NEW DELHI: There has never been a case in India when the role of credit rating agencies was called into question. The Big Four auditors have come under regulatory scrutiny in recent times amid myriad debt defaults. Meanwhile, the government itself is being called out on the GDP growth numbers.“Who would you trust,” asks Dhiraj Relli, Managing Director & CEO at HDFC Securities. It’s a kind of ‘Samudra Manthan’ in progress, in which the good will eventually get separated from the bad. “The million-dollar question is: who would finally walk away with the elixir?”Relli, whose brokerage has 6.72 lakh active clients, second only to ICICI Securities among full-services brokers and third overall, says the domestic market has been bleeding more because of internal problems than global ones. This, he said, is already reflecting in India’s underperformance against global peers this year.Relli says attractive stock opportunities are emerging across sectors, but insisted, one must see to it that ‘value’ goes hand-in-hand with ‘quality’.Money chasing only a handful of stocks is not sustainable, says Relli. Citing acute pain in the broader market, he said: “If Nifty50 were to match the fall that midcap and smallcap indices have seen in last 18 months, it would have been at 9,000 level!”Data showed 1,350 stocks on BSE have eroded over 50 per cent of investor wealth since January 1, 2018. A staggering 2,500 stocks – 86 per cent of the total 2,900 actively traded universe on BSE – have failed to deliver positive returns since January 1, 2018, even as BSE Sensex has gained 11 per cent.A few largecaps have started to correct. Even H2B2 – the HDFC twins and the Bajaj duo – are seeing some correction. Largecaps, where valuations had gotten stretched, have started cooling off.“The overall sentiment is negative at this stage. If institutional investors in particular have to take out money, these are the stocks which will take the hit,” the market veteran pointed out.Relli, whose career spans over two decades, said India’s economy has slowed down in last couple of quarters, but the market was slow to accept this reality. Earnings growth , on the other hand, has made a mockery of consensus estimates in last few years, as they kept on getting revised downward every year.Currently, consensus analyst estimate for earnings growth is in the high teens (at 18 per cent) against 22-23 per cent estimated at the start of FY20.“In March quarter, GDP growth stood at 5.8 per cent while nominal GDP was down by 300 bps. It used to be 12 per cent, but now it is 9 per cent. This 25 per cent correction in nominal GDP has created a lot more stress in the market,” Relli said.For those looking to take a plunge in midcap and smallcap stocks, Relli has a word of caution: only seasoned investors who understand what quality is will make the most of the opportunity, while for part-time investors, it would not be an easy ride.“If one does not have the ability to differentiate quality or identify solid businesses, passive investing in Nifty Junior or the midcap index, that too in a staggered form, would be the best option,” Relli said.Relli said his company has an opportunity to do a lot of stock picking as valuations have corrected significantly to mean levels. “Across sectors, some stocks are looking very attractive. But investors who have no access to professional advice can take the mutual fund route and should go in for passive investing in midcaps and indices,” he said.Relli has been with HDFC Securities since 2015.The market veteran said if there is positive resolution of a few big debt cases, it would be a positive for PSUs and corporate-focused banks.“Corporate-facing private banks are a better story because they will continue to gain market share vacated by NBFCs and from continued reduction of market shares of PSU banks. The last quarter was an aberration, and commentaries of some of the banks show there will be some slowdown in the retail space, which may be compensated by corporate lending,” Relli said.India is a penetration story. Penetration of consumer durables and discretionary is still low. This is another sector where Relli hopes to see good growth.“The government thrust on the infrastructure sector should help. IT is one space where we still are not seeing double-digit growth; we may struggle there. We expect volume pickup in FMCG post monsoon . Higher government spending should aid volumes,” he said.Even though Dabur ’s commentary was not positive, the numbers were good. Even for Avenue Supermarts, same-store sales were good. “We do not see any big stress there,” he said.Pharma is still having a regulatory overhang. Relli said, adding he would probably give this space a miss.The primary market suddenly has a long queue of IPOs, which has baffled market watchers as the IPO mart generally comes alive when there is momentum in the secondary market, especially in midcaps and smallcaps. While a host of IPOs have been lined up, except for a few quality issues, others might get delayed by at least two quarters, Relli said.“I do not think we will have a great primary market for next two quarters. One or two quality issues may come and get subscribed, but we will not see significant activity. Primary market activity will follow the secondary market. Here a bigger concern is promoters’ greed, as they have been pricing issues to perfection in the past and that has led to a lot of non-performance or underperformance as well as post-IPO correction in stocks, a trend that has not gone down well with investors,” he said.