Markets have been very volatile lately and Vinit Bolinjkar, Head of Research, Ventura Securities believes the volatility is here to stay. Bolinjkar sees the IT sector is poised for long-term growth but the market seems to be factoring the effect of wage hikes in the IT sector. Edited excerpts from an interview:
Markets have been very volatile in recent times, till when do you think this volatility will last?
The recent indication of the change in stance by RBI from accommodative to less accommodative is what is driving volatility in the market. We believe that volatility is here to stay in the short run given nervousness around FED tapering, after-effects of Russia Ukraine war, etc.
What is your Nifty target for December 2022?
We believe that it is a futile exercise to provide Nifty target. However, directionally we believe that trend will remain negative from hereon.
What is the main reason behind the recent market volatility?
As already highlighted above, we believe RBI raising interest rates, FED tapering, and after-effects of Russia Ukraine war is driving volatility in markets.
Why are the IT stocks witnessing a negative trend? The TCS results were strong, still, the market reaction was not as it should have been, or was after the Accenture results. Why was it so?
The market seems to be factoring in the effect of wage hikes in the IT sector. Also, the attrition level for the company stood at a high level of 17.4% which has been viewed as highly negative for TCS. Also, since most of the positives have been factored in for the IT companies, investors are now booking profit.
Are you bullish on the IT sector currently? What are its positives and negatives?
While structurally the IT sector is poised for long-term growth but in the short run, we believe that most of the positives have been factored in the price and hence it is better to book profits and sit sideways.
Which sectors should investors bet on in the current scenario and why?
One can take positions in defensives like staples or companies which have a low debt-to-equity ratio in times of rising interest rates.
In the upcoming earnings seasons, which sectors would you bet on? Any favorite stocks?
Metals. We like Tata Steel, Hindustan copper, and Hindalco.
Midcaps and small-caps have outperformed largecaps in recent times, do you think this trend would continue?
Generally in a rising interest rate cycle, large caps outperform mid and small-cap stocks. We believe that the same trend should continue even this time.
Should investors focus more on mid and small-cap stocks or continue focussing on the safer largecaps? what do you think?
We believe that in a rising interest rate cycle, one should bet on large caps over small and mid-caps.
What sudden event, according to you, in recent times, can lead to a huge crash in Indian markets?
We do not see any reason for a major crash. However, time corrections are bound to come given current high valuations.
How do you expect the March quarter earnings to be?
We expect it to be robust for metals and commodities. For IT companies, markets have already factored good numbers in current prices. However, consumer companies' results should show some disappointment given the rise in crude oil prices and inflationary trends which should affect volumes.