Sushil Kedia, founder of Kedianomics Research, predicts that PSU banks will face significant market punishment. He suggests that some previous “no-brainer” investments are now clear choices for short selling. In a chat with Moneycontrol, Kedia emphasized his bullish stance on FMCG and IT stocks, believing they will perform well despite high valuations.
Q: Is Tuesday’s sell-off a one-time event or will the weakness continue?
Kedia believes that regardless of the election outcome, there’s too much hype around banks, especially PSU banks. Even after a 15% drop in the PSU Bank index, any rebound should be seen as a selling opportunity. He thinks the bank index has peaked for the long term, though the Nifty might fluctuate between 21,000 and 23,000. Kedia’s safer election bets were in FMCGs and small IT stocks, which have held up well.
Q: Why invest in FMCG and IT?
Kedia sees these sectors as safe bets with clear earnings visibility. As funds need to rebalance, FMCG and IT stocks will benefit. He believes the time for financials and PSUs is over, with defense and railway stocks having peaked.
Q: How does the market typically respond after sharp sell-offs?
Large single-day falls tend to clear out weak, leveraged bulls. Historically, markets return to core fundamentals like corporate performance and sectoral shifts after political events settle. Kedia expects new sectors and bets to emerge, with older ones becoming short-sell targets.
Q: What is your strategy going forward?
Kedia plans to continuously short PSU banks on every rebound. He also sees potential shorting opportunities in telecom stocks like Bharti, expecting a 30% downside.
Q: What about last week’s bullish stance after exit polls?
Kedia was bullish with the expectation of a strong government mandate, which would have lifted all sectors, including IT and FMCG. However, with a weaker mandate, IT and FMCG are now the safe havens. Glamorous stocks that had peaked are falling more sharply than anticipated.
Q: Are stocks like HAL, PFC, REC, Bharat Dynamics, and Mazagon Dock past their peak?
Kedia believes that popular PSU, railway, and defense stocks have peaked, with widespread investment even from small-scale investors. He thinks these stocks would have fallen eventually, regardless of the election outcome.
Q: Any other opportunities besides FMCG and IT?
Kedia sees mid-cap pharma as a good six-month investment but is bearish on large-cap pharma like Dr. Reddy’s and Sun Pharma. He also watches real estate and cement stocks, such as DLF. Overall, he predicts a tough time for banks.
Q: What about concerns over expensive FMCG valuations?
Kedia argues that momentum will override valuation concerns. He quotes RK Damani: “Premium goods will always command premium prices.” He sees higher PE ratios thriving in a market seeking safety and is considering adding Titan to his long bets.
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