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Equity market investors had a bad time in June as sharp corrections wiped out returns generated over the last one year. Overall, Sensex and Nifty declined over 5% in the last month (as on June 30). Reports cited rising inflation, aggressive tightening of rates by central banks and FPI outflows as the key reasons behind the sharp fall in the market.
With no relief in sight on the inflation front, will equity markets have any reason to cheer in July? Also, if the situation remains unchanged, which equity funds should investors look at? Let's look at what experts have to say:
Ashutosh Bhargava, Fund Manager and Head of Equity Research, Nippon India MF
- Market is likely to remain range bound in the near term owing to a lot of factors from domestic to global
- Given that we are at the midst of earnings upcycle, valuations are reasonable compared to 6 to 9 months ago levels
- Key positive triggers to look out for — positive development on Ukraine/Russia conflict, a resultant decline in crude oil prices and softening of hawkish stance by major central banks
Srinivas Rao Ravuri, Chief Investment Officer, PGIM India MF
- High inflation, liquidity tightening across the world and concerns of global slowdown are likely to keep the market volatile in the near term
- Expect corporate earnings and price to earnings multiples to take a hit due to hardening of rates
- If the situation in the US market worsens, impact will be seen across the world. However, the impact on Indian economy should be minimal in the medium term
Vinay Paharia, Chief Investment Officer, Union AMC
- We need to be cautious in the near term, given that domestic demand growth has started to decline and supply side bottlenecks are still in place. As a result, inflation is high and central banks are under the compulsion to hike rates
- The resultant reduction in liquidity and the rise in ‘cost of equity’ is bad news for the stock market. However, economic growth is likely to bounce back in the medium-term
- Given the discounted valuations at present and expectations of revenue growth in the future, we are optimistic on equities in the medium-to-long term
- Positive triggers to look out for — softening of inflation, stability in global interest rates and acceleration in economic growth
Commentary on sectors
Ashutosh Bhargava
Optimistic on large banks and insurance, capital goods, autos and real estate
Srinivas Rao Ravuri
Pharma, financials and auto are some sectors that have growth potential and relatively less impacted by global turmoil. Their valuation is also reasonable
Vinay Paharia
We are bullish on financials (given the expectations of credit growth), consumer discretionary (as they are likely to benefit from easing supply-side bottleneck) and industrials (due to expectations of an uptick in private capex)
Fund recommendations
Ashutosh Bhargava
There is value in select companies across market caps hence a multicap or flexicap fund should be the preferred choice. Balanced advantage fund is also a good option
Srinivas Rao Ravuri
Flexicap and balanced advantage are well suited for the present scenario as they have the ability to position the portfolio as per changing market environment and trends
Vinay Paharia
Flexicap funds as they invest almost all their assets in equity markets
