Nishit Master, Portfolio Manager, Axis Securities PMS, believes the Indian market will remain volatile in the near term as growth slows down globally and in the country while inflation remains sticky. However, he expects the second half of the year to be better.
In an interview with MintGenie, Master pointed out that the Adani Group saga dented retail investor sentiments more than it affected institutional investors or mutual funds. It is virtually impossible to time the market, so keep investing regularly, he advised investors.
Edited Excerpts:
Where do you see the Indian market headed in the next few months?
We believe Indian markets will remain volatile in the near term as growth slows down globally and in India while inflation remains sticky. The second half of this year will be far better than the first half as macro headwinds settle down and India's growth story remains intact, which will help attract global flows.
Is it a good idea to allocate money to debt/bonds from a one-year perspective?
Since the interest rate cycle is close to peaking out in India in the next quarter, it makes sense to invest some part of the portfolio in medium/long-dated bonds from a one-year perspective where there is a possibility of making capital gains.
How seriously have the developments with the Adani Group dented investor sentiment, both for foreign and domestic investors?
Development with the Adani Group has mainly dented retail investor sentiment as most of the Adani Group stocks were owned by retail investors and ETFs. Ownership of Adani Group stocks with actively managed mutual funds and PMS was very thin. There has been a concern in some quarters of the market about the impact on the banking sector due to the Adani Group, but we feel that these concerns are overstated, and the Indian banking sector is well placed in the current environment.
FPIs have remained net sellers this year with the money moving to Chinese markets instead of India. How long will this trend continue?
With China opening up after Covid, there was an expectation amongst global investors that there will be a spurt in growth after a couple of years of intermittent lockdowns, as seen elsewhere globally when a particular country opened up after Covid. This development led to FPI inflows in China. The evidence from China has been mixed after opening up, and there is a high possibility that the growth spurt post-opening up might not materialize to the expected extent. If the growth expectations from China start moderating, money will start flowing back to India as India remains the fastest-growing major economy globally. In an environment where global growth is slowing, FPI money will chase growth.
What will help the FPI flows return to Indian equities?
Once we start witnessing the global economy slowing down, including other emerging markets like China, we believe FPI investments will again start flowing to India to chase growth. Another trigger for FPI flows returning to India will be interest rate cuts by global central banks which seem unlikely in the immediate future.
Has the December 2022 quarter earnings played out well, according to you? What were some major surprises or shocks in Q3?
December 2022 quarter earnings have been slightly lower than estimates. Some disappointing sectors are metals & mining, oil & gas, industrials, and telecom, while auto, banking, power, and FMCG surprised positively.
Is it a good time to buy new-age companies after the correction seen in the last 12–18 months?
One needs to be careful in buying new-age companies despite the correction seen in the last 12-18 months. One should bet on companies that have a visibility of sustained cash flow generation, while also not compromising on growth to a great extent. Amongst new-age companies, we own One 97 Communications (PayTM) as part of one of the strategies we manage.
IPOs have reduced massively in 2023 due to volatility. What’s the road ahead for the primary market over the next few quarters? When do you see the trend improving?
Since we expect volatility to continue in the near term, we expect primary market activity to remain lackluster during this time, but once we start seeing the market stabilizing, most likely in the second half of this year, primary market activity should pick up.
What are the key risks markets are ignoring at current levels?
There is a possibility that inflation globally remains sticky and starts inching up again, which can lead to higher interest rates globally for a sustained period, significantly affecting growth. Another risk is some emerging markets facing significant dollar shortages, signs of which are already emerging across Asia and Africa. In case one of the major emerging economies faces a USD shortage and defaults, it can have a domino effect on other emerging economies, which are currently ignored by the market.
One key piece of advice for new investors?
My advice to investors is that it is virtually impossible to time the market, so keep investing regularly and maintain a disciplined approach to investments to grow your long-term wealth. Discipline is as important as, if not more than, the right stock picking, to generate returns in the equity markets.
