There seems to be a unanimous consensus that India will be able to avoid a full-blown recession. According to Deepak Chhabria, CEO & Director, Axiom Financial Services, oil prices are also trending down, which is going to be a great relief to India.
In an interview with MintGenie, Chhabria said that many investors are now trying to capitalize on the short-term market movements, thus, hinting at a change in investor behaviour.
Q. NSE wants to increase trading hours for the equity segment. How do you think would this impact the market?
In a globalised and interconnected world, our markets often take cues from what is happening in other markets. Due to different time zones, we often face volatile openings based on the behaviour of US markets,
Extended trading hours will hopefully reduce volatility only to an extent. However, this may put an extra burden on the broking community and the operations of the broking houses. From the long-term investor perspective, this move may not be of any great significance, but the traders who are glued to the screen may land up spending more time at work.
Q. Many investors still think that the banking and financial services sector will continue to perform irrespective of market downturns. Do you still find steam in this sector? If yes, then why?
In a rapidly developing country like India, where the penetration of banking services has just begun to take shape and reach the bottom of the pyramid, the B&FS sector holds tremendous scope. This sector has a long way to go and still has the potential to generate healthy long-term returns. The current correction is due to the collapse of a few banks in the US and Europe this is not the same as what transpired in 2008, once the dust settles down, Indian markets and this sector will resume their journey. Indian banking and financial services sector NPAs are under control and last quarter’s results have been decent, considering the overall economy.
Q. There is a unanimous feeling about India not succumbing to recession. Does this explain mutual fund houses coming out with new fund offers every week?
There seems to be a unanimous consensus that India will be able to avoid a full-blown recession, but it is unlikely that we may not face headwinds. Our IT sector is already reeling under the impact of layoff and other exports are also showing signs of slowing down. What may happen is that we may come out relatively better. AMC’s launching NFOs has nothing to do with India avoiding recession, many AMCs are filling the gaps in their portfolio of schemes and in some cases trying to find niche products that may find appeal to investors. But the proof of the pudding is in eating, we have to wait and see the performance of these schemes and how much assets they gather is retained.
Q. What is your take on the current valuation of the Indian stock market?
Valuations are not as stretched as they were a few quarters back, they seem to be falling in the comfort zone for long-term investors with a minimum investment horizon of three to four years. But, what may spoil the party is the slowdown in the economy which may lead to depressed corporate profits. Some stocks may appear expensive, but definitely, there will be opportunities to look at for the long-term investor.
Q. The investment philosophy seems changed. Investors are shorting their stocks instead of holding for long periods causing the market to fall repeatedly. What do you think has changed in the market?
There is a clear and visible shift in investor behaviour, many investors are trying to capitalize on the short-term market movements, and the realization will dawn only when they burn their fingers. Very few succeed in short-term trading, but many get attracted in the hope of making quick money. Volatility created by short-term investors and traders is often an opportunity for long-term investors to capitalize on price distortion.
As Warren Buffett said, “The stock market is a device to transfer money from the impatient to the patient.”
Q. The FED has hiked its interest rates again prompting the RBI to increase its repo rates once again. Do you believe this hawkish approach of the Central Bank will help it tame inflation earlier compared to the rest of the world?
Inflation is showing signs of ebbing, the initial and post Covid-19 surge due to supply-side bottlenecks has been mostly addressed. RBI has handled the economy and inflation very well and avoided any major disruption. Even though the pace of rate hikes globally is slowing, we may be close to the peak rates. With the fear of global recession, rate hikes cannot continue at the same pace, I expect a change in the strategy. Oil prices are also trending down, which is going to be a great relief to India.
Q. What according to you should be one’s investment strategy now?
Investors should draw up the strategy according to their goals and investment objective, no single strategy can work all the time and for all the investors. What is common is approach, focus on the long term, stay invested and don’t get swayed by short-term market gyrations. Picking stocks is not easy, it’s difficult for investors to keep a tab on the economy and the invested companies, instead invest through mutual funds. Asset allocation based on risk profile should be the bedrock of any investment strategy.