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Equity markets remained volatile last month due to rising inflation, hike in interest rates and geopolitical issues. While foreign institutional investors continued their sell off spree, domestic investors both institutional and retail gave much needed support to the markets through their purchases.
In such times, what can we expect from the equity markets in the coming month?
Here is what industry experts have to say:
Gaurav Misra, Co-Head Equity, Mirae Asset MF: Investors with over one-year horizon can get better returns from equities.
Markets may remain volatile in the short term and there is no strong near view. However, investors with a one year plus horizon can get comparatively better from equities.
Overall, valuations have corrected across capitalisations and become more reasonable. In addition, there could be a reversal in any of the recent unfavourable dynamics like global crude oil prices, elements of supply shock inflation and geopolitical issues. However, investors should avoid timing the market on the back of some expected trigger.
Currently, we are bullish on banking, insurance, select non-banking finance, automobiles, consumer durables, home building and select pharma models. We are positive about stronger business typically found in the mid cap and large cap space. We recommend assigning a predominant weightage to multi cap and large cap categories.
Sachin Relekar, Senior Fund Manager-Equity, IDFC MF: Any correction provides a suitable market entry point through lump sum investing.
In the medium term, the market could remain volatile predominantly due to the likelihood of tightening of liquidity from major central banks. Rising inflation and interest rates, geopolitical issues led by the Ukraine-Russia war and a slowdown in China's economy could have significant impact on markets.
However, long-term opportunity in overall consumer discretionary is robust. Digitization and cloud adoption could be medium to long-term opportunities in the IT sector. Commodities/materials comprising speciality chemicals and building materials (cement, steel, and plastic parts) have specific drivers for medium to long-term value creation.
We recommend a staggered investment approach through SIP and STP for first-time investors. However, any correction provides a suitable market entry point through lumpsum investing. From the long-term perspective, first time/conservative Investors could opt for balanced advantage funds, flexi cap funds, multi cap funds and ELSS. Seasoned equity investors could invest in value funds and large & mid cap funds based on their risk tolerance.
Sorbh Gupta, Fund Manager - Equity, Quantum MF: In tougher times, larger companies can manage risks better
Inflation, crude oil prices and interest rates are the key triggers for the market hereon. Considering rising inflation, some companies have already started passing on price hikes. Besides, India imports most of its crude oil requirements and its price will impact consumer balance sheets. Also, interest rates (repo and reverse repo) are likely to go up but the pace at which they will rise is unpredictable.
Historically, in tougher times larger companies can manage risks better and are less volatile than small caps. Thus, large caps make more sense currently.
Also, there is an expected cyclical uptick for the next three-four years that the economy will see and valuations in cyclical stocks/sectors appear comfortable. We are bullish on banks where the balance sheets and capital levels are much better. We are also positive about consumer discretionary like two-wheelers and the utility sector.
With at least a three-year view, we recommend a value fund with a 15-20% allocation. Investors could build other strategies like mid cap and growth around this anchor fund. They could also add thematic styles like ESG to their basket.
Yogesh Patil, CIO-Equity, LIC MF: Investors should focus on the medium to long term potential and value creation.
While uncertainties related to inflation, rising interest rates and geopolitical events may continue to create volatility in short term, investors should focus on the medium to long term potential and value creation. We believe that formalization, consolidation, digitization, urbanization, Make in India (China+1 Policy) and certain structural changes will continue to support India’s growth story in the long term.
Valuations have corrected across the spectrum. But instead of focusing on market capitalization, it makes sense to look at stock-specific valuations. Some of the sector leaders are available only in the small or midcap space.
We are positive on domestic consumption, private banks, IT, chemical and export-oriented companies, and believe that large and midcap funds can address most of investors’ requirements.
