Yogesh Kalwani, Head Investments, InCred Wealth is positive on the Indian market. Kalwani said he likes small and midcap stocks that are domestic economy-focused, banking and finance companies, and manufacturing and building material companies.
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How do you see the market's journey in the last one year? On October 1, 2021, the Nifty was at 17,532. After a year now, the index is struggling to breach and sustain 18,000.
The developed economy situation is challenging due to higher energy prices (Inflation) and slowing growth and we believe US and European central banks will continue to hike rates to reduce Inflationary pressures.
Post sharp rallies of July and August, we had advised investors to book gains and raise equity portfolio cash to 20%.
We believe markets would provide re-entry opportunities over the next few months. The Indian market has outperformed the US, Europe, and other emerging markets in the last one year.
Nifty is down about 4% in rupee and nearly 14% in the US dollar as compared to S&P 500 (US) down about 16% and DAX (Germany) down nearly 35% in the US dollar.
What is your overall outlook on the market considering the prevailing concerns that seem to have refused to fade away? What is your year-end target for Nifty?
Over the next five years, India will be the fastest growing economy and will see double-digit corporate earnings growth hence equity investors will get superior returns over a three-to-five-year time horizon.
What sectors would you recommend betting on in this market? Please explain your views on those sectors.
We like small and midcap stocks that are domestic economy-focused, banking and finance companies, and manufacturing and building material companies.
If I have ₹10 lakh to invest in this market, how should I deploy it? Would you recommend holding some cash too?
Interest rates have moved up and fixed income/bonds have started looking attractive.
For a balanced profile we recommend 60% equity and alternatives and 40% fixed income.
We recommend adding to equity allocation on a staggered basis over the next six months to let the volatility play out and have a better rupee cost average.
What is your view on the IT sector? Do you see value emerging in the sector for long-term investors? Should one bet on midcap IT firms or the largecap ones?
The IT sector has seen a sharp correction over the past few months over growth concerns and margin pressure.
Although deal pipeline commentary in Q1FY23 was encouraging, LTM order book growth moderated and suggests Q2 bookings are critical for sustaining growth assumptions.
Management interactions suggested instances of budget constraints, decision delay in select verticals, focus on cost optimization, moderation in net hiring and pricing conversation going on the back burner in the current macro uncertainty.
Having said that, the recent Accenture numbers showed strong traction in outsourcing bookings and improved pricing but reported high attrition, lower employee addition and wage inflation pressure.
Global macros continue to remain uncertain; we would prefer to wait for the Q2FY23 earnings outcome to allocate meaning to the IT sector.
Pharma stocks are touching their 52-week lows. What is the outlook for the sector? Can we make a contra bet on the sector?
Our recent interaction with a few companies’ management suggests that the pricing environment in the US generics market has improved substantially from the one six months ago.
Various companies highlighted that product pricing has broadly stabilized and the worst phase seems to be over.
The issue of a high Covid-related base was essentially a Q1FY23 phenomenon and is primarily behind us. Across companies, managements gave guidance of normalized growth in the second half of FY23F.
The heightened cost pressure of the last two quarters has not worsened further but no major respite has come either. Still, there is unlikely to be any incremental margin pressure in the near term.
We feel pharma could be a good contra bet from hereon with pricing stability in the US and domestic business also stabilising after a strong base during Covid.
Auto stocks have run up smartly. Is it time to book some profit? What are your views on the sector?
We have been recommending auto stocks for the past two-three quarters and they have done well. We remain positive on the sector, especially passenger vehicles as car demand looks exciting with new products driving a long waiting period while supply challenges ease.
The commercial vehicle cycle is looking on the recovery path as visible from the volume growth year-to-date.
NSE auto index trades above the 10-year mean level and volume surprises flow in. We feel lower commodity cost benefits will be extended to customers, via discounts in the two-wheeler segment, in the coming festival season to revive demand.
The overall auto volumes are still below the pre-covid peak, we feel there is good scope for the sector to do well over the next two-three years.
Disclaimer: The views and recommendations given in this article are those of the analyst. These do not represent the views of MintGenie.
