Let me divide the market in just three words – buy, sell and hold. Considering the current market, what is in the buy zone, what is in the sell zone and what is in the hold zone?
I believe that this continues to be a buy on dips market. We have seen that there has been a steep price correction in several sectors and several stocks have become even more attractive post this round of correction. We still believe that it is going to be business as usual and life as usual. We believe that some of the businesses around consumer and around unlocking and those powered by digitisation and the internet will continue to thrive in this kind of environment.
In addition to that, add the businesses which I would associate with socialising like the alcoholic beverages space, food stuff and snacks. These categories again look very attractive. One interesting sector which has caught our attention in recent times has been the media space, especially the news broadcasting space and that is where some of our recent additions have been. So lots of sectors and businesses have come into the buy zone.
In terms of the sell zone, one has to keep in mind that metals probably have run their course, they may give a bit of trading rallies here and there, but I do not see any kind of material upside. Metals of course have done extremely well, especially the ferrous space. It continues to be a sell zone especially for somebody who is running an investment kind of style.
In terms of hold, the technology space has appreciated quite well. A lot of tier II IT services companies are more of a hold now rather than an aggressive buy.
Is the current leg of decline, 10% on the index, 15-20% in individual stocks — what you have been waiting for? In and around Diwali, stock prices were reaching an overbought and priced to perfection zone. Midcaps had almost become Humpty Dumpties.
Yes and why the indices have corrected quite a bit with some players or some investors getting into basically a risk-off mode and things of that kind for concerns around the latest variant of the virus or maybe even concerns around rate hikes and the taper. The concerns have been multiple and these are not concerns which are in a way going to materially impact the fundamentals. We continue to believe that we would be able to deal with whatever the next round of the virus brings in. I continue to believe that the interest rate environment at least in India will continue to be benign. Overall, strong demand across both pockets of urban India as well as rural India continues. Monsoons have been good. Rural economy has been strong.
In addition to that, on the urban side, we have seen very strong hiring by companies — wage hikes and salary hikes happening and so across the board, we are seeing a lot more disposable income out there. With disposable income going up, there will be more spending which is good for a lot of the consumer facing businesses.
Lower interest rates essentially are going to continue to give a push to infrastructure with tailwinds of a lot of government policies. So capex also looks very attractive, especially the whole theme around decarbonisation.
So far India has been more around demographics, of late it has been also around digitisation. We now have the third D coming in which is decarbonisation. That itself is essentially going to unveil a huge capex cycle in India. So across the board I clearly believe that this correction is not an adversity, it is only an opportunity.
Credit: economictimes.indiatimes.com – Source link