Reliance more likely to underperform expectations | Economic Times

I hope investors have learned that staying invested in the market is much better than timing the market, says Sunil Subramaniam, MD & CEO, Sundaram Mutual. You were one of the boldest and loudest advocates of buying even in the correction time after the 2017 big correction came in. One should not waste the opportunities provided by difficult periods like 2019-2020. Your point has been vindicated. Yes, I feel a sense of vindication because the reason I was saying that is ultimately economic growth has to reflect in the financial market growth. There are no two ways about it. Second, the market always tries to predict the future. So when there is a correction, the market is saying there is a downturn coming but it is not saying that it is a permanent downturn. If you are a contrarian there, you know that the market is going to read an upturn well before the upturn happens. If you are invested in the market, you are going to catch that upturn well before others. The reason is very simply a combination of these two factors; the long-term correlation between economic growth and market growth and the market being a harbinger, you cannot keep jumping out saying the market is now saying it is down, so let me come out and come back. There are a range of participants in the market. There are long-term players who actually do this contrarian buying. There are short term players who do profit booking. As an investor, you just align yourself with the long-term player. In the long run, the upturns will far outweigh the downturns which is exactly what the last 9-10 months has shown us. So I think that is a very key aspect and I hope investors have learned that staying invested in the market is much better than timing the market.Asian Paints has beat consensus estimates handsomely. This is not a Rs 10-15 crore beat, it is almost a 300 crore beat!Before this came the Kajaria Ceramics report, which is also a company I actively track. They also beat numbers very strongly. This is a phenomenon which we are seeing continuously in many of the stocks which are expensive but that does not take away the fact that they are expensive and to that extent we have to take the valuations into mind also and that protects the downside in any correction. But it does not mean that you buy the stock at 80 PE. Bajaj Auto has shown great numbers from both export as well as the domestic markets?Bajaj Auto has been doing well and unlike the other two-wheeler companies, they have had a strategy of bringing in volumes into the market which track the retail sales. They are not loading the markets. Whatever numbers they come out with typically are the real numbers and Hero MotoCorp has a tendency as a company to put inventory into the system and if the demand falls, then we see wholesale number suffering. For Bajaj Auto, the export markets picked up very strongly and like other companies, the cost-cutting initiative seems to have played out in terms of whatever profits they have delivered. In my view, the outlook from most auto companies will be very interesting given the huge surge in input costs. What they say about margins going forward will be important because the stocks are no longer cheap. Reliance has been moving for the last four trading sessions ahead of its numbers. Another 3% dash is coming in here as well. What could we hear on the sidelines of the earnings tomorrow?Reliance underperformed severely in the last 20% up move of the market and actually moved down. So, in my view, it is just a catch up. The key variables to monitor will be the Jio performance. I think that is the only stock price driver. And whatever they have to say on Jio Platforms is going to be important because it is very tough to understand what they are doing out there and why they have got the valuations. If greater clarity comes out on those fronts, greater will be the probability that the stock up move could sustain. Given whatever is out in the market, the probability that they will underperform expectations is greater than outperformance.