scorecardresearchBrace for volatility; higher crude may cause stagflation, says Trideep Bhattacharya of Edelweiss AMC

Brace for volatility; higher crude may cause stagflation, says Trideep Bhattacharya of Edelweiss AMC

Updated: 20 Apr 2022, 10:32 AM IST
TL;DR.

  • Bhattacharya raised concerns over high inflation and said that it will have significant implications on the earnings of Indian firms.

Bhattacharya said if the crude oil prices remain elevated for an extended period, it will erode consumer demand and the country may even face the situation of stagflation.

Bhattacharya said if the crude oil prices remain elevated for an extended period, it will erode consumer demand and the country may even face the situation of stagflation.

The market may witness high volatility in the first nine months of the year and investors should invest in tranches rather than in a hurry, said Trideep Bhattacharya, CIO, Edelweiss AMC in an interview with ET Now.

"In the medium term, we remain quite positive while in the first six-nine months of the year, we are asking investors to take a more graded look and to invest more in tranches rather than trying to be in a rush," said Bhattacharya.

Bhattacharya raised concerns over high inflation and said that it will have significant implications on the earnings of Indian firms.

"We will see a result season where on one hand, the commodity users will see the impact on their earnings and on the other, commodity earners would see a positive rub-off on their earnings. That is getting reflected in the form of volatility in the overall market," he told ET Now.

"The impact of inflation on the financials of India Inc. is yet to get fully factored in and I think that will probably start getting factored in by the end of the June quarter," he added.

Bhattacharya said if the crude oil prices remain elevated for an extended period, it will erode consumer demand and the country may even face the situation of stagflation.

"Come Diwali, if we still see oil lingering around $120 plus, then all bets are off. There is academic evidence to prove that if oil sticks around $120 plus over more than nine months, there is reasonable chance of demand destruction not just in India but globally and India would be not left out in such circumstances. In those circumstances, there would be demand destruction, more stagflationary situation, more recessionary conditions overall and we should be worried about that," he said.

Bhattacharya is positive on domestic cyclicals sectors such as industrials, lending financials, direct and indirect plays of real estate but neutral or negative on IT, pharma, consumer and utilities.

"In terms of sectors, domestic cyclicals in the form of industrials, lending financials, direct and indirect plays of real estate are that we are positive on from a portfolio construction standpoint. On the other hand, we stay neutral to negative in pharma, IT services, consumer staples and utilities," said Bhattacharya.

He is also positive on mid and smallcaps for the medium term anticipating good economic growth.

"If I were to take a one-year view, I would be market cap agnostic but from a medium-term standpoint – three- to five-year outlook – given that my view on the Indian economy is constructive, we would think that the midcaps and the smallcaps certainly deserve a place in investors asset allocation," he told ET Now.

Disclaimer: This article is based on an interview done by ET Now. The views and recommendations made above are those of the analyst and not of Mint Genie.

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First Published: 20 Apr 2022, 10:32 AM IST