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MF News Nilesh Shah talks about the market turnaround from ‘Mughal-E-Azam’ to ‘Om Shanti Om’

Nilesh Shah talks about the market turnaround from ‘Mughal-E-Azam’ to ‘Om Shanti Om’

Nilesh Shah shares how in in the last 4-6 weeks the macroeconomic factors have turned in the favour of India.
Shreeta Rege Dec 10, 2018

In a press conference held today, the Kotak MF team presented their market outlook for 2019.

Nilesh Shah, MD - Kotak MF gave a filmy twist to the macroeconomic outlook. Reminding the journalists of the iconic Mughal-E-Azam dialogue ‘Salim tujhe marne nahin dega aur hum Anarkali, tujhe jeene nahin denge’ (Salim will not let you die and Anarkali, I will not let you live), Nilesh shared that we were amidst a Mughal-E-Azam market during the last few months.

He shared that  a few factors such as high oil prices and expensive valuations, which restricted market’s rise. Balancing them were good monsoon and improving corporate earnings, which limited market’s fall.  This seesaw between the positives and the negatives kept markets range bound. However, in the last 4-6 weeks there has been marked improvement in fundamentals. Correction in oil prices by close to 25%, appreciation in Rupee, dovish US Fed announcement, 90 day truce in tariff war, improvement in banking liquidity, fall in interest rates, correction in valuations are all positives for India growth story. He said that this reversal is akin to the universe conspiracy to turn things in favour of Indian markets. Mentioning the famous Om Shanti Om dialogue ‘Agar kisi cheez ko dil se chaaho to puri kayanat usey tumse milane ki koshish mein lag jaati hai’, which echoes the same sentiment, he said that we are now part of the Om Shanti Om markets.

Subsequently, he shared that the recent US –China trade woes could lead to a supply chain disruption. This could be an attractive opportunity for India to improve its manufacturing base and grab some market share from China. According to him, this could be similar to the Y2K opportunity, which made India the IT hub.

He advised investors to play contra in the short-term i.e. if markets believe that there will be a stable government, book some profits and re-invest once the event transpires. On the other hand, if markets predict a doomsday then it’s better to stay put as majority of the negatives are already priced in.

Next, Harsha Upadhyaya, CIO – Equity, and Anshul Saigal Head – PMS, SVP Portfolio Manager talked about the current happenings in equity markets and the opportunities in mid and small cap space.   According to Harsha, in the immediate term, domestic politics and global scenarios will guide market. Investors can utilise this near-term volatility to build their long-term equity allocation. 

The team is currently bullish on engineering, capital goods, cement, private banks and gas and sceptical of further growth in consumption. In addition, they are bearish on telecom, media and entertainment. They are particularly positive on the mid and small cap segment, which offers better risk-reward proposition post recent correction.

Subsequently, Lakshmi Iyer, CIO (Debt) and Head Products discussed the debt market outlook. Lakshmi shared that the positive tidings in November have been like a sanity check for the markets. Owing to the change in fundamentals, the team is positive about the long-term outlook. While the graded decrease in SLR will reduce the g-sec demand to some extent, expectations of continuing OMO operations, increasing interest of foreign investors will help support g-sec yields. 

Talking about the short-term rates, she shared that the open market operations and receding fears of NBFC crisis have contributed to the fall in short-term rates. She feels investors having a slightly longer tenure should wean away from liquid funds and invest in short to medium duration funds as the rates in those buckets are substantially more attractive.

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