In recent times, markets have found it tough to hold on to the higher ground, said Christopher Wood, global head of equity strategy at Jefferies in an interview with Business Standard. Wood added that he has been looking to raise his India weighting and will buy Indian equities if the Nifty drops to around 14,000 or 14,500 levels.
Amid the current environment, he advised that investors should look to sell stocks on a rally in the short term.
"Nifty can slide to these levels in case the US Fed does not alter its course over the next few months. India does not have the same inflation-related problem structurally as the US. That said, one cannot rule out the rising inflation in India, which needs redressal. A risk for the Indian markets is a sudden rise in crude oil prices due to any geopolitical issue. Another thing one needs to monitor is how long domestic institutions and investors continue to absorb the foreign selling," Wood told BS.
He further stated that there is a chance of retail investors and domestic institutions starting to panic and exit if the Nifty50 can slip to the 14,000-mark. However, he expects foreign funds to start buying at that level.
"Foreign investors have been selling Indian equities for many months now; and for me, 14,000 on the Nifty will be when the foreign money will start to come back in," he said.
Among sectors, he told BS that right now, his favourite sector is energy, however, he reiterated that his core holding remains private banks.
For the short-term, he told BS that he still maintains the view that investors should look to sell stocks during a rally.
"What will see the markets rally is a sudden end to the Russia – Ukraine conflict as it will ease supply pressure across commodities. Crude oil prices, too, may soften. Though all this may trigger a relief rally in the markets, there is no evidence of this happening as things stand. Right now, the best outcome looks like a stalemate. That said, the best bet for a sustained equity market rally before the year ends is a possible change in the US Fed’s language," he noted.
Talking about the US Fed's latest policy, Wood noted that the US Fed has been zpressure to do something about inflation since the fourth quarter of 2021 (Q4-CY21). Rising prices have been the biggest concern of Americans, opinion polls show; and people are blaming the administration for this, he said.
As a result, the US Fed is doing a massive catch up. Once the implications of the (monetary policy) tightening become clear in the next few months, then the political pressures may change and the US Fed’s stance may also change as a result, he further explained.
