“All the IPOs which are out now are valued much higher than what they should ideally be. My advice is to be focussed more on the secondary market and look for opportunities as corrections play out because that is where one could actually pick out stocks for durable value creation,” says Sandip Sabharwal, analyst, asksandipsabharwal.com. What should we be focusing on in the market as we head towards earning season?There are various things at play both globally and domestically. Domestically, the resurgence of Covid could threaten recovery, especially in the consumer side. We need to watch out for it although by all indications, it should be contained eventually as we are seeing in other countries. The second development is that the market gyrations are becoming bigger and sometimes intriguing. On Friday, most Asian markets sold off significantly. Indian markets went up. Part of it could be attributed to the index rebalancing. But this kind of volatile moves on both sides indicate that we are reaching a level where going higher is becoming tougher but people are still not convinced that the market should go down. Globally, in some emerging markets like Brazil and Turkey, the central banks have been forced to increase rates much more than was expected on the back of surging inflation. Inflationary pressures also seem to be building up in India and how the central bank reacts to that will be interesting to see from the standpoint of financial stability. There are various forces at play right now and to that extent, we need to be cautious in our approach to the markets. The result season is coming now. It will be interesting to see what is going to be the impact on the margins of many companies because of the huge increase in raw material prices which happened over the last few months and how companies are able to handle that. If companies are able to handle it in a good way, then markets could take comfort from that and it will be the most interesting standpoint of the current result season. Much attention is still on the financials as an indication of the recovery. How would consumption be hit? Where do you see the maximum pain? So on the consumption side we have two segments – durables, non-durables. So on the durable side we have already started seeing pressure because of higher inflation and higher fuel cost with people being concerned about their future income. We have seen some slowdown in demand, especially in the two-wheeler side. That is where people could be surprised negatively. On the consumer non-durable side also, there has been a huge increase in pressure on prices. Marico CEO in an interview indicated that they have increased prices by 5-6% on coconut oil and 15% to 20% on the Saffola range. These kinds of price increases are very huge and on the basic side, such huge increases in prices hit consumption because people will buy the thing they need on a day-to-day basis but the discretionary items could suffer. On the discretionary side we have several very strong blue chips like Britannia, Asian Paints, Pidilite. It will be interesting to see their demand trends as the results come out. What are your thoughts on the fundraising activity? While the primary market has seen a gush of IPOs and QIPs in the last fortnight, have you picked up any trend there? Is there any particular IPO that you are keenly watching?The right time to invest in IPOs is when there is related interest. From the companies’ perspectives and from the merchant banker’s perspective, it makes sense to raise money when people are willing to pay any price for the IPO as they are coming out. I think people need to be cautious. Just because you have made money in a few of the previous IPOs irrespective of valuation, does not mean that you are going to do that going forward. All the IPOs which are out now are valued much higher than what they should ideally be. In any case, the rate of over-subscription was very high and people tended to get very low allocations. My advice is to be focussed more on the secondary market and look for opportunities as corrections play out because that is where one could actually pick out stocks for durable value creation. Do you find value in the secondary market given that the market has corrected quite a bit from the top?From the largecap side, L&T has given up decent gains from the top. People could start to accumulate that and spread out the investments. Bharti Airtel has been adding subscribers and gaining market share. It has corrected after Reliance Jio launch and to some extent could provide opportunities. Some of the larger private sector banks like ICICI Bank could offer opportunities but I would think that there could still be downside in the near term. We need to watch out for RBI’s policy in the first week of April and see what stance they are taking and that will impact the financials significantly. These are the few stocks on the large cap side which should be on the buying list.