The Ukraine crisis has led to a new headache for markets as economies were finally getting back to pre-covid normality. The uncertainty around the conflict along with talks of interest rate changes globally, inflation and rising oil prices led to high market volatility in February.
With no resolution in sight for the Ukraine crisis, will the markets continue its volatile run in March? What are the other major triggers and which sectors are likely to do well?
Here's what fund managers have to say.
What to expect
Cheenu Gupta, Fund Manager — Equities, L&T MF
- Corrections in the last 6 months has resulted in some comfort in valuations. However, markets are still around 35% higher from pre-covid levels
- Expect a brief rally post the correction due to Ukraine crisis. From here on, only selective stocks may see upside unlike the broad run up till a few months back
- Companies with good execution capabilities can continue to gain market share resulting in better earnings and rise in stock prices
- Geo-political issues and inflation are the biggest concerns. Easing of Ukraine tension and increase in rural income can give much needed boost to the market
Chintan Haria, Head - Product Development & Strategy, ICICI Prudential MF
- Despite equity valuations correcting from record highs, they are not as cheap as they were during March 2020
- Short-term outlook remains unclear due to the Russia-Ukraine conflict. In case of an early resolution, there could be a short-term trading rally
- We are cautious in the medium term due to US Fed-related uncertainties. The long-term outlook remains strong given India's robust structural story
Jinesh Gopani, Head of Equities, Axis Mutual Fund
- Presently, there are a lot of uncertainties. Markets may remain volatile for the next 4-5 months
- Apart from the geo-political issues, markets will be guided by Fed decisions on interest rates and the oil price trajectory
- Future performance of stocks will depend on earnings growth and impact on margins due to rise in raw material costs
Commentary on sectors
Cheenu Gupta
- Discretionary consumption is likely to do well due to rising salaries and job additions in the formal sector
- Auto, real estate, retail, hospitality and services are expected to benefit from pent-up demand and rise in disposable income
Chintan Haria
- We are positive on corporate banks, autos, power, telecom and pharma
Jinesh Gopani
- Technology, financials and consumer discretionary are likely to do well in the near term
What to recommend
Cheenu Gupta
- Multicap and large & midcap funds are good options presently as they have the flexibility to pick winners across market caps
Chintan Haria
- Largecaps seem to be better placed right now compared to mid and small caps. Hence, largecap funds should be preferred
Jinesh Gopani
- Investors can go for multicap funds. They provide the best of all the three segments — largecaps, midcaps and smallcaps
