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Inflation, global events and policy rates continue to raise questions in the minds of many. In such times, which sectors and which funds should you look at?
In this regard, Cafemutual spoke to industry experts to help you get answers to these concerns. Read on to know their views.
Alok Singh, Chief Investment Officer, BOI MF
Overview - The market has aggressively discounted inflation, supply issues due to the Russia-Ukraine war and resultant RBI actions. This means the market should stabilise at current levels and may react as incremental data. Most likely the reaction would be positive if there is no new dimension to the above.
Currently, there is comfort on the valuation side. Small cap and mid cap have corrected more than large cap and are quite rightly priced. Their valuation is thus more attractive than large cap.
Sectoral views - Corporate lending banks, capital good companies and the automobile sector look positive.
Recommended fund categories - Mid and small cap categories with at least a 5-year view. For risk averse investors, large cap and balanced advantage funds make more sense.
Neelotpal Sahai, Head Equities, HSBC MF
Overview - While market valuations are now reasonable, they cannot be considered cheap yet. Over the near term, market to remain volatile due to uncertainties around inflation, resultant central bank policy actions, growth moderation and volatile input prices driven by geopolitical conflict.
Many of these factors are inter-wined and could adversely impact the drivers of equity performance namely valuations (given rising interest rates) and earnings growth (slowing demand & inflation).
Sectoral views - Financials followed by auto and real estate appear bullish. Technology, chemicals and healthcare have smaller overweight. Additionally, capex oriented players (cement, industrials, and building materials) appear optimistic.
Recommended fund categories - Investors with a higher risk appetite and a longer investment horizon can consider flexi-cap/focused funds while investors with a lower risk appetite can opt for aggressive hybrid or large cap funds.
Sachin Relekar, Senior Fund Manager-Equity, IDFC MF
Overview - Near term market movements will be dependent on rate actions and central banks’ guidance. Additionally, the direction of energy prices will be a near-term trigger for the markets. Also, earnings season is underway and earnings downgrades can be a further dampener on the sentiments in an already risk-off sentiment market.
Valuations have moderated from the elevated levels at the start of the year. However, macro concerns are likely to weigh on the sentiments.
Sectoral views - Financials, IT services and auto are the key sectors to look at.
Recommended fund categories - First-time/conservative investors can look at balanced advantage, flexi cap, multi cap and ELSS from the long-term perspective. Seasoned investors could allocate to value and large & mid cap.
Tejas Gutka, Fund Manager, Tata MF
Overview - At this juncture, the near term outlook is balanced. There are no expectations to see a big upside nor an overtly bearish market. However, incremental data flow will decide the direction in which this balance tilts.
Fundamentally, the triad of inflation, interest rates and earnings growth are the key triggers for the market. Also, global macro bearings, currency and geo-politics can impact the markets in the short term. Besides, the ongoing tug of war between rising interest rates and slowing equity market returns can potentially impact retail flows, which in turn will largely decide the fate of the markets in the near term.
Sectoral views - Banking, automobiles, real estate, building materials, and capital goods appear bullish.
Recommended fund categories - As prices and valuations are coming off from their highs, pure equity funds over hybrid or balanced categories would be better. At current prices, opportunities exist across all market caps. At lower levels, it makes sense to increase allocation towards small and mid cap depending on risk profile and overall asset allocation framework.
