Due to major global challenges, investors should be cautious and not exuberant this Diwali, said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. In an interview with MintGenie, Vijayakumar said that investors should not rush to buy on Muhurat trading day instead wait for market declines to accumulate quality stocks. He sees Nifty around 17,600 this Diwali and expects another 12 percent return by the next Diwali. Edited excerpts:
With markets correcting ahead of Diwali? Do you think this is a Diwali sale for investors?
There are major challenges for the global economy and equity markets now. Therefore, investors should be cautious and not exuberant this Diwali. Of course, high-quality stocks can be slowly accumulated, particularly on market declines. But there is no need to rush to buy on Muhurat trading day.
What themes are you looking at for Diwali? Which sectors are likely to outperform?
Financials, autos and construction-related segments are likely to outperform. A bottom-up stock picking would be a better strategy than a theme-based investment.
At what level do you see Nifty on this Diwali day?
This Diwali day Nifty is likely to be around 17,600. Investors can expect around 12 percent return by next Diwali.
Apart from equities, what other assets would you advise investors to shop for this Diwali?
Since interest rates are moving up and are likely to remain high for an extended period of time, investors can invest in fixed-income assets like debt instruments. Debt funds and Balanced Advantage Funds are ideal for investment.
Is gold a good investment, since it has not rallied a lot in this festive season?
Gold will remain subdued since the dollar is strengthening. But from a one-year perspective, gold is attractive. When the Fed stops raising rates, say by next March, the dollar will start weakening providing a tailwind to gold.
Where do you see the market heading between Diwali and the year-end? Will it remain in the positive territory, or do you see it ending the year in the red?
Difficult to give such a short-period projection for Nifty. It can go either way.
What strategy would you advise investors for the Diwali day trading? Should they buy, sell, or hold for the next day?
Invest on the Muhurat trading day since it is auspicious. From the long-term wealth creation perspective, it doesn't matter when you invest. Systematic investment for the long term is the ideal strategy for long-term wealth creation.
What are your top 5 Diwali picks for this year?
I can't be stock-specific due to compliance issues. We are very positive on large-cap private sector banks, some of the leading PSU banks, both large companies in the telecom segment and the leading domestic-oriented pharma companies.
What key factors would impact the markets in the remainder of the year?
The important factors that would impact the market going forward are: inflation in the US and the Fed's response, the nature of the likely US recession - whether it would be mild and short or severe and long - the course of the Ukraine war and capital flow into emerging markets.
What do you expect from the Q2 earnings? will it be better than the June quarter or on the same lines?
Q2 results will be a mixed bag with financials posting very good numbers and sectors like cement and metals disappointing. IT results are reasonably good but there are concerns about the likely recession impacting IT demand. IT is attractive from the long-term perspective.