If you already have defense and railway stocks but avoid fresh investments if you have: Dipan Mehta

I want your vote on the overall market, of course, but select the market once again gaining some steam like railway and defense. These are the themes that saw the runup, then cooled for a while and they started spiking again today. Do you think this is the beginning of the other foot of the spikes or you believe it is the only one?
Dipan Mehta: It has been in the motion seen in these companies for the past few weeks or more. If you analyze the entire earning season, the best field has been defense, not so much railway, but defense has definitely turned out with flying colors and that is why investors are focusing there and there are many Momentum trading and many retail traders have entered these counters,

I think the evaluation is a bit pulled at this time. There is no doubt that this time there was a great quarter of the field, but there are always execution challenges and if you go back to history, there are many lumps in their earnings that are not completely allowed in the evaluation ratio. So, if you invest in defense, I would say that investment is pending but from a fresh investment point of view for me, it’s a avoidance.

I’m not sure about the railway. They are expressing sympathy with the defense that in the hope that government costs will move from there. We do not know that in the last three years, the railway costs have been around Rs 2.5 lakh crore or more stable in the budget, despite the improvement of 30-50% of the railway stocks, it is still very expensive and some big people like Titag ARH Wagon also came up with a disappointing set of numbers.

I will avoid both sectors from a fresh investment point of view. But there is long -term visibility and if you are an investor with a long -term point of view, you can invest.

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Right now a large wave or FAD promoter exits in the market and in some cases the EP is at a discount among rich valuations. There are many block deals on a daily basis and some are operated by FIIs and DIIs. What is that smacking and now someone should be careful in the markets? Does he smack peak valuation by no chance?
Dipan Mehta: We have seen this play in the past until September 24 in the early 2024 and we have seen the improvement since. Therefore, in the minutes in which the market starts to work well and the valuation EP is lost, we are watching selling the promoter and we are watching private equity selling and all of them have been absorbed by direct or mutual funds by retail investors.

It did not reach the peaks we have seen in 2024, but certainly the trend is being more pronounced. So, yes, it is a sign that the markets are in the expensive zone and in my view, there are now less uncertainties than a few months ago, without the exception of Trump, and we also have a Assistant Reserve Bank and many convenient macro factors. One thing is very clear in this earning season that it has been very selective.

I suspect that the next few months will be too selective for markets and wherever there are pockets of excessive evaluation, we will continue to see the supply and this will be a very challenging time for investors and the last three to four years of September ’24 will like what the whole market has increased. The whole attitude will be very narrow and it will be a little difficult for novice investors to charter.