And secondly, there are threats of more tariffs. So, this entire thing eventually will lead to slower global growth. So, India is relatively insulated but if there is an impact on global capital flows, then obviously India also gets impacted.
I would think that as an economy, India is least impacted given its lower linkages in terms of the domestic economy versus an export economy. However, any global moves will obviously have an impact and that will be seen today.

What is it that one should do in terms of a portfolio allocation because the most obvious emotional trade on Saturday was buy consumption, sell capex?
Sandip Sabharwal: Buy consumption is a good theme. Sell capex, now that is somewhat overreaction because finally what has happened to capex this year is already in the stock prices. Next year projections indicate a reasonably good hike in overall capex. So, there is an overreaction there.

So, consumption obviously will be an outlier, they are under-owned stocks. So, durables, non-durables which include brown good, white good companies, autos, and FMCG companies, these are likely to outperform for some time because of the fact that not only there is a positive fillip for them, but they are also under-owned. Now, capex, infra theme companies they have also become reasonably priced post-correction which we have seen over the last few weeks. Now, it is also important to see what the monetary policy action is because if liquidity is further improved and rates come down, typically these are rate-sensitive companies, so they will get a support because of that.
If one has a portfolio and the portfolio after the market fall, I mean really everybody is sitting on a lot of cash, so if consumer looks like the go-to space in the near term for obvious reasons and if capex could take a backseat and if somebody has to choose, it is a choice between let us say HUL and L&T. It is a choice between ITC and let us say BEL. Is one better off locking out of 15% of their capex stocks which is the built India stocks and move that portfolio right away into consume India stocks which is FMCG, consumer, autos, hotel, discretionary spends, low-ticket, brown good, white good?
Sandip Sabharwal: It makes sense because next two years, this theme should outperform. But what do you move? Then, you have to decide whether you move out of some of the capex themes or you move out of some of the export-oriented themes because IT industry outlook will become more hazy if the overall US economy and global economy outlook becomes hazy.

So, it is a choice which people have to make and it also depends on how is your current allocation. If you are very heavily underweight consumption because consumption was doing badly for the last two years, then obviously your move has to be much greater.

If you already own a few of them, so it will depend portfolio to portfolio but overall, consumption as a basket has to be overweight now.

Just going a little deeper into what within consumption, FMCG is price inelastic, so maybe the reaction on Saturday was a little exuberant, would you say stick with the premiumisation theme?
Sandip Sabharwal: Impact will be felt across the board because of the fact that demand has been subdued across the board. So, I would think durable companies which include like brown good companies, white good companies, autos, as well as FMCG companies I think all tend to benefit because of the fact that the tax breaks are very significant and it has been proven that tax breaks given to people who are on the lower to mid-income bracket have a much greater impact and multiplier on consumption than those given to the higher income brackets because they as it is are not so impacted so their consumption as it is is going on. So, the impact should be across the board and the biggest factor in all of this is these sectors are heavily under-owned. If you see large funds, if you see large even blue chip funds, etc, their ownership of consumer stocks or even the mid-tier investment themes is very low. So, I think that will get corrected over the next few months.

Let us get some names within consumption because that is where valuation comfort also is at least when it comes to the FMCG basket.
Sandip Sabharwal: The consumption theme valuation never go down so much so I think they always remain high, but the segments which could benefit more would be let us say the QSR space, something like maybe Devyani International, Westlife, Jubilant Foodworks because they have been under a lot of stress and as sentiments improve we could suddenly see people wanting to go out and consume more.

Then, on the brown and white good side there are a lot of companies, so not necessarily in order, so Crompton Consumer is there. We have companies like V-Guard Industries, Voltas, Polycab, and a few others on the white and brown good side. So, all of them could benefit.

Then, autos obviously the numbers are also decent and there are also companies like Eicher, Bajaj Auto, Maruti, Mahindra & Mahindra so all of them could benefit. And on the FMCG side across the board I think because one good thing about most of the consumer companies is they do not tend to raise equity, so equity remains the same.
The capital raising is low so to that extent any positive move tends to be outside.

Within autos like you were mentioning any particular theme that you would pick up, would you say that it is going to be two wheelers versus passenger vehicles, any segment you think which will do particularly well?
Sandip Sabharwal: The companies which are doing well, so companies which are standing out in terms of what they have been able to deliver export plus domestic and on valuation basis have been companies like Maruti, M&M, Eicher Motors, Bajaj Auto they have been doing well. So, those four could be the preferred ones.

You did make the point that perhaps the selling in capex was a little exaggerated, I mean stocks like NCC fell about 8%, IRFC, JSW Energy, ABB, I think Saturday was more of an emotional trade perhaps. But how is it that you would rejig your portfolio when it comes to the capex theme right now?
Sandip Sabharwal: There are some companies where the demand trends are pretty strong. So, I think which include companies which would be supplying power ancillaries, transmission tower, etc, companies, those are still doing well. On the other hand we have seen that there are some themes related to railways, related to some investment cycles which are government funded where we have seen some slackening.

So, we need to see how that overall thing plays out, but I would say that the valuations post the kind of selloff we have seen across the board on the capex side also because if you see many stocks are down 30-40% already. A lot of it is already built in. Now, it will depend on the pace of recovery.

Hotels, that also stands to be a beneficiary of consumption and more money in the hands of consumers. Within the hotel pack would you stick by with IHCL or would you diversify your portfolio?
Sandip Sabharwal: We have a larger stake which we own in Indian Hotels which continues to do well and there is no reason to sell because the company has indicated continued good growth and if the tax incentives also help some more people spend, they could do better, but these tax incentives could actually benefit the cheaper hotels more I would say, so there are a few other hotel stocks listed, so I think as a percentage impact there could be a greater impact on those than IHCL purely on these measures.