We should be happy if Nifty closes 2022 somewhere around 18,000-18,250, said Deepak Jasani, Head of Retail Research, HDFC Securities. In an interview with MintGenie, he said that a sharp sell-off is unlikely before the end of this year though a small correction is overdue. Given the attractive rates on fixed-income instruments, now is a good time to allocate appropriate amounts into adebt portfolio for 3-7 years, he suggested. Edited Excerpts:
Do you think 2022 will have a tepid ending or will the year end with highs for the market?
Given that we are about 6 percent positive for 2022 after gaining 24 percent in 2021, we should be happy if we close somewhere around 18,000-18,250 for the year. Going by the currently known triggers, a sharp sell-off is unlikely before the year end though a small correction is overdue.
Is this a good time for investors to buy/accumulate stocks? How can they take advantage of the rally?
For investors who are under-invested in equities, any time is good enough to top up, although a staggered buying would be advisable for them. They may also review their equity portfolios and take some profits out of stocks that have outperformed very well over the past two years and raise some cash for deployment after a decent correction. Similarly, they can look to exit stocks (irrespective of profit or loss) that have not performed in these good times after checking the reasons for the underperformance.
Apart from equities, what other assets are you bullish on?
Given the attractive rates on fixed-income instruments, now is a good time to allocate appropriate amounts into a debt portfolio for 3-7 years. Investment in gold (5-10% of portfolio) as an asset diversifier strategy is also suggested.
Which investment themes or sectors would you recommend to investors?
BFSI (credit cycle now recovering and asset quality under check), Pharma (worst of export performance seems behind and domestic growth remains robust), Capital Goods (Govt capex has kicked off, private sector to follow suit even as capacity utilisation remains high), PSU (focus on improvement in business parameters and robust order flows) look good to accumulate on dips.
Also, which sectors should investors avoid?
Metals, Oil & Gas may be avoided for a few more quarters.
Small and midcaps also witnessed some selling – how should one play this theme?
This space offers the best alpha over time and hence the tendency to keep looking at this space. Small and Midcap stocks had run up quite well between June and Sept 2022 and in some cases, their valuations ran ahead of time. Also, some of these stocks posted unencouraging numbers in Q2FY23 results. This led to some of these stocks underperforming. Investors need to keep checking the growth rates expected with the valuation in these stocks to decide their strategies. Also, the fact that FPIs have largely stayed away from these stocks over the past few months means that the next upmove will require good performance from the companies and risk appetite from investors.
What strategies should investors deploy in a volatile market?
Regular evaluation of asset allocation and portfolio reviews will help investors in taking profits in good times and having enough cash to invest in dips. Given that disruption is all-pervasive, investors should avoid being complacent and review their buy-and-hold strategies at intervals.
What are the risks to the bullish scenarios?
Prolonged global recession, delayed peaking of inflation and interest rates, subdued risk appetite, delayed restoration of supply chains through the globe, populist/adverse Union Budget provisions (the last one before the next general elections) and the rural economy taking time to revive are some risks to bullish scenarios.
What is your outlook on hospital stocks, now that they are back to pre-covid levels?
While the potential of growth is large, one will have to keep checking as to whether their valuations have run ahead of time. We have in the past recommended Apollo Hospitals, Aster DM, HCG and NH.
What is your view on the metal space? Top picks in the sector?
We are not bullish on metal stocks for 1-2 quarters due to recession fears and high volatility in currencies across the globe. However, companies that have limited debt, are efficient in their operations and a good dividend yield can be accumulated over time.