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    Traders can wait; investors can buy this fall: Deven Choksey

    Synopsis

    “I believe that this kind of correction or a sharp fall is becoming an opportunity for investors to buy into. The traders may still want to wait, but investors would possibly look at this falling market to buy into the portfolios.”

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    “It is more or less clear that market crash is about the collateral damages which the market and the participants are required to pay for the losses incurred in crypto currencies and the new age stocks, where there has been a significant amount of selloff, including in the US markets, says Deven Choksey, MD, KRChoksey Holdings Pvt. Ltd.


    How do you make sense of what is happening in the markets right now?
    The view was very clear even yesterday morning. Today also, it is more or less clear about the collateral damages which the market and the participants are basically required to pay for the loss that they have incurred in crypto currencies and the new age stocks, where they have seen a significant amount of selloff including in the US markets. Largely, the deleveraging process is also continuing because of the Fed tapering plans.

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    I guess all these factors have started combining and those ETFs who have been trading the global markets have started pulling out money from equity largely to correct their books from the deleveraging to begin with and also to balance the kind of losses they are incurring in other asset classes like cryptos.

    The situation has still not normalised though yesterday’s selloff has been quite sharp and it is quite possible that the market may have some rebound, some pullback from the lows of yesterday. That could give some sense of stability as far as the market is concerned. However, having said that, this is a truncated week, tomorrow being a holiday. Thursday is the expiry day for the derivative contracts. All in all, the trader would be reluctant to carry any kind of long position immediately and that is where the market as is seen today is likely to be muted.

    So a small bounce here and there in some select stocks is a possibility. Fundamentally, things are quite in shape as far as the Indian economy and the corporate sector earning outlook are concerned. I believe that this kind of correction or a sharp fall is becoming an opportunity for investors to buy into. The traders may still want to wait, but investors would possibly look at this falling market to buy into the portfolios.

    At Rs 90, is it a good time to buy Zomato or given what is happening to the global internet stocks,could Zomato go below its issue price?
    My understanding on the subject is that as a company, its business model is definitely the one which customers want. However, when one starts looking at the financial numbers, these are not looking very clear to me, particularly from the sustainability point of view. Recently, they have been in a position to pass over some amount of cost to the customers. Whether it remains sustainable is a big question mark because there are competitive forces in the industry they are operating in. According to me this is a challenge that remains as far as sustainability of the revenue is concerned.

    Zomato has a great model but the visibility of business is not completely clear to me. Given that kind of a situation, I am not in a hurry to buy into the stock. I may allow this company to sustain its numbers for a few quarters. Even if I have to buy a little expensive subsequently, that is still okay but let it sustain numbers and then probably buy into this stock. A similar story would remain for many other new-age company stocks. They may have a great business model to talk about. However, till the time they produce revenue and profits, we will have to wait before buying into these kinds of companies.

    I guess the Street is going to be quite wary of these deca-corns and unicorns which are getting these big fat cheques when they hit the primary markets and perhaps the valuations will be more rational, if not subdued?
    That is the trick. Once the companies get listed, suddenly the disclosure levels are at 360 degrees. In the private market when they were invested by the private equity investors, I think the disclosures were limited. Second, once these companies get listed, they also end up meeting the other challenges including trading from the futures side and all from the derivatives market as well in some of the cases. So that is always a challenge.

    If the companies are at a significantly higher amount of valuations post listing and if they are unable to catch up with the profit performance, then those companies remaining under attack would be very high and that is a thing one needs to be wary about. In my viewpoint, as I said before also, the new age companies have got nominal amount of potential in many cases. However, they need to have a very systematic backend model.

    Companies like Paytm may have a very fine ability to acquire customers but are they also in a position to service the product? If you do that, then probably the margin is yours but in this case, that is not happening. They only burn cash in acquiring the customers but revenue and profit are not generated. One needs to be wary about the new age companies. Selectively, they have potential but the business product mix will get a little revamped in many cases to make a case for higher amount of valuation that they are quoting at currently.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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