Vijay Kedia says worst is behind markets; his latest stock bets and Samvat strategy

Market guru Vijay Kedia believes the coming Samvat could be better than the one that has just ended. In an exclusive interview with BTTV, Kedia said the worst of the market fall may already be behind us. He sees the market recovering or moving sideways for six-eight months before probably entering a fresh bull run.

He cited the carnage in mid and smallcaps, particularly over the past 15-20 days, saying stocks have lost 50-70 per cent from their peaks and many have delivered no returns over the past two years. Investors have not made money even through mutual funds, he added.

"All these developments suggest that the crisis is nearing its end. But what matters now is having the courage to stay invested. I believe these are signs that the crisis is coming to an end," Kedia told BTTV in an interview in Hindi.

Kedia said the stock market is fundamentally driven by optimism. What is happening now is not unprecedented, and the broad trend is that whenever markets experience euphoria, it eventually turns into a crisis, he said.

"I believe the euphoria we witnessed in the market in 2022, 2023 and 2024 has now given way to a crisis-like situation. This is a reversal of that phase. Of course, a crisis causes anxiety because people lose money, the value of their investments falls and they suffer losses. But history shows that when such crises occur, markets generally form a bottom around that time," Kedia said.

Reasons behind market underperformance

Kedia said there are several reasons why markets fell and they are not limited to domestic factors.

"Consider the wars. Earlier, there was the Russia-Ukraine war, and now we have the new conflict involving Iran and the US. The Russia-Ukraine war did not affect us as much as the Iran-US conflict does because we have a direct relationship with crude oil. We import 85-90 per cent of our crude requirements," Kedia said.

He cited a rally in crude oil prices and a depreciation in rupee, which pushed up import bill significantly.

"The second problem is exports. There are serious difficulties on that front. I was speaking to a company that has confirmed orders, but shipping freight rates have risen five to seven times compared with their normal levels. At those rates, exporting is no longer viable. Commodity prices have also started rising sharply. Aluminium, steel and copper prices have gone up. This is also an indication of a slowdown and points to pressure on corporate profitability. Inflation is another concern. There are several issues at play," Kedia said.

FPI selloff

Kedia said market were absorbing FPI selling but there is a limit to how much it can take. The money coming in from domestic retail investors is helping counter foreign selling, but even that has its limitations.

"Foreign investors have continued selling without showing signs of stopping. Look at corporate earnings. Except for a few companies, most are not reporting particularly good numbers. Ultimately, the market is a reflection of the economy. It has no independent existence of its own," he said.

Kedia said the transformation taking place in the IT sector is a revolution. IT exports have been, and remain, one of India's biggest foreign exchange earners. But there are concerns that this sector could face some difficulties in the future as well. Infosys has cut its guidance, he noted.

The market guru said every such phase has a limited duration, as he hoped these issues should begin getting resolved by January 2027.

"Things should return to normal. That is why I hope the next Samvat will be better," Kedia said.

Kedia's recent stock picks 

Kedia said he has made some fresh purchases over the past six months but all the stocks that were bought are now either below his purchase price or trading around those levels. Some had initially gone up but have since fallen back to around my buying price or below it.

"But that is not a benchmark. Nobody is God in the market. I have a quote: there are only two people who know the market top and bottom. One is God and the other is a liar. I am neither," Kedia said.

That is part of the market cycle, Kedia said.

He said he does not see much scope for further bearishness from these levels, although nobody can be certain in the market.

"I do not think the market will fall much further. The worst-case scenario, in my view, is that it does not rise significantly and instead moves sideways," Kedia said.

Strategy, what to watch

The reason for a sustained recovery will ultimately be growth in corporate profits. Company earnings will improve when geopolitical conditions become somewhat better, he said.

"I also believe that stocks linked to emerging themes and futuristic technologies should do well over time, even though they are underperforming at present. These could be companies in the energy sector, electric mobility and EVs, or businesses related to AI. Companies that use AI to improve their efficiency stand to benefit. Some infrastructure stocks could also do well. These are the areas that appeal to me," he said.

He asked investors not to try timing the market. "Do not expect a stock to rise the day you buy it or even within three months. That rarely happens. You should buy these stocks only if you have the patience to hold them for at least three to four years," he said.

Vijay Kedia said the biggest reason for FPI outflows appears to be that they see relatively lower growth opportunities in India. Another major factor could be the lack of emerging technologies in India, at a time when the entire world is chasing such opportunities.

However, foreign investors have also withdrawn money from several other countries in which they had invested. So it is not just India, he said.

"Ultimately, unless they find opportunities in emerging themes here, they may not return in a big way. Another reason being cited is the long-term capital gains tax applicable in India, which investors in some other countries may not have to pay. But I do not think removing long-term capital gains tax alone would bring them back," Kedia said.

Kedia on LTCG tax cut

He said he does not believe the government will withdraw LTCG tax for domestic investors. If it does, that would be an added benefit, but it is not the only reason for foreign investors' exit, Kedia said.

"After all, you pay capital gains tax only when you make gains. If there are no gains, where is the question of paying tax? The rupee has also depreciated significantly, resulting in losses for foreign investors.

There are several reasons behind their selling: currency depreciation, capital gains tax, the lack of emerging technology opportunities and subdued corporate earnings. If these factors improve, foreign investors will return.