4 FY16 results will be fantastic pointer in terms of picking the right sort of stocks.

This articled originally appeared on The Economic Times: “Q4 results to help in picking stocks: Sanjay Guglani, Silverdale Capital” written by ET Now.