In the next year, the focus will continue to remain on earnings growth and its visibility, said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS. In an interview with MintGenie, Kulkarni pointed out that a new market high cannot be ruled out if global markets are supporting it. He sees the market in the 17,800-18400 band till December. Edited Excerpts:
1) Sensex hit 60k recently, do you see a new high in sight?
The market is not very far from an all-time high. Quarterly results have largely been in line with expectations. India VIX has declined in the last few trading sessions. Thus, a new market high cannot be ruled out if global markets are supporting it.
2) Where do you see Sensex and Nifty by Dec 2022?
We see the market in the 17,800-18400 band till December.
3) Which sectors are likely to remain in the limelight in the coming quarter?
The banking sector delivered a tremendous set of numbers. SBI reported its all-time highest profitability today. Bank of Baroda also reported a strong set of numbers. All the other large private banks like ICICI, HDFC, or Kotak have reported a good set of numbers. Thus, banking will remain in focus. Apart from Banking, Autos and Consumer discretionary will be the key focus sectors.
4) What is your view of the September quarter results?
September quarter results have largely been in line. The banking sector reported a strong set of numbers. IT sector numbers were also largely in line. There have been some misses like Asian Paints, Wipro, and Cement companies, but overall consensus expectations are unlikely to change meaningfully. So, overall the results season has been in-line without any structural changes to be worried about on the earnings growth trajectory.
5) What key trends one should focus on for the next 1 year?
In the next year, the focus will continue to remain on earnings growth and its visibility. The market is marked by trends of rising interest rates which keep the valuations under pressure. In this scenario, earnings, growth, and visibility will be very critical. Companies missing earnings expectations are likely to see significant de-rating risks, which will result in significant stock price correction.
6) Inflation has been over RBI's band for the past 3 quarters. How long do you think this trend will last?
This is difficult to predict as the inflation trajectory seems to have peaked out. Also, as interest rates have been hiked around the world, liquidity will get absorbed and inflation is likely to cool down in the forthcoming quarter. So, considering RBI’s commitment to inflation management and further rate hikes on the anvil, inflation is likely to have reigned.
7) How much repo rate hike do you expect by the year-end to help curb inflation?
The repo rate hike will be in line with global trends. Thus, another round of rate hikes is on the cards taking the Repo rate to ~6.4%.
8) Where would you advise new investors to invest in this volatile market? One piece of advice you would like to give all investors?
Investors need to be patient in this market and invest in a staggered manner consistently. Also, investing in dips will work well in this market, and underlying fundamentals are strong, but valuation challenges continue to persist.
9) Are you bullish on mid and small-cap stocks currently or would you advise investors to avoid them?
Mid and small caps performed well over the last two years. In the last year, small caps have taken some beating, although the underperformance is not significant. Overall, small caps are still a good space to invest.
10) FII has turned net sellers again, Do you see inflows like in August in November? What factors will help FII buy more Indian equities?
FII inflows depend on a lot of factors. If there are global inflows in equities then India will also see an inflow. But if there are outflows, then India will also see the same result. Overall, the FII flow picture remains rather complex.