What are your thoughts on the overall market construct? While we have already fallen about 6% odd from the October highs, is there further elbow room you think for the markets to ease off?
Markets need to give up some more gains for them to come to a sustainable level where we can find a durable bottom because although the current correction has happened from the top, on a monthly basis, since February, we have not had even a single month where the market has actually fallen even 1% including the current month, if we assume that the markets were to close around the current levels at the end of the month.
So this is no correction. On a few weeks’ basis markets have corrected, but month-on-month, there is no correction. So some froth needs to go out. If you look at what is happening to the recently listed IPOs like the Paytm stock faced selloff but then it got bought aggressively at lower levels and the other listed companies which have similarly high valuations and concerns and lack of profitability concerns, are still sustaining at very high levels. So euphoria has not gone out of the market from the retail investor perspective. Until that happens, the rest of the market will remain. In the recent past, macro developments have not affected the market so much.
Historically there was a very high correlation between the rally and the US dollar index. The US dollar index rallies and emerging market corrections were very closely interlinked to each other. Some emerging markets have corrected because of that, but India has hardly corrected. Normally such strong moves in the US dollar would lead to significant selloffs. The rupee also has been absolutely stable. It has not budged at all. That is another risk and a huge amount of FII outflows is getting balanced due to domestic flows. If it continues, we could reach a level some days or weeks down the line and markets give up substantial gains and that will give an opportunity to deploy the cash.
If we were to decline further, what would you be tempted to buy?
Some good private sector banks have corrected substantially and they are giving up a lot of gains. That is where I see an opportunity to buy. I am not saying buy them now, I still think that if markets correct, more financials will keep on leading the fall. That is where an opportunity will come in the form of larger sized private sector banks.
I am positive on some companies like Mahindra & Mahindra. As the markets correct, if it again comes back to around Rs 850 level, then it will be a good investment opportunity for investors to buy for the next couple of years.
In telecom, is one of our top holdings but it is not giving up any of its gains and might not correct so much, given the developments in the industry. An investor should keep a look out for some bad day and keep on allocating to that. And then there is the entire capital good, infrastructure story which I think is becoming stronger and the valuations are still reasonable. That is another segment investors can have a lookout on.
Credit: economictimes.indiatimes.com – Source link