Global as well as Indian equity markets have been quite volatile in the recent past mainly on the back of an escalating war between Russia and Ukraine. Further, the surge in crude oil prices due to the crisis and inflation led interest rate hike outlook by global central banks weakened the sentiment.
However, most analysts believe that the present volatility is an opportunity for long-term investors. Patience is always rewarded by the markets, they note.
As per a report by ICICI Direct Research, "the present market volatility offers an opportunity to build long term portfolio of quality companies, which have a lean balance sheet, are capital-efficient and have growth longevity," it advised.
The brokerage further noted that the corporate earnings, a true barometer of the health of the market, have been quite resilient with growth momentum continuing unabated. The management commentary is also optimistic and hopeful of a strong rebound, going forward.
"Meanwhile, other macroeconomic indicators viz. GST collection, e-way bill generation, advance tax collection, etc, also point to a better-than-expected economic rebound. With growth capex on the anvil by the public and private sector, we expect a broad-based economic recovery, going forward," it explained.
Another brokerage, KR Choksey also believes that the India story is very much alive and kicking which is led by government policies and increased capex spending across sectors. While rising crude prices and worries of inflation will lead to volatile sessions until the dust settles, the brokerage sees further investment opportunities in such conditions and advises investors to make use of the same. It recommends investors to ignore the noise and stay put with their current investments.
Dr. Joseph Thomas, Head of Research, Emkay Wealth Management also feels that long-term investors should utilise this opportunity to add onto the positions in well-established businesses as volatility is likely to continue in the markets.
Nitin Raheja, Executive Director, Head – Discretionary Equities, Julius Baer believe that the geopolitical factors are more short-term in nature and the current correction is more of a bull market correction which tends to be in the range of 12-15 percent on average. A large part of which has been done till date. Further individual stocks have corrected even more and there is a case for gradually buying into the markets using a bottom-up stock-specific approach, Raheja added.
Going forward, ICICI Direct sees healthy double-digit growth across sectors led by auto space (albeit on a low base), capital goods (capex linked) and BFSI domain.
KR Choksey also remains bullish on BFSI as history tells us, the BFSI sector outperforms during interest rate hike regimes. In addition to this, it has taken targeted exposure to Autos which has seen a prolonged down-cycle over the last 3-5 years.
Further, given the thrust by the government on housing in the recent past and the renewed push to the infrastructure sector, KR Choksey is also positive on home builders and the construction space.
Meanwhile, ICICI Direct added that it revises the Nifty FY22 EPS target. FY22E Nifty EPS gets an upgrade of 5 percent at ₹720 percent per share versus an earlier estimate of ₹685 per share, it added. FY23E estimates, however, remain unchanged at ₹815/share. Incorporating FY24E numbers, ICICI Direct expects Nifty earnings to grow at over 20 percent CAGR over FY21-24E.