November has been a blockbuster month for equity market as both the key indices - Sensex and Nifty 50 surged close to 12% each. Positive global cues coupled with reports of development of effective Covid-19 vaccines supported gains.
In terms of sectoral gains, while the banking sector funds delivered the highest (18%) returns in one month, technology sector funds at 1% delivered the lowest.
Fund managers believe markets will continue to remain strong in December on the back of positive economic outlook.
What to expect
Ashutosh Bhargava, Fund Manager and Head Equity Research, Nippon India MF
- After a strong rally, market may remain rangebound in near term
- However, broader market may continue to outperform supported by strong earnings
- Market does not seem cheap on most metrices
- However, equities are still attractive versus bonds and that's the key support for higher valuations
Atul Bhole, Senior Vice President and Fund Manager, DSP MF
- Currently, Covid-19 vaccine success rates, massive liquidity & fund flows are supporting Indian equity market
- Equity outlook looks promising from the top-down basis based on domestic recovery, fiscal position and strong external balance situation
- Considering sharp rally in past 3-4 months, market may consolidate in a narrow range with sector rotation taking place in the near term
- At present, the market seems expensive but there are good opportunities, some amount of broad-basing of rally can happen given a conducive outlook for equity assets
Krishna Sanghavi, CIO - Equities, Mahindra Manulife MF
- While the festive season has clearly been better than expectations, the real test starts in the next few months which will give a clarity about the pick-up in demand
- Also, with worries surfacing about second wave of covid, it would be a better idea to wait and watch
- Due to uncertainty in covid situation which ultimately impacts the economic situation, expect moderate gains in near term
- Valuations seem a bit expensive currently because of significant surprise in the earnings in the first half of current financial year
- Contrary to all expectations, Indian corporates have had a very good earnings growth as cost cutting has really helped companies grow margins and profits
- Markets typically are not expensive on the whole and they offer a wide range of expensive, fair and attractive sectors/companies to invest in
Meeta Shetty, Fund Manager, Tata MF
- Visible signs of recovery on the economic front, whether it be the supply side indicators like cement, electricity, coal production or demand side indicators like diesel/petrol consumption, retail foot traffic or tractor/car/two wheeler sales
- September quarter too was an above estimate quarter for Nifty 50 and this is giving a lot of comfort on the outlook for current quarter
- Management commentaries have been positive both on revenues as well as margins, as most managements expect Covid led cost saving to partly sustain in future
- Currently, financial year 21/22 earnings growth estimates are ranging round ~5%/30%+. As most severe earnings cuts were in financials, there is a possibility of further upgrade as economic recovery broadens
- Increase in covid cases and future lockdowns is a risk to the upgrades and current estimates but current data suggest India probably has already seen its peak
- Near to medium term, incremental positive data both on economic and quarterly results should keep the momentum strong
Commentary on sectors
Ashutosh Bhargava
- Materials, financials and IT may do well on improved earnings momentum and relatively better valuations
Atul Bhole
- Even after the recent rally in financials, there are good opportunities at very reasonable valuations in banking space
- Based on long leeway of growth & strong business fundamentals, recommend sectors like pharma, cement, FMCG, chemicals
Krishna Sanghavi
- Next 2-3 months are expected to provide clarity about pace of economic recovery and to that extent from a very near term perspective, sectors like consumers, pharma, IT could be better
Meeta Shetty
- Overweight on pharma, chemicals and cement
- Underweight on IT and financials
What to recommend
Ashutosh Bhargava
- Multicap or midcap funds look best placed in the current environment. For conservative investors, asset allocation products like balance advantage funds or multi asset funds offer good risk reward
Atul Bhole
- Large & midcap, multicap or aggressive hybrid funds
Krishna Sanghavi
- Mid cap and multi cap funds
Meeta Shetty
- Systematic allocation to multi-cap funds and balanced advantage funds
